Ingram Micro Canada has laid off 40 sales associates in response to a soft distribution market.
The company made the cuts Wednesday, the same day its Santa Ana, Calif.-based parent took more serious measures. These included the closing of its Newark and Rancho Cucamoga distribution centres, centralizing its returns processing and reorganizing its sales force along specific customer segments. In the U.S., Ingram also laid off 1,000 people.
Asger Falstrup, Ingram Micro Canada’s president, said the company had seen a strong first quarter thanks in large part to purchases by government users before its fiscal year-end. Since then, however, demand has steadily dropped.
“Personally, I’m not sure we have hit the bottom yet,” he said. “I think, however, that we will see recovery hopefully in the next two or three quarters. If you look at the macroeconomic indicators for Canda, we still have good growth.”
Falstrup said Ingram has been working over the last six to nine months to streamline various processes in its sales organization, primarily through e-commerce activities. Last month, more than 40 per cent of the distributor’s total orders came in electronically. The Ingram Micro Pipeline, which allows resellers to get pricing and SKU numbers from its mainframe database and use the information on their own Web sites, has also been adopted by between 40 to 50 Canadian VARs, he added.
Similarly, Ingram U.S. also said it planned to automate more of its business functions and integrate e-commerce applications worldwide.
Ingram, like Tech Data and Merisel, has been trying to increase sales volumes in a number of ways, including doubling the minimum order to qualify for free shipping from $500 to $1,000. But in the last two months, Falstrup said overall weakness in the technology sector had forced its hand.
“It was a sad day yesterday, but I know a lot of our colleagues understand why we’re doing this,” he said. “This is not about doing a good job or a bad job. We need to cut costs in order to maintain our profitability in the company.”
While Ingram Micro Canada’s parent company has decided to consolidate its product management division from six product categories to four — systems, networking, high-end storage, peripherals and software — Falstrup said the Canadian business was organized along different lines. There are separate units for marketing and purchasing, for example, and there are no immediate plans to make similar changes. The company also recently launched an Xtreme Products division for the video-game and retail market. While there have been some transfers within specific groups to get Xtreme going, Falstrup said no jobs were cut in order to downsize specific business units or channel programs.
“This will be invisible to the reseller customer. They will continue to get see a high level of service from us,” he said.
Ingram is cutting back at a time when other Canadian distributors are expanding or growing. Last week Tech Data Canada said it would broaden the scope in its Xalyx unit to include networking products, while Bell Micro Canada said it would acquire Forefront Graphics.
Falstrup admitted that these were not the easiest days to be a broadline distributor. “There’s probably less volatility in the high end in some of these areas than in the low end,” he said. “You’re also seeing growth in companies with a high-margin value-add like EMJ Data systems. I have great respect for Jim Estill and what he’s been able to achieve.”
Falstrup pointed, out, however, that with many large corporate purchases made in 1999, the market could see a considerable rebound in 2002 if customers choose to upgrade their infrastructures.