Ingram Micro 2006 Annual Report Download - page 31

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• price;
• products and services availability;
• quality and breadth of product lines and services;
• speed and accuracy of delivery; and
• web or call center-based sales.
We believe we compete favorably with respect to each of these factors.
We compete against broadline IT distributors such as Tech Data and Synnex Corporation. There are a number
of specialized competitors who focus upon one market or product or a particular sector which whom we compete.
Examples include Avnet, Arrow, and Bell Microproducts in components and enterprise products; D&H Distrib-
uting, ADI, and BDI Laguna in consumer electronics; and ScanSource and Bluestar in AIDC/POS products. While
we face some competitors in more than one region, others are specialized in local markets, such as Digital China
(China), Redington (India), Intcomex (Latin America), Esprinet (Italy and Spain), and Actebis (Europe). We
believe that suppliers and resellers pursuing global strategies continue to seek distributors with global sales and
support capabilities.
The evolving direct-sales relationships between manufacturers, resellers, and end-users continue to introduce
change into our competitive landscape. We compete, in some cases, with hardware suppliers and software
publishers that sell directly to reseller customers and end-users. However, we may become a business partner
to these companies by providing supply chain services optimized for the IT market. Additionally, as consolidation
occurs among certain reseller segments and customers gain market share and build capabilities similar to ours,
certain resellers, such as direct marketers, can become competitors for us. As some manufacturer and reseller
customers move their back-room operations to distribution partners, outsourcing and value-added services may be
areas of opportunity. Many of our suppliers and reseller customers are looking to outsourcing partners to perform
back-room operations. There has been an accelerated movement among transportation and logistics companies to
provide many of these fulfillment and e-commerce supply chain services. Within this arena, we face competition
from major transportation and logistics suppliers such as DHL, Menlo, and UPS Supply Chain Solutions.
We are constantly seeking to expand our business into areas closely related to our core IT products and services
distribution business. As we enter new business areas, including value-added services, we may encounter increased
competition from current competitors and/or from new competitors, some of which may be our current customers.
Asset Management
We seek to maintain sufficient quantities of product inventories to achieve optimum order fill rates. Our
business, like that of other distributors, is subject to the risk that the value of our inventory will be affected adversely
by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products
comprising the inventory. It is the policy of many suppliers of technology products to offer distributors like us, who
purchase directly from them, limited protection from the loss in value of inventory due to technological change or a
supplier’s price reductions. Under many of these agreements, the distributor is restricted to a designated period of
time in which products may be returned for credit or exchanged for other products or during which price protection
credits may be claimed. We take various actions, including monitoring our inventory levels and controlling the
timing of purchases, to maximize our protection under supplier programs and reduce our inventory risk. However,
no assurance can be given that current protective terms and conditions will continue or that they will adequately
protect us against declines in inventory value, or that they will not be revised in such a manner as to adversely impact
our ability to obtain price protection. In addition, suppliers may become insolvent and unable to fulfill their
protection obligations to us. We are subject to the risk that our inventory values may decline and protective terms
under supplier agreements may not adequately cover the decline in values. In addition, we distribute a small amount
of private label products for which price protection is not customarily contractually available, for which we do not
normally enjoy return rights, and for which we bear certain increased risks. We manage these risks through pricing
and continual monitoring of existing inventory levels relative to customer demand. On an ongoing basis, we reserve
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