Direct vs. AV Distribution: A Cost-Benefit Analysis

The Benefits of AV Distribution

“Oh, so you’re the middle man.” With implications of inflated costs and unnecessary complexity, this was the disparaging response from an old acquaintance while catching up after a time apart. Putting aside Almo’s “value add” let’s look at the real financial implications of sourcing equipment; considering both the hard- and soft-dollar costs of a purchase order. Hard-dollars are the unit cost of the equipment and freight. Soft-dollar expenses associated with purchase orders include:

  • The time spent getting quotes.
  • Receiving shipments (and associated work interruptions).
  • Reconciling packing lists.
  • Cutting checks.
  • Balancing the checking account.
  • The process of managing cash-flow.
  • Coordinating returns with vendors.
  • Warehousing and staging equipment until all items have arrived for a project.

Each of these soft dollar items has a direct cost in wages along with an opportunity cost from lost employee productivity. There are numerous studies available on the Internet discussing the costs of issuing a purchase order. Some studies show a range of $35.88 for automated purchase orders to $741 for some manual POs. To find your cost per PO, add up the time spent each week on all of the above activities and divide by the total number of purchase orders.

The following tables compare streamlined purchasing of equipment for a modest project through buying direct from manufacturers versus the same purchase from a distributor. These scenarios reflect actual prices of commonly used equipment. The soft-dollar average of $75 reflects the low-end of actual cost per PO as communicated by our commercial integrator clients. The manufacturer names and model numbers are masked to protect integrators and resellers from this information reaching the end user.

 

Scenario 1) Single Source from an AV Distributor

Qty Manufacturer Description Unit $ Ext $
1 Manufacture A Controller / switcher / amp $3,710.00 $3,710.00
1 Manufacture A 7” touch panel $2,340.00 $2,340.00
1 Manufacturer C Ceiling Mounting Plate for Projector $31.33 $31.33
1 Manufacturer D Projection screen $1,286.76 $1,286.76
4 Manufacturer F Remote Sequenced Power Conditioner $124.97 $499.88
1 Manufacturer F Rackmount Power Conditioner / Sequencer $343.72 $343.72
1 Manufacturer P Projector $2,474.73 $2,474.73
2 Manufacturer P Wall Mount for Displays $200.00 $400.00
1 Manufacturer P Ceiling mount bracket for high ceilings $823.08 $823.08
1 Manufacturer P Bracket assembly $274.73 $274.73
2 Manufacturer P 50” Display $839.78 $1,679.56
3 Manufacturer Q Ceiling Speakers (Pair) $214.76 $644.28
Sub Total: $14,508.07
Freight: $500
“Hard Dollar” Total: $15,008.07
1 Purchase Order (Soft Dollar Average) $75.00 $75.00
Total: $15,083.07

In order to provide a conservative estimate of savings: shipping is calculated to Lebanon, KS – the geographic center of the Continental US. Assumed origination point is a warehouse in Pennsylvania, even though closer options are available. This maximizes the distributor shipping cost in this example.

Scenario 2) Multi-source from Individual Manufacturers

Qty Manufacturer Description Unit $ Ext $
1 Manufacture A Controller / switcher / amp $3,710.00 $3,710.00
1 Manufacture A 7” touch panel $2,340.00 $2,340.00
Manufacturer A Freight: $75.00
1 Manufacturer C Ceiling Mounting Plate for Projector $31.33 $31.33
Manufacturer C Freight: $12.00
1 Manufacturer D Projection screen $1,286.76 $1,286.76
Manufacturer D Freight: $200.00
4 Manufacturer F Remote Sequenced Power Conditioner $124.97 $499.88
1 Manufacturer F Rackmount Power Conditioner / Sequencer $343.72 $343.72
Manufacturer F Freight: $28.00
1 Manufacturer P Projector $2,474.73 $2,474.73
2 Manufacturer P Wall Mount for Displays $200.00 $400.00
1 Manufacturer P Ceiling mount bracket for high ceilings $823.08 $823.08
1 Manufacturer P Bracket assembly $274.73 $274.73
2 Manufacturer P 50” Display $839.78 $1,679.56
Manufacturer P Freight: $280.00
3 Manufacturer Q Ceiling Speakers (Pair) $214.76 $644.28
Manufacturer Q Freight: $85.00
Equipment Total $14,508.07
Freight: $680.00
“Hard Dollar” Total: $15,188.07
7 Purchase Orders (Soft Dollar Average) $75.00 $525.00
Total: $15,713.07

Improving the Margins of Error on Your AV:

What would an additional margin of 1 to 4% do for your business? The above comparison favors using a distributor due to a 4.1% lower cost. This assumes per-unit costs are the same for purchasing direct and from a distributor. In some situations, not all, the per-unit cost for an item may be as much as 3% lower by purchasing direct. Running the above comparison with a 3% discount across all products for direct purchases brings the equipment total down $14,072.83 with a new total of $15,277.83. This is still a 1.3% savings by using a distributor. For the sake of brevity, these scenarios do not include every item necessary for a complete system. If we add in racks, cables, and all the other necessary elements for a complete system, the comparable savings would only increase. Additionally, in order to provide an “apples-to-apples”, the mount manufacturer specified above is constrained to the same manufacturer as the display and projector. However, over 80% of display and projector mounts are not supplied by display or projector manufacturers. As such, real world savings will be greater as more manufacturers are added to the mix.

But Wait, There’s More:

The reduced opportunity cost of streamlined purchasing can also result in productivity gains. This has the greatest implications for smaller firms where most people juggle multiple responsibilities. How long does it take a design engineer or sales person to regain full focus on a project after multiple interruptions by UPS, FedEx, and other freight deliveries for a single project? How much time is spent gathering quotes from multiple vendors only to find any potential savings diluted through increased shipping costs? How many “to-do” items are aging on your list and how would your business grow if more of them were completed? Regaining otherwise lost productivity through streamlined purchasing may allow for faster project completion, additional bid responses, selling more jobs, and greater efficiencies in general.

There may be circumstances where purchasing directly from a manufacturer may save a few dollars – perhaps with a single-item box sale. When considering some distributors also provide equipment staging, simplified communication with manufacturers, more flexible credit terms, technical expertise, and education; the benefits extend beyond streamlined purchasing. If you have not looked into utilizing the services of a distributor lately, you may be leaving money on the table.

March Madness Arrives Early: Via Indonesia and Amsterdam

I am a proud alumnus of the University of Kentucky and as such, a huge college basketball fan. I followed in the footsteps of the uber fan, Ashley Judd and started as a French major. I quickly decided to double major in marketing because the prospects of finding a job with just a French degree didn’t seem to grow on trees. I certainly wasn’t following Ashley any further than the UK Campus and into Hollywood.

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As proof of my loyalty, here I am last year at the National Championship in Indianapolis. For those of you who don’t follow or just don’t remember, Kentucky was undefeated going into the finals and on the threshold of history. Alas, they lost in the first round and now on to a new year of basketball.

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Fast forward to February 2016 and I’m in Amsterdam at the ISE show, the largest Audio Visual show in the world. After taking in the show, my colleague and I decided to sample of the local fare. I asked my friend Sara Abrons from rAVe publications and she commenced with a small history lesson to explain her recommendation.

Indonesia was a Dutch colony back in the day and to brag about their conquest, they wanted to showcase the breadth of spices imported from the colony. This came in the form of an Indonesia “tasting table” which is not Indonesian at all but the result of the peacock feathered bragging meal made palatable for the Dutch and now I’m sure for the tourists like myself.

Presented with about 20 plates and a warming tray, we dove in to a wonderful display. It was a small place with a varied décor – suffice it to say kind of like an Indonesian/Dutch TGI Friday’s with all sorts of pictures, signs and license plates on the walls. I’m looking at these licensed plates and notice some of them are from America when suddenly, I see a familiar face next to the Oliver North for President:

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I say to my colleagues, “That’s a UK license plate!” He contends it has to be from the United Kingdom. I remind him that all four years at UK, I worked as a cashier at Kennedy Book Store and rang up THOUSANDS of those plates! Upon further examination, it was confirmed.

Walking back to the hotel (or should I say rolling after 20 courses of Indonesian tasting plate), we are rounding the corner which is adjacent to the MOMO restaurant. By day it’s a sun drenched breakfast nook. By night, it becomes a swanky restaurant/club. Curious, I look through the window at the D.J. Low and behold:

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The guy is wearing a Kentucky Wildcats shirt! I tell my colleague that we have to go in and get photographic evidence because no one would believe me. I walk in and the hostess asked me if I had a reservation and I told her, “I’m with the D.J”

They guy was surprised when I ran up to him, complimenting his shirt. He said he got it at a second hand clothing shop in Amsterdam and didn’t even know what it was. He liked the color. I tried to explain it was the greatest college basketball team in the U.S. but I could tell it was no use. It was, in fact, a good color on him. Go Wildcats!

Welcome to San Antonio: In Super High “Razor”-lution

It’s especially nice when the manufacturers plan their distributor summits in a nice warm location during the dead of February. Such was the case this month with Samsung in beautiful San Antonio, Texas. Distributors, resellers and DMR’s gathered to hear the vision to 2016 and beyond, while seeing some of the latest product developments.

One of the greatest things about these functions is the networking aspect. You’re surrounded by customers, the manufacturer’s folks and even your friendly competitors (and if you are lucky a celebrity or two). The opening reception kicked off this portion of the conference. Here I am rubbing elbows with George Gervin from the San Antonio Spurs (left) and Director, US B2B Distribution for Samsung, Tom Perrier (right):
networkingSA

A lot of the conversations revolved around the ever-present dilemma of shrinking and sometimes even razor thin margins on displays in both the Pro and especially consumer markets. I think Samsung has got some new things up their sleeve that may be impactful for their partners as to help with the margin issue. More on that later. Now speaking of razor….

I’ve been on the road a lot lately, and even though I consider myself a season traveler, inevitable I forget something. This time it was a razor so I went down to the JW Marriott gift shop. Filled with cowboy hats, sombreros, ponchos, hot sauces and other Texas sized treats, it was your typical gift shop. I grabbed my usual brand from the stand, went up to the register and the cashier said, “That will be $20.12”. WHAT???!! $20.12 for one disposable razor?

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I said no thanks and started to wonder…in this age of fighting declining margins in our industry, how is it that a commodity product like the razor can command 3000% mark up? Location, location, location. Resourcefulness took me to the spa and they ponied up a razor at no charge.

On to the Samsung Product Showcase – in usually Samsung fashion they never disappoint when it comes to new product development. It was good to see some of the concept things coming to fruition such as:

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The transparent display which holds a multitude of applications such as retail and anywhere the end user just basically wants to be uber swank.

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The mirror display which they showed in a retail setting with RF technology in clothing and shoes that dynamically changed when the user took them to the mirror. Here is our Business Development Manager extraordinaire, Apryl Lamberti taking it for a spin.

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Outdoor displays – not just ruggedized, coated and cased back- lit LED panels but..

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Surfs’up! Samsung’s YESCO acquisition last year brings the new outdoor LED.

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Finally the indoor LED was quite a hit. Here is Apryl examining the type of panel used to make the video wall in the background.

I think the future looks bright with the new LED products (no pun intended). What Samsung was showing are solutions that require an ecosystem of services, which is where the margin lies and value to our partners. The opportunity for services such as content creation, can create that long-term relationship with a customer, long past the sale of the display.

Making the Move to 4K Ultra High Definition

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The use of 4K Ultra High Definition has skyrocketed since its commercial introduction in 2010. Professional installs of all kinds – digital signage, hospitality, corporate, education, command and control – can be dramatically enhanced due to the stunning beauty and astounding resolutions made possible with this display technology.

The worldwide 4K display market is expected to reach $52 billion by 2020 according to industry researchers. And while commercial displays are still the top use for 4K, the technology has even started to appear in the entire range of display devices we commonly use, including PC monitors, notebooks, tablets and even smartphone screens.

Here are some common questions we get asked about moving to 4K:

What makes 4K UHD such a critical display tool for commercial integrators?

A 4K UHD display has four times the number of pixels (3840 x 2160) compared to full HD (1080p) resolution. The major advantage of using 4K displays is that you can ultimately deliver a very immersive and rich experience that is in close proximity to the display without sacrificing image quality. UHD provides the ability to display finer details, amazing depth of colors and more information on a screen. As the technology matures and costs are driven down, we will see 4K screens become the norm and 1080 slowly drift away due to lack of production.

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Why purchase a 4K display through Almo Pro A/V?

brightsign4kAlmo offers a range of 4K displays, including exclusive accessibility to the Sharp AQUOS® 70-inch display, which features the Revelation Upscaler to display all content at near-4K quality for an amazing picture all the time, no matter which source is being used. Almo also offers a host of powerful media players with high storage capability from manufacturers like BrightSign to drive the data and produce the best results based on the content that is being shown.

So, what about content?

Obtaining 4K content has been the biggest 4K barrier to date, however, as the technology increases in popularity, more content is becoming available and the cost to create that content is decreasing. With Almo’s Content Creation Services, integrators have the opportunity to offer 4K standard and customized still images or full motion video content as part of an initial installation and ongoing maintenance package. This creates recurring revenue, builds margins and lengthens customer relationships.

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What if I need support to help select and integrate the 4K displays?

Almo has a highly specialized fleet of Business Development Managers that offer technical knowledge, system design assistance and in-depth brand knowledge about 4K displays to help you integrate the technology into your commercial installs. No other distributor in the AV industry provides this level of expertise to its partner community.

A Smart Display That’s Built to Enhance Communication

sharp_header3Sharp’s Professional division has been the industry leader in touch monitors 60 inches and above with the AQUOS BOARD®. To remain as the industry leader Sharp has had to modify these panels over the years. Some of these changes have included the addition of multi touch, anti-glare features, simultaneous annotation, and improved hand handwriting recognition, making it a collaborative solution with its touch display link software that comes free with the purchase of any AQUOS BOARD®. Sharp offers the AQUOS BOARDS® in 60”, 70” and 80” sizes, and most recently Sharp has introduced 2 more AQUOS BOARDS® to their current lineup, the PN-C603D and PN-C703B. These new versions of the AQUOS BOARD® are really aimed for the education market, specifically K-12.

The value series PN-C603D and PN-C703B don’t sacrifice features and are similar to the PN-L line up of AQUOS BOARDS® with the exception of a few differences. The PN-C603D and PN-C703B are still multi touch but only 6 points of touch versus the 10 points of touch in the PN-L series. The other differences between the PN-C and PN-L series are 2 can simultaneously annotate versus 4 people and the PN-C series are rated 16/7 rather than the more robust PN-L series which is rated at 24/7. Even though the PN-C series gives up these few features for it’s economical cost, it still comes with a 3 year warranty, sharps pen software, touch display link software – and best of all – it is still built on the same open platform as the PN-L series allowing it be versatile and agnostic to most software on the market. Even though the education vertical is the primary focus for these new AQUOS BOARDS® it can be used in any application such as way finding, collaborative conference rooms or huddle areas, interactive signage in places such as museums and hospitals.

Stay tuned to more exciting products from Sharp Professional on future blogs. For versatility and performance in business office meetings, education and high-impact signage, there’s never been a better time to think Sharp. For more information on Sharp Professional or to schedule a demo, contact Darren Altman at [email protected] or 888.420.2566 x6541.

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