CCT 355 | E-Business Technologies | Fall 2009

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CCT 355

Business Technologies | Fall 2009

Business Analysis Consulting Project

Michael Jones

Date: 30 November
, 2009

Team Member

Chiu, Ling Yan Jennifer


Kwong, Tiffany


Ly, Lorianne


Wu, Man Fong



The Middlemen: Samtack

Company Overview

Founded in 1989, Samtack Inc, is a member of the international PINE
Technology Holdings Limited (PINE)

a respected and world
renowned presence
in the computer industry. PINE is headquartered in

the Hong Kong Special
Administrative Region (Hong Kong SAR) with a distribution in over fifty countries
around the world such as Canada, the United States, the UK, Netherlands, China,
Hong Kong and Taiwan (PINE).


is a leading, private
label dist
ributor of computer in North
America. Under the International Pine Technology Group,

branded manufacturing goods around the world. Samtack acts as a “middle man”
between its vendors and

its retailers in the market. Samtack

from vendors in China and those products are then shipped to the headquarter of


ck in Markham. Samtack also trades
s with different compan
ies in North
America and Europe
. Therefore, Samtack has a competitive presence in the
er industry sinc
e they have an established
connection with
small, medium,
and large


. The products that Samtack provides to its
customers are very divers

from computer systems, to
, to
electronic products

including optical & storage pr

video graphics,
networking devices and accessories (Samtack). The company’s products are
widely used in a variety of markets including government, education, business
and home environments (Samtack).
Samtack’s headquarter locates at Markham
and has


branch offices in Montreal and California
. The main distribution of
tack can be divided into two areas: small companies and mass retailers.

Corporate Culture
: The 5 Fs


Samtack is
quick to manufacture


according to market needs
. Unlike
other computer companies, Samtack has its own products manufactory, in which
they handle all the packaging and boxing. This has shortened the duration of
producing the products as they do not need to outsource such process to the
other companies.
In our te
chnology driven world today, it is important to have a
rapid response rates to the market.


Samtack focuses on customer


They offer different types of
products from many well
known manufacturers such as LG Electronics, Mitsumi
ion, Seagate, Maxtor, WD, Pioneer, Creative Labs, Inexq, XFX,


Microsoft, Intel, Nero and more. Retailers often have

several options to pick the
most suitable choices for themselves


Samtack has an excellent flexi
bility in dealing with customer

needs. The
company tries their best to satisfy all their clients by providing products and
services that one desires. Samtack thinks that clients are valuable
to the
company. They stress the importance of

customer satisfaction
as they believe it


element of business strategy. Therefore, when a client approaches

company with some specific requ
ests, Samtack

will try

their best

to implement
the reques

Samtack strives to make their customers feel important.


Samtack is friendly to thei
r customers as well as their vendors. As a customer,
Samtack has a good after
sales service in which it offers online technical supp
This provides customers with a direct access to help if needed
. The company
also offers service delivery to individual
customers as well as foreign retail
and industrial buyers.


Samtack has created a fun working environment to their employees. Unlike the
other businesses, Samtack’s warehouse has a section in which it allows the
employees to play ping pong and badmin
ton, or watch TV during their break time.
Also, they have created a learning area for the employees to learn updated
technological information via the Internet. In addition, Samtack often hosts events
with their employees such as annual Christmas dinner
s and house parties


In this way, employees will be attached to the company as it creates a family
environment to the staffs.

Company Structure

Samtack has over 130 employees in Canada
. The business structure of Samtack
follows the common

l structure:


Apart from doing daily book entries and monthly and annual financial reports, the
main responsibility for the accountants is handling the credit payments of their
suppliers (vendors) and customers (mass merchants). In contrary to al
l cash
payments by their small business clients, the accountants keep track of the 30,
60 to 90 days credit of the mass merchants to make sure payments are cleared
in the specified terms and agreements. On the other hand, they make sure there
is enough cas
h flow from the small business accounts, on top of the credibility of
mass merchants, to settle payments to their vendors.


The sales department can be divided into two main groups of sales: (1) Retail
(small stores distribution) and (2) Mass merchan
ts. A group of salespeople
handle small retailers’ consumption in per sales call base. Another group of sales
people deal with the mass merchants through long term relationship building in
account based sales. By setting monthly and annually sales goals by

the sales
manager, the performance of each salesperson can be measured based on
revenue and sales margin he/she generated. For instance, a salesperson in the


retail side may focus on the number of new retailers that he/she should bring in
monthly to achie
ve the set sales target.

Product Management

As a middleman distributing mainly electronic parts and appliances and daily
consumer goods, a good mix of products from a variety of vendors is critical to
sales performance and other aspects. Product managers
should buy in a right
amount of a product at a right time in order to push the inventory off the shelves
as quickly as possible. Not only is it significant for a product manager to
negotiate a right price for a product to lower the cost of sales, the right

moment according to the changing market interests is also a major factor for
Samtack, particular for its large portion of electronic goods as they depreciate
rapidly in market value.

Production and Assembly

The majority of the human resources con
centrate in the warehouse, where
production, storage and assembly are run. It is subdivided into smaller
operational departments. First, the assembly line packages, labels and seals
goods using the latest UV sealing technology to facilitate the package and

repackage process (Samtack). Second, the shipping and warehouse area, where
newly arrived inventories are received, scanned for inventory tracking and stored.
Next, the service department checks returned product and reports defects and
faults. Also, the t
echnical support group answers phone calls from end customers
regarding to product information and return policy and inquires.



Other departments include IT support, which is responsible for all technology
systems and networks for the whole company,
and creative group, which
comprises of graphic designers for package, logo and advertisement designs.

Business Models

Small Companies

As a leading distributor in North America, Samtack does business with thousands
of resellers, VAR’s, systems integrators,

national and regional retailers, and
consultants from coast to coast (Samtack). Samtack currently has a network of
over five thousands dealers, systems integrators and consultants across Canada
to provide a large number of high
tech products

for the North

American market.

One of the main goals of Samtack is to provide excellent customer
intimacy and operational discipline, so it exceeds the expectations of its
customers by providing more than they need. With the ease of a
ccess to high
tech products, Sam
k is well positioned to fill its customer’s needs by providing
very diversified products. This makes Samtack to become a very popular
company and increase its position in the computer business market. Doing
business with this thousands small dealers is the

main distribution of Samtack
since it makes up fifty present of its overall business.



The mass


segment of Samtack’s business has grown tremendously
over the last ten years. The revenue generated from this segment constitutes

than forty percent of Samtack’s overall business. The major chains that
support Samtack in this segment

include many big companies such as Future


Shop, Staples, Office Depot, and Wal
Mart. In order to satisfy the big demand of
this mass



Samtack has a facility called “packaging and re
packaging” by utilizing the latest UV sealing machine to seal more than ten
thousands packages of blister per day (Samtack). The efficiency of Blister
packaging helps to protect these retail chains from shop
lifters and store
One of Samtack’s core strengths is its ability to partner with the
world’s most prominent and respected technology companies by successfully
distributing their products across the globe (Samtack). This has unsure that
can maintain its dedication to high quality products to its customers.

Competitive Advantages

Samtack differentiates itself from its competitors in the following ways:

Credit Payments and Strategic Transfer of Funds

Samtack has different payment policies

for its two main clients

small retailers
and mass merchants. Small retailers are required to pay in cash for any sales
order. On the other hand, Samtack offers 30 to 90 days credit payment policy to
its big clients. Giving out credits to large companies

such as Wal
Mart provides
them more time and budget to buffer for their operations and, hence, creates a
customer value and long term customer relationship. Moreover, Samtack also
enjoys credit payments from its vendors. Therefore, the extra payment perio
helps Samtack retain budget while enjoying cash payments by the small retailers.
Due payments and interests by mass merchants then serve as the credit
payments due to its vendors. This strategic funds transfer from one party to


another party gives Samtac
k a privilege financial position, which helps secure the
company’s reliable fund for business operation.

Strategic Product Packaging and Branding

Samtack produces products in a unique way. One of the strategies that Samtack
has used is that they produces

identical products and package it into different
brands, they then sell the each product separately to the retailers such as Wal
art, best buy and to the small businesses. For instance, Samtack produces
hard drives, and they package it into different box
es that has different brand
name on it. They then sh
ip the brand name A
hard drives to Wal
art. The Brand
name B hard drives will then ship it to the other company like Future shop. In this
way, Samtack could avoid having the original price of the hard dr
ives decreases
by the retailers. The reason behind this is Samtack wants to avoid the retailers to
compete against each other by lowering the products price. Therefore, they
choose to produce products in a slightly different way, in which, they package the

same products into different Brands.

Inventory Management

Inventory management is an integral part of a successful supply chain
management. It is the backbone of Samtack. Especially being a distribution
company, a balanced inventory system

those sit at

the warehouse waiting to
ship to customers

is essential in order to control the related costs such as
storage cost, insurance, taxes, sales prices, etc (Merchant OS). An effective
“ordering dilemmas”, which have direct cause to those expenses, should
ximize productivity through considering balanced assortment of items, quick


and efficient turnover, maintaining service quality, stocking up
date items, high
volume purchases and cost control (Merchant OS). The ‘aging report’ in Samtack
acts as part of
the response to the ordering dilemmas. Product managers and
sales reps keep track of the aging report and make sure no inventory has been
sitting at the warehouse over 90 days. It is particularly important for electronic
products as their selling prices (r
elated technology) always depreciate once they
sit on the shelves. Therefore, they should be sold as soon as possible and
clearance sale would be the choice when they are ‘expiring’ soon.

EDI System

Electronic data interchange (EDI) is
the only informatio
n system Samtack
adopted in its supply chain management and the company as a whole. EDI is
transmission means from one computer to another. It is beyond e
mail because
it is the transfer of technological documents that follows standards like that of the

ASCII standard before exchanges. The transfer of documents for EDI standards
requires that all parties agree to standard document format, thus following safe
business standards before the document is transferred.

EDI is the new modern way of conducting

business. EDI is the modern,
rapid, inexpensive, and secure way of conducting “purchase orders, invoices,
shipping notices, receiving advices, and other frequently used business

For example, Samtack uses EDI to transfer large,
omplex, engineering designs. International firms use EDI to transfer documents
through continents under safe and secure conditions. Another example would be
that universities use EDI to transfer transcripts at a rapid pace. Another


important use of EDI is

to transmit financial information and payments in
electronic means. When it is used for such a purpose, EDI is often referred to
Financial EDI or Electronic Funds Transfer (EFT).

In order to conduct EDI, these are the components required:

Trade Agreement

a legally binding trade agreement between the trading
partner and yourself

Standard Document Format

the standard document format agreed to be
electronically agreed upon.

anslation Management Software

a software used to translate the
document y
our applications format in the agreed upon standards. In order
to obtain maximum performance, both platforms should be the same.

Communications Software

a programming tool that allows the user to
write communications protocols, or a separate application.

“ It can be a
module to the translator or a separate software application.”



a hardware piece used to transmit electronic data between
computer to computer. The higher the baud rate, the faster the
transmission would be.



Value Added Network. This is a network wh
ich you can
connect to

transmit data from one computer to another. In such cases, a
network can act as a gateway to another computer.


Point to Point

a direct communication link from one system to another.
Some tr
aders offer a direct connection to their EDI connection. Traders
may choose this method of communication instead of opting for a VAN.

To perform EDI, a trading agreement must occur between two trading
partners. Joint decisions are made according to the sta
ndard used. Information is
to be exchanged. Decisions and standards must be made to ensure the methods
of how information is exchanged, of how data is to be sent, and how data is
received. The data can be sent through a direct connection (a.k.a point to po
or through a VAN.

In order to send a document through EDI, a translation software is used to
convert the document format according to the agreed standards.” The translator
cr3eats and wraps the document in an electronic envelope and puts the ID for
your trading partner on it.”

If the document is transferred point
point, the information is transferred
directly from one computer system to the next. In another case, if a VAN is used,
the computer software dials the number for the oth
er network and then it
transfers the packet containing the data. The VAN ensures the information on the
envelope and sends it to the correct destination.

If the EDI is sent without a translation, it is taking on a high risk that the
information will not
be read and sent properly. Different applications may be
used but the translator ensures that information is communicated. Therefore, a
translator must be used to ensure correct communication.


Data Modeling for Business Process

Since Samtack
s as a middle
man in the market, the process of
Samtack’s business can be described into two main steps: the step between
Samtack to its vendors and the step between Samtack to its retailers.

Business Process I:
Distributor Ordering

The di
agram below shows the process of how Samtack orders inventories form
vendors. Inventory management checks the products that Samtack needs in a
regular time. A list is created and product managers will check and require the
number of orders that Samtack wan
ts from its vendors. EDI system is used to
transfer product data such as the deadline that Samtack needs for a specific
amount of items to its vendors. After checking and confirming information with
Samtack, Vendors ship products to Samtack and it can eith
er pay cash or credit
for those items.

Refer to

the data model below.


Flowchart I: Samtack orders inventory from vendors

Business Process II: Distributor
Retailer Selling Procedure

On the other hand, Samtack increases its profit by selling and s
hipping products
to its retailers. The diagram below shows the relationship between Samtack and
its retailers. After buying the items from its vendors, Samtack will scan the items,
number them and the workers from design department will pack and label them
These items will be put in the storage of Samtack. If retailers want and request
for a specific products, Samtack will ship the items directly to these retailers. The
duration of store these computer products are short as the price for computer
related t
echnology products usually decreases with longer time it stays in a
company. Therefore, if some products of Samtack have been staying in the
storage for more than ninety days, Samtack has to make a clearance. The sales


people of Samtack will contact its re
tailers, telling them that there is a promotion
to some of its products. After negotiating with a price that satisfies both sides,
Samtack will use EDI system to transfer the required documents to its retailers.
The products will then sell and ship to its

Flowchart II: Samtack sell and ship products to retailers

Business Process III: Returned Items procedure

Specifically, we looked into the merchandise returns process of Samtack.
According to a cyclic schedule, retail companies send in defect
ed merchandise.
Samtack receives the merchandise and forwards them over to their warehouse.
At the warehouse, the service department examines and categorizes the
returned merchandise. Once examined, the merchandise is then separated into
three categories:
defective, customer dislike, and no fault found. For the
defective category, disposal would be the next step. As for customer dislike
category, Samtack repackages the item and then resells it to retail companies.


Lastly, the no fault found merchandise is m
erchandise that is of no use anymore
and goes into the disposal along with the defective returns.

Flowchart III: Original
process in dealing with returned items

The issue we found was in the defective merchandise process. In this
process, all defective
items are disposed of. However, not all defective items are
completely defective. At the site visit, we witnessed items t
hat were slightly



on the surface of a keyboard. The keyboard was still able to carry on
its functions. Disposal of partiall
damaged items would be a waste of resources.

Suggested Business solutions

Solution 1: Inventory Management and EBay

In addition to the option of disposal, we propose another method for items that
are only partially defective.
Samtack should set up a sec
ond layer of inspection
and categorize those ‘defective’ goods into ‘critical’ and ‘minor’ type of defects.
Those considered as ‘minor’ defective should be repacked and labelled and store
in a separate shelf. Then,
amtack can create an eBay account
on eBa
to sell its dam
aged goods as second
hand products online
. So as not to be
competition to its own cust
omers (retailers), Samtack
should set up its eBay
store under a different company name. Samtack coul
d branch out as a third
business model
ically for damaged goods. This way, Samtack can still
make some profit off items that are not completely defective.
Nevertheless, in
parallel of the second
hand goods selling, Samtack can set up another EBay
account, under a different name, to sell its nor
mal inventories. As such Samtack
can expand its business to directly sell its products to the end users to the extent
where no conflict of interests between retailers caused.

Refer to

the revised data model below.

Flowchart IV: Samtack re
sell retur
ned items on EBay



Solution 2: CRM Integration

Nowadays, businesses adopt different types of information system to gain and
sustain a competitive advantage. However, Samtack doesn’t seem to utilize
much information system to support its business processes
. One of the possible
improvements Samtack can do is to adopt Customer Relationship Management
system. Customer Relationship Management System, also known as CRM,
refers to “methodologies, software, and usually Internet capabilities that help an

manage customer relationships in an organized and efficient manner”
(Alexandrou). CRM uses information about customers to gain insights into their
needs, wants, and

in order to serve them better. CRM typically
include function like sales force
automation and marketing
management analysis.

CRM system can help Samtack to
collect data accumulated over time and
makes inferences on what clients like to buy. Samtack currently doesn’t have
such system to record client’s ordered information. Sa
mtack could start collecting
such data in order to
understand the client’s need. This can help Samtack to

products and services in order to win more business in the future.

By adopting CRM system, Samtack would share the following benefits:

It enh
ances customer satisfaction and retention, ensuring that the
company’s positive reputation in the marketplace will continue to grow.

It increases value from the existing customers and reduces total cost of


It improves profitability by focusing on t
he most profitable customers and
dealing with the unprofitab
le in more cost effective ways
The National
B2B Centre

CRM system allows Samtack to track entire process of a pre
sales, sales
and service relationship with a customer. It is much more efficien
t than
fragmented records as it can save time in tracking communications and
transactions with a particular person. (
CRM Vendors
) Many software
applications are now available that permit company to record this relationship
from the time the clients asks t
heir first question. In order to save time for
developing their own CRM system, Samtack can search for companies that offer
CRM solutions, such as, Oracle, and SAP.

Change Management Theory: How does/will Samtack survive?

Samtack has a trad
itional organization structure with limited technological
integration in the business model. Samtack’s position in the industry, where there
is limited interaction with the end users of their products, turns its focus on
business processes efficiency and s
ervice quality. In fact, Samtack has a well
established reputation on those areas, especially in supply chain management,
and has a healthy cash flow due to its strat
egic financial

plan. This is a
competitive advantage of Samtack

mentioned earlier
. Besides
, another major
competitive advantage being a middleman is the comprehensive service package
it provides to the vendors and retailers. Samtack deals with the sales and global
distribution processes, which could be a hassle for an overseas vendor to directl
approach potential retailers and end users in a new market. Samtack deals with


all the distribution and inventory issues plus a high quality after
sale services.
One of the critical services as a middleman is the handling of the complicated
procedure of
returned items from retailers.
Currently, their returned items are
either treated as trash or
shelved items (customer dislikes). By adopting
technology like EBay, where limited cost of sales on an online selling platform
can be achieved,
opens up pot
ential revenue from the supposedly
$0 value
‘defective’ products. At the same time, instead of
waiting to face

the threat of
being removed from the vendor
retailer model, Samtack can

proactively expand its business models to directly reach its
end users.

Through the meeting with Samtack, we realized that the company has a
low willingness to change under the rapidly changing technological environment.
One information system and limited database management is definitely not
sufficient for a mult
inational business like Samtack.
Based on the change
management theory, Samtack should execute a change
process in order to
integrate the operation with
technology to the next level



Understand: understand the attitude of the staf
f towards change; educate
its staff the importance and benefits of integrating information system in
their daily work. For example, a CRM information system.

Enlist: appoint key human resources from different departments to a core
change team

Envisage: top

management should set

and feasible

vision and strategy for the

change outcome


Motivate: create a sense of urgency
towards the threat of the current
business situation; workshops and training related to the change process
can be outsour

Communicate: reinforce the need to change and the planned vision to give
a better picture where the staff will lead to

Act: the launch of new information system within operation begins;
relevant training and recruitment for technical support may be re

Consolidate: continuous motivation with awards and solid goals
should be
done in view of the outcome of the whole change process



Alexandrou, Marios, “CRM Definition”.
. 30 Nov 2009

"Customer Relationship Management (CRM) Vendors."
CRM Solutions
- Web. 30 Nov. 2009. <http://www.crm

“GlobalTech: ExperienceChange”.
ExperiencePoint Inc
. 22 Jun 2009.

Chan, Sean.

2009. 27 11 2009


. Web.

29 Nov. 2009




The National B2B Centre. "Customer relationship management."
benefits of CRM
. Business Link. Web. 30 Nov. 2009.

“What is Inventory Management?”.
Merchant OS
. 25 Nov 2009