Tech Data UK boss on distie service levels, supply chain issues and life after Synnex merger

UK boss David Watts warns customers that ‘lead times are less secure than they’ve ever been’ and discusses how formation of TD SYNNEX will impact Tech Data's UK business

With the merger between Tech Data and Synnex closing at the start of September and the formation of TD SYNNEX, CRN recently spoke to Tech Data's UK MD David Watts to find out how, if at all, the distribution giants coming together will impact Tech Data's business in the UK and the rest of Europe.

In a wide-ranging interview, Watts also weighs in on recent frustrations from resellers about an apparent fall in distribution service levels, as well as how Tech Data is becoming a more sustainable business.

Josh Budd: The Tech Data-Synnex merger closed at the beginning of September. Can you tell us what you expect to change for the UK business post-acquisition?

David Watts: For a significant period of time from the UK and Ireland point of view, it's very much business as usual. I see that as a positive thing. We will get the benefits of TD Synnex coming through, but at the same time we're not the focus in terms of what other countries are having to do in trying to bring two organisations together, and everything that comes with that.

We've done more than our fair share of acquisitions in the UK over time, and we know how time consuming they are. They're always worth it; you're always better off at the end of it, but to have the opportunity to be merged but not be massively impacted by change management for a period of time is great. So for us it's unrelentingly positive.

Has there been any change to the branding already following the merger?

I don't know if it has been completely clear from the comms, but we aren't changing our name. I don't know if that's been clear to everybody.

The global brand is changing to TD SYNNEX . The North American business is changing its name on the basis that there's brand equity in Synnex and there's brand equity in Tech Data. But in the UK, it is not a brand that's really present.

So we are going to be Tech Data, a TD SYNNEX company, and that will be across Europe and Asia-Pac as well.

The big thing our CEO has talked about, which I really want to underline, is that distribution is to some extent at the centre of the aggregating of solutions. Different analysts and journalists have different views, but everyone agrees that this solution aggregation has to have a point of focus at some point to bring it all together.

Now we have, like any distributor, our own strategy and our own pot of money for that, but now we're going to have Tech Data and Synnex's pots of money coming together. That's very important, because these are high investment digital areas with massive change management that goes with it.

There were a lot of management changes in Europe after Tech Data acquired Avnet Technology Solutions a few years ago. I assume we won't really see much of that with the Synnex merger?

The European leadership team stays the same. If you look at the strategy, vision and mission of the new company, it is not dissimilar from the old one. You won't see any of the distractions that can come with a big merger.

The other difference is, last time we had a new CEO following the Avnet acquisition in Rich Hume. And Rich took the opportunity after the Avnet acquisition to reset our strategy and our focus, our mission and our values. And again, that has been tweaked slightly this time around, but not much. So the reset that we might have had now has already happened; it happened when we purchased Avnet.

Does Synnex's minority stake in Westcon International have any bearing on Tech Data in Europe?

At this point, that's nothing to do with us. I can't speculate on what might come with that. But in terms of what you said about Synnex having a stake in Westcon International, factually that's completely correct.

When we spoke a few months ago, we talked a lot about how Tech Data is navigating the supply chain issues. What's been the update on that and what have you seen from a business perspective over the last quarter or two?

The shortages issue continues. Since we spoke last we haven't seen anything close to our worst case scenario. If you think of the range that we had, which was basically based on the conversations we had with manufacturers, we have been without exception at the better end of the range of expectations for that, which has been great news.

It's very, very variable by vendor when you're talking about finished products as to who has been impacted, but pretty much all of them have done well. And the manufacturers have a horribly tough job - to go from sourcing resources to finishing a product to deciding where it goes and what's the supply chain to get it there is extraordinarily tough. And then being able to predict that for customers and give them really good information with all those factors has been very tough and continues to be.

We work very closely with our vendors and our customers to try and get that right. But the reality is that the information flow moves around a lot in terms of the shortages themselves. There's probably not a category that's unaffected in terms of hardware. And in terms of the headline products, notebooks have been affected a lot and it's true that notebook inventory across Europe continues to be low.

The market is still very, very mixed overall, although August was very slow and down year on year. But it's not equal across technologies yet. The infrastructure vendors and hardware vendors have been hit in a tough market with tough shortages as well.

We did an article on CRN after we noticed a few resellers venting their frustrations about distribution service levels. Are these isolated cases, or are there genuine issues with giving resellers predictable delivery times?

Shortages would be the vast, vast majority of the feedback we get from customers which is effectively, at the end of the day, about the information flow. If you're getting no information from us then that's something we would always need to correct and we should be better than that. But a lead time moving, or being provided to us and passing that on with some caveats around it, is very, very common at the moment. Lead times are less secure than they've ever been, and that's very frustrating for customers.

The thing I would ask for our customers is to say, first of all, we want to always do our best. Let us know if you feel like we're letting you down and we'll address it. But be very cautious about lead times, because they're moving around quite often, and, although we're doing our best to be prudent when providing the times, we're only basing them on the information we're given.

If I was committing resource on-site for an install, for example, I will be very cautious about that at the moment. Again, coming back to the vendor partners, I can really appreciate their challenge of getting these products made, let alone the logistics issues.

Is there an expectation that these problems will get better in 2022, or is this going to be a 2022 issue as well?

It depends on who you talk to. We'll have notebook shortages and other finished product shortages going into next year. I think the extent of those shortages will largely depend on vendors' decision making around whether they're putting more into consumer products or into B2B products.

There have been high stocks of consumer products in channels. I think maybe some of that balance has gone wrong. We've had low weeks of stock on B2B product and high-end consumer product so a lot depends on whether the vendors get that balance right.

If you look at individual components impacting unfinished products or displays for example, I'd expect them to carry on for the whole of next year to some extent or another. I think they'll come in and out of supply, to be honest. A lot of that comes back to the original resources that these products are being made from.

Will these shortages impact Tech Data's growth potential next year?

Our fastest growing parts of the market are security, analytics, IoT and cloud. The vast majority of those businesses aren't hardware at all, and if they're dependent on hardware, it's usually hardware that's already deployed. In terms of our overall growth, everything that has been accelerating will continue to accelerate. If you're looking at that underlying hardware picture, that's a much more difficult question to second guess. Is the supply going to be there to the extent that we need it? I don't know.

What are Tech Data's goals at the moment from a sustainability perspective?

If I start off with locally, and then I'll finish off globally. Locally we've worked closely with channel partners and some of our vendors on the lessons they've learned from going quite early on setting the net zero carbon date. So we've spent time doing our homework on that.

And now we've partnered with a company, I can't say who it is yet, but we'll be announcing it soon, who will fast track us on our own journey to produce our own aims in the UK and Ireland for net zero carbon. And we're also about to announce someone to run sustainability from within the business.

So we've got a lot coming down the line. At the same time, globally, what you'll see is we're already recruiting for a head of ESG globally and they'll be headcount across the globe. And then also globally we'll come out with net zero carbon aims as well.

We're aligned to the global strategy, but the reason why we're moving really fast in the UK is A: we've just got a really strong aspiration in that area, and B: the UK government's been pretty smart as to what they've put into legislation and is moving more voluntary action into legislation as well.

So we just need to get moving on this. It's the right thing to do morally, and then commercially it is absolutely the right thing to do as well, because more and more partners are bringing more and more tenders to us. This means that we have to have a formal response on our net zero carbon aims and our plan.

There's also been some things we've done in the background. We reviewed our energy suppliers, we've done a lot with our facilities. It's just that it's been not as coordinated as it will be once we've got the net zero carbon aim in place.

Are vendors making it a requirement for you to be sustainable as well, or is there some kind of incentive from the vendor side?

There hasn't been but I hear talk on that and I'd welcome it actually. The relationships where the discussion is most active is with our customers. The more our customers are involved with end user tenders that ask them for sustainability responses, when we're part of their supply chain, they need to know our position. That's where the conversation is most active.

That's exactly how the legislation should work - having this knock-on effect and this peer pressure to say we are open to it and we're ready for it. That's why I really supported CRN's Tech Impact Awards. There's a bit of an element of the channel needing to wake up to this and we're an example of one of those companies. We need to get on with it.