Service kings

Components distributors and vendors look for an edge over the competition with best-of-breed RMA and after-sales service in the Middle East.

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By  Stuart Wilson Published  January 27, 2005

Handling failures|~|RMAmanoj200.jpg|~|Manoj Kisani, director at Sky Electronics|~|Forget price; forget functionally; after-sales service and top-notch RMA procedures is where the real action is at in the crowded component vendor landscape. In the Middle East, return material authorisation (otherwise known as RMA) is a big deal. Product mishandling coupled with the cost of moving faulty products from site-to-site has created a situation where resellers, assemblers and end users have to weigh up the pros and cons of each vendor. Like it or not, product will occasionally go wrong and when that happens customers want distributors and vendors they can rely on. It is a fact of life that a small percentage of motherboards, memories, CPUs, hard drives (and any other IT component you care to mention) will unfortunately fail. With a proliferation of new vendors entering some of these product areas, taking a careful look at the reliability of products has never been more important for the channel. The C-brand Chinese motherboards entering the Middle East as grey product may well have a compelling price point. When 10% fail and an assembler finds there is no procedure in place for returning the goods — yet alone getting replacements — the up front saving suddenly looks a lot less attractive. There remains huge variation in RMA rates between vendors. Typically these figures are kept locked away from prying channel eyes by vendors fearful that the true statistics could damage sales. Alan Chu, regional sales manager at motherboard vendor MSI, explains: “There can be a lot of variation. A good manufacturer can have an RMA rate of just 1% while a bad manufacturer may have a figure of 10%.” In the Middle East, handling components incorrectly can have a massive impact on RMA rates and has resulted in vendors investing a significant amount in channel training and education. Misuse of products can also wreak havoc with product return rates. “In the ODD space, if a product is used to produce pirated materials it will have immense usage,” says Mehran Darrehshiri, RMA manager at components distribution powerhouse Golden Systems. “This can create variation in return rates.” ||**||Return to sender|~|RMAnassir200.jpg|~|Nassir Nauthoa, reseller channel manager, Gulf countries and Saudi Arabia at Intel|~|When a product does go wrong, the actual process of return and repair varies wildly between vendors in the Middle East. Some vendors have dedicated service centres in the region where product can be sent to for repair. Others outsource this function to regional distribution partners while a few insist that product is sent to global RMA hubs that could be located in Europe or Asia. Resellers and assemblers also need to consider the replacement policy for faulty goods. “If a customer purchases a product and encounters a problem they sometimes have to approach the vendor rather than the distributor they bought it from,” adds Darrehshiri. “If the distributor does not have its own RMA and after sales service facilities it can result in significant inconvenience in terms of time and money.” This sounds straightforward enough but in fact only tells part of the story. While some vendors may not have service centres located within the Middle East, a comprehensive replacement policy for faulty goods can more than make up for the absence of a local service touch. Authorised Intel resellers can return a faulty product to an authorised distributor within 30 days of purchase and receive a replacement part from stock. The distributor consolidates the returns and sends them back to Intel. After 30 days, authorised resellers can then take advantage of Intel’s advanced online warranty programme. “When they log on and inform us that they have a problem with a particular part, Intel will actually ship them a replacement part completely free of charge with all duties covered,” explains Nassir Nauthoa, reseller channel manager, Gulf countries and Saudi Arabia at Intel. “When he receives the replacement — normally within 48 hours — there is a return envelope so the faulty part can be returned to Intel.” While faulty Intel parts are winging their way back to Europe through the post, archrival AMD has adopted a different service policy in the Middle East. Working with Sky Electronics — closely associated to AMD’s master distributor, Thacker — the CPU vendor has set up a Dubai-based service centre and is replicating this facility at in-country distributors around the region. AMD also draws attention to the problem of product mishandling in the Middle East. “When we had processors in trays we saw issues with handling,” says Manoj Kisani, director at Sky Electronics. “There were also issues relating to low quality cooling fans. We have introduced boxed processors (PIBs) so that even when a product passes hands from the factory to us, to a distributor, to a reseller and then to an assembler, handling issues are minimised because it is a sealed pack. We have also educated the market on how to actually put the processors into the PC systems.” ||**||Grey deterrent|~|RMAPierre200.jpg|~|Pierre Brunswick, regional sales general manager for Middle East and Africa at AMD|~|For all major components vendors, RMA and after-sales service is a vital value-add that also helps in the fight against grey product. Those buying through authorised channels have access to a support and services network that those going grey will not be able to take advantage of. There are many different shades of grey in the components channel and this can often make for a confused picture in terms of identifying customers eligible to return product from those that are not. Pierre Brunswick, regional sales general manager for Middle East and Africa, comments: “There is grey and there is grey. If an OEM customer takes product away from the assembly line that was supposed to be mounted and puts it into the market as grey, there is no warranty on the product. If someone is importing PIBs from Europe and using an authorised distributor they have a worldwide warranty. But if he has to send product back, he will have to send it back to Europe.” It is a similar story in the hard disk drive arena, with Western Digital claiming that its local service centre, situated at Jebel Ali on the outskirts of Dubai, gives it the edge over the competition and also helps repel the entry of grey product into the Middle East. “A reseller can buy locally from a distributor at Jebel Ali and both parties know that Western Digital is close by to help out with the repair or replacement process,” says Hafeez Khawaja, senior regional director Middle East, Africa and South Asia at Western Digital. “We accept all drives purchased from authorised distributors in the region. If it is a drive from Singapore that has made its way to Dubai through illegal channels, then the warranty is only valid in Singapore. This is one of the ways we are fighting grey and it is one of the reasons why more and more people want to buy Western Digital through authorised channels. They realise the value of the service structure,” he added. The value attached to RMA and after-sales service by the reseller and assembler community is clearly appreciated by components vendors. “When we are selling our products, Intel is not just selling the product itself,” explains Nauthoa at Intel. “It is the whole concept: product, after-sales service, technical training and sales and marketing assistance. This package includes what happens if they have a problem. I know that the advanced warranty replacement programme is well liked by resellers as it helps them minimise their cost of sales.” ||**||Sevice economies|~|RMApavan200.jpg|~|Pavan Gupta, general manager at eSys Middle East|~|In today’s cost conscious IT world, savvy resellers are looking beyond up-front prices and realising that faulty goods and service callouts can destroy profits further down the line. Picking vendors with higher return rates can also erode brand equity in a business where reliability is a valuable attribute. When a PC goes wrong, the average user blames the PC vendor, not the manufacturer of the component that let the whole system down. A chain is only as strong as its weakest link. Khawaja explains: “Assemblers need to look at the total cost of ownership and realise that they are the ones facing the customer and it is their name on the PC. If they put in a drive with a high return rate, customers associate it with their PC brand and next time they could lose a major tender. Is it really worth losing your reputation for a small cost saving up front? Go with the market winners that have demonstrated quality and total cost of ownership.” Assemblers, sub-distributors and resellers need to start asking more questions about the quality and reputation of the vendors they work with. Asking for information on RMA rates and procedures is a great place to start even though vendors are normally loath to divulge this information. For US-quoted vendors, website provides an interesting insight into the percentage of sales that major IT players spend annually on warranty claims. Providing a comprehensive portfolio of after-sales service assistance can elevate a distributor above the competition if handled correctly — even more so than in developed markets such as Europe. “In the Middle East the concept of a distributor offering services is not that well developed,” explains Pavan Gupta, general manager at eSys Middle East. “In Europe, the role of the supply chain in the RMA process is very negligible while in this market it is critical. Most of the components vendors do not have direct service centres so distributors need to step in. Those that understand this function and can deliver it efficiently can provide a real bonus for both customers and vendors.” One master distributor providing an outsourced RMA function for several in-country distributors can also create economies of scale in the market. For example, three in-country distributors may each serve 20 customers but there will inevitably be some overlap in this customer base. This could mean that there are only 40 resellers in the country. Rather than each in-country distributor building the service infrastructure needed to handle 20 customers, it is more efficient for the master distributor to provide a countrywide facility capable of serving 40. ||**||Staying flexible|~|RMAHafeez200.jpg|~|Hafeez Khawaja, senior regional director Middle East, Africa and South Asia at Western Digital|~|Some distributors take this model a step further. Imagine a situation whereby one distributor offers after sales service to resellers actually buying from one of its competitors in the distribution space. Not only does the service provision set up a point of contact with that reseller for the distributor, it can also provide valuable information on buying behaviour as well. “If you are doing service and RMA for products that you did not sell to resellers, it can be a real bonus,” explained one sneaky distributor on condition of anonymity. “The serial numbers can help you work out who these companies are buying from and then come up with a more effective sales strategy for actually taking that business away from your competitor.” While RMA remains a crucial area in the high-value components space, there is the very real possibility that it could become an outdated concept at the low-end where average selling prices and profits are eroding fast. Some customers will actually cut a deal with the distributor on some products to discard the after-sales service and build a discount into the up-front price instead. “This is happening more and more,” says Gupta at eSys. “First of all the failure rates are coming down as is the cost. A CD-ROM drive can be a US$10 product now. If there is a 1% failure rate, we work it into the original deal. Nobody is too bothered about casings, mice and keyboards. There are four major components where RMA effort is focused: hard drives, memory, CPUs and to some extent motherboards.” While the global behemoths of the components space such as Intel do their level best to roll out a consistent worldwide after-sales service policy, other vendors retain an element of local flexibility in their model. For many, RMA and service policy is worked out on a country-by-country basis for each individual product with differing levels of distributor involvement. Any gaps in this service matrix can have a profound impact on both reseller mindshare and marketshare. At present, Maxtor has minimal marketshare in Saudi Arabia and eSys, one of its distribution partners, admits that a local service centre could be the answer. Western Digital has established collection centres in the Middle East with plans afoot to accelerate the rollout during 2005. “We have collection centres in the UAE, Saudi Arabia and Egypt,” says Khawaja. “Now we are considering new centres in Morocco, Tunisia, Kenya, Tanzania and Turkey. Wherever we go, the message is that if you buy Western Digital you buy peace of mind in terms of quality and after-sales service.” Nobody buys a new car without taking a good long look at the warranty and post-sales service. The components space is no different — especially for those buying in bulk. As RMA processes mature, the temptation to go grey will erode even further in the Middle East. Darrehshiri at Golden Systems concludes: “RMA and after-sales service remains of vital importance in the eyes of customers.” ||**||

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