What is the information supply chain?

Like a physical supply chain, an information supply chain (ISC) is comprised of the organizations that connect with each other to produce a desired end — product or service — for a user. But where other supply chains may be roughly linear, the information supply chain is more reminiscent of a web, according to Ed Kamins, senior vice president and chief operational excellence officer at Avnet, Inc. Kamins moderated a panel at the recent "Cultivating and Securing the Information Supply Chain" symposium sponsored by CABIT. Enmeshed in this web, Kamins said, are four key players: the manufacturer, the distributor, the value-added reseller and the end user.

The phrase "information supply chain" first surfaced in information technology circles a year ago, but since then it has achieved the status of a buzzword. Ajay Vinze, director of the W. P. Carey School's Center for Advancing Business through Information Technology (CABIT) said he ran a Google search for the term a year ago and received three hits.

Six months ago the same search yielded 50 web pages. Recently he tried again, and Google churned out page after page of links. But what does "information supply chain" mean? Like a physical supply chain, an information supply chain (ISC) comprises the organizations that connect to produce a desired end — product or service — for a user.

George Marinos, a data quality partner with PriceWaterhouseCooper, wrote in the April 2005 issue of DM Review magazine that the information supply chain is "the full set of elements — technology-based, process-specific and organizational in nature — that are necessary to 1) collect information from discrete processes, 2) transform this information from data into knowledge, and 3) distribute this information efficiently and in a timely manner to the appropriate data consumers."

But where other supply chains may be roughly linear, the information supply chain is more reminiscent of a web, according to Ed Kamins, senior vice president and chief operational excellence officer at Avnet, Inc. Kamins moderated a panel at the recent "Cultivating and Securing the Information Supply Chain" symposium sponsored by CABIT.

Enmeshed in this web, Kamins said, are four key players: the manufacturer, the distributor, the value-added reseller (VAR) and the end user. Likening the development of an efficient information supply chain organization to that of a fast-growing city, Kamins said that an information supply chain needs to develop infrastructure to accommodate population growth.

A city's infrastructure has to grow in order to provide the value that its population requires in order to operate fluidly, Kamins said. In the same way, "we want to grow the supply chain in terms of what can go through it, but we also have to make sure that we don't inhibit the speed of interaction that goes through it," he explained. That interaction — or flows, as Kamins calls it — involve the back-and-forth exchange of products, money and information.

Kamins' company, Avnet, Inc., is a Phoenix, Arizona-based business-to-business distributor of electronics components and systems; it also provides supply chain management and engineering services to its business partners in 70 countries worldwide. To explain the dynamics of this new sub-species of supply chain, Kamins brought representatives of Avnet's information supply chain with him. The participants included:

• For the manufacturer: Leonard Iventosch, vice president of channel sales for Sunnyvale, California-based NetApp (Network Appliance), a developer of data storage products;
• For the distributor: Jeff Bawol, senior vice president and general manager of enterprise software and storage for Avnet Partner Solutions, Americas;
• For the value-added reseller: Bill Nowlin, chief executive office and founder of Scottsdale, Arizona-based data storage services company Custom Storage Inc.

The fourth component of the information supply chain is the end user. With chief information officers from the public, private and government sectors in attendance, the audience itself represented the end users.

The manufacturer's challenge in an info-driven world

According to Sun Microsystems CIO Robert Worrall, 390 gigabytes of data are created every second of every day worldwide. That volume is enough to keep a CIO awake nights, and it's the driving force behind the product solutions developed by NetApp. The staggering growth of information exchange on a global basis has caused Leonard Iventosch's company to rethink its original motto of "fast, simple, and reliable."

"It would be very hard now to claim that servicing your data is very simple," Iventosch said.

NetApp's present goal, he said, "is to simplify what is a very complex environment while reducing cost, complexity, and risk."The key is to allow companies to tailor their growth without having restrictions placed upon them by the limitations of an unyielding IT network. As NetApp's business grows, so do the problems associated with growth — which is where their partnership with Avnet has allowed them to focus on their core strengths.

NetApp offloads the more burdensome costs of business to its business "channel partners." Avnet, for example, distributes NetApp's products, selling to value-added resellers who in turn can support end users with their own brand of services. The channel partner relationship allows each partner to maintain a key focus — in NetApp's case, on technology research and development and manufacturing — while offloading what they do not consider to be core competencies such as sales reach and distribution logistics, two areas which happen to be Avnet's key strengths.

"We're comfortable with the idea that we're a great technology partner, but there are other things that we don't do that well," Iventosch said. The result of this symbiotic relationship has been explosive growth for NetApp. When NetApp first hooked up with Avnet, the company had relationships with 20-30 value-added resellers who were expected to produce $20 million in that first year.

In the 3 years since, NetApp has expanded its channel partner network, developed in partnership with Avnet, to 285 VARs, with the expectation of generating $300 million in revenue this fiscal year. This paradigm shift serves to re-image the way companies within the information supply chain rely on one another. Not only are operations streamlined, the end result is a snowball effect of increased margin gain in a global economy that is consolidating industries into leaner, ever-tightening service clusters.

Avnet as matchmaker

Jeff Bawol has seen plenty of change in his 28 years with Avnet and acknowledges that no distributor can afford to remain an island unto itself. "Logistics used to be, especially in the old days, all about having inventory — but for us, today it's about moving information. It's about having information and being able to deploy that information faster and quicker," he said. "For us, logistics is definitely about the flow — to determine how fast the market is growing, and where you have to be in that market to capitalize on it."

Avnet has developed the ability to be a key channel partner, where the bottom line means knowing and constantly increasing the value derived from the information supply chain by the end user, Bawol said. "We continually form this ecostructure that says 'alright, how do we better service that end customer?'" Bawol said.

"By servicing them better it allows the VAR to touch more end customers, and allows us to touch more suppliers … we try to pull together the suppliers that work well for us, that accelerate the growth of the channel for both the partner and ourselves, then allow them to touch more end customers along the way."

Avnet is not just a cheerleader — it follows up with solid support. Avnet strengthens the supply chain by providing suppliers and value-added resellers alike not only technological know-how, but also financial backing for up-and-coming partners that might not otherwise have the fiscal firepower needed to land a make-or-break contract. "Imagine a $5 million reseller that goes in to an end user and lands a $3 million or $4 million deal," Bawol said. "It might be hard for them to finance that deal. With a $14 billion company behind them, they're capable of doing that."

Benefits for the value-added reseller

In the four years it has been in business, the Scottsdale, Arizona-based value-added reseller Custom Storage has reaped the benefits of being a channel partner with NetApp and Avnet. "[Our customers] get the value of not only our expertise, but also the collective experience of our customer base, our manufacturing partners, and our distribution partners," said Bill Nowlin, founder and CEO. "So it's not just what we know, it's everybody we know and all their information coming to the table as well."

Nowlin's company provides storage architecture, data protection, and encryption, backup and restoration services to its client base concentrated in Arizona, Utah, and Idaho. In his role within the information supply chain, Nowlin is able to rely on his channel partners to provide a unified line of products for Custom Storage's clients, eliminating what he calls "swivel-chair technology."

"We'd get information from one partner in one form," Nowlin explains. "We'd then have to swivel the chair over to a second system to re-enter that information." The inconvenience of dealing with incompatible data formats was compounded by the potential for human error. Partners provide Custom Storage's technical staff with cutting-edge education and, in the case of their affiliation with Avnet, access to financing and marketing programs otherwise unavailable.

For Nowlin, this unified, one-team approach translates into a no-lose proposition for his customers. These integrated product suites provide customers with a value incentive that translates into repeat business for value-added resellers. Providing a "Total Customer Experience" builds loyalty.

As a result, the satisfaction on the value-added reseller/end user side of the supply chain translates into referrals passed via word-of-mouth from the end user, or developed from leads passed on by the channel partners as part of the channel partner compact. The collaboration between specialized sectors of the information supply chain, according to Kamins, makes this partnership indispensable to value-added resellers like Custom Storage.

"If you don't add value, you can't get paid for it — it's that simple," Kamins said. A successful information supply chain, he stresses, is contingent on operational excellence. "A lot of the slop and waste is out of the system, so you'd better do things that the customers really want done."

Bottom line:

• A working definition of the information supply chain, according to Ajay Vinze: a collection of information and communication technologies to provide a secure integrated decisional environment that enables business partners to collectively sense and respond to opportunities and challenges in a networked eco-system.
• Globalization is a reality — deal with it, Kamins said.Even when you are dealing with a local reseller who in turn is dealing with local customers, there's a reasonably good chance that the customer has international impact — either because they are an international company or they are dealing with people who are.
• Information is the key to controlling inventory. By leveraging the information base, the hot potato of excess inventory is controllable, Kamins said. If you know where the inventory is, what's coming and what the order flow is up and down the supply change, only the right amount and right kind of inventory will be on hand at the right time.
• Specialization beats vertical integration, Kamins added. Becoming a jack-of-all-trades no longer works. Whether it's manufacturing, distribution, or logistics or end sales, focus on what works, then leverage the channel partnerships within the ISC to build up one another's strengths.
• Speed creates value. Information has to flow smoothly, Kamins said, in order to take maximum advantage of the ISC and generate the greatest value to the end user. Value is not what you think the customer wants; value is what the customer tells you he wants.