Kevin Briggs

Interim Financial Management

Distribution

Distribution businesses occupy that space between the original manufacturer and the end user, although sometimes the line can be blurred slightly. Examples of distribution businesses that I have worked with include:

·         Securicor Telecom Ltd. This business was the sole import distributor and maintainer of Samsung Telecom products and ultimately was purchased from Securicor by Samsung

·         Ultralife Batteries (UK) Ltd was a distributor for products made by its US parent, most notably the 9-volt or PP3 battery used in fire alarms. Similarly the US parent was a distributor for the UK product in the US

·         TTML was a distributor and maintainer of Avaya PABX equipment

·         Fiddes Payne Ltd and Trutex Ltd designed product in the UK, subcontracted the manufacture to Hong Kong, China, The Philippines, Indonesia and Bangladesh and then imported and distributed the product in the UK

·         Autimatic Minibar Systems had a manufacturing capability in the UK but then this was combined with refrigeration units from Electrolux in Germany. The product was distributed and maintained worldwide.

·         Torex Retail plc was a distributor of point-of-sale computer equipment for retailers and subsequent maintenance. A key supplier of this business was

·         DigiPos Group. This business designed, manufactured and maintained point-of-sale computer equipment for retailers in the Far East, imported and distributed the product in the UK

Some of these businesses involved maintaining equipment once it was sold, notably Securicor Telecom, Automatic Minibar Systems, Torex Retail and DigiPos. This requires specific accounting treatment called deferred revenue which has unique devices for accurate reporting and budgeting. In addition, there are some other key accounting skills:

The key skills associated with distribution businesses:

• maintaining cash through application of a credit policy, inventory management and cash flow forecasting.
• understanding the supply chain and the part that any project costing and bill of materials systems play in this.
• understanding route to market and the differences this can make to profitability.
• being able to understand the unique selling point of the organisation and the approach taken by the sales team
• understanding product innovation and the control processes around this strategy.
• understanding the effect on profitability for the loss of a key account in terms of sales or contract maintenance.
• key business risks: the impact of foreign exchange movement (for which there should be a mitigation strategy) and inventory holding on profit and cash. For business that have a maintenance base, operational gearing is high so there is a risk of incurring losses if a key customer were to move their business to a competitor.