OEM and EMS customers want their distributors to help them cut total cost, reduce time to market and help them solve component allocation issues
Distributors, whether they are big or small, know they have to do more than sell parts if they want to increase sales and grow their number of customers.
While distributors obviously have to stock the components customer need, they must also help them compete in the marketplace by aiding their efforts to reduce total cost and get new products to market faster. In addition, over the past year helping customers compete means helping them manage long lead times and shortages.
Such assistance sometimes comes in the form of value added, supply chain, inventory management, and design services. Information is key. Distributors provide technical and market information on their websites crammed with, not only part numbers and market data, but also with spec sheets, tutorials and design tools to make it easier for customers to find the most technically fit, cost-effective solutions.
It’s not just brand-name distributors, such as Arrow, Avnet, Future, Mouser and TTI that provide services that help customers reduce their total cost of ownership and reduce time to market. Even small, lesser known, specialised distributors provide value-added, supply chain services and design expertise to customers .
For instance, Joel Levine, president and founder of distributor RFMW, based in San Jose, Calif., said his company provides many services that reduce cost for customers including custom cable assemblies, visual inspection of die, tape and reeling, some kitting, and private labelling. RFMW, which is being acquired by TTI, specialises in RF and microwave components.
“Some things that we do that traditional distributors don’t
do is handling die and doing
visual inspection of the die,” he said. “A customer may want a visual inspection because the part might be going into an environment that can’t have any dirt or dust or scratches or things like that. We have a clean room in-house and after visuals” the die is re-plated and serialised, he said.
Another specialist distributor, Symmetry Electronics based in Hawthorne, Calif., has inventory programs to help reduce cost for customers. “We have the ability to do all the standard inventory bonds,” said Mark Zack, vice president and general manager of Symmetry Electronics, based in Hawthorne, Calif. ”We can do proximity warehousing. We can
do one-day or two-day shipments,” he said. Symmetry is also increasing inventory for customers.
Shortening lead times
Helping customers to reduce cost by carrying inventory for customers is also a focus for Integra Electronics, a small distributor based in Anaheim, Calif.
“We carry the inventory. We try to shorten the lead times so customers always have products on the shelf,” said Victor Montez, president of Integra, which carries a range of components including capacitors, connectors, diodes and transistors, frequency control devices and LEDs among other parts.
“If a customer needs a half million pieces and we know that they’re using them we are going to have” the parts in stock, he said. “Some of the inventory is bonded, but most of it is dedicated to our customer
Montez said Integra’s customer base is limited, but it offers a high level of services to its customers. Integra understands customer forecasts and “is in tune with their products” and what parts they will need for new designs that are going into production, he said.
Montez said customers are “looking for boutique type of service.” When they have a new design, “we understand what they need,” he said. If a part being considered for a new design is going end of life, Integra offers alternative solutions.
“We know the strengths and weaknesses of our products and where the technologies are going,” he said.
Distributors say customer requirements have evolved over the years and are more complex than in the past and there is no one-size-fits all solution to satisfy requirements. For instance, some OEM customers want to use the web exclusively to do business with distributors and are not interested in face-to-face meetings with field application engineers, sales reps or account executives. Others insist on in-person meetings with both sales and technical support.
Because of the web, customers have a lot of information but they “don’t want to have to hash through hundreds of thousands of pages to understand what’s the best technology for their requirements, for their challenges and for the boards” that they are building, said Karim Yasmine, corporate vice president strategic supplier development for Future Electronics based in Montréal.
As a result, Future and other distributors have highly trained field application engineers to help customers find the best solution for a design. “The FAEs are not driving one manufacturer over another. They are driving the best solution for the customer,” and helping reduce the time it takes to bring a new product to market, he said.
On the supply chain side, OEM and EMS providers’ reliance on distributors has become more acute over the past year because of market conditions. There are shortages and allocations of semiconductors and passives and many buyers are looking to distributors for shortage parts, or alternative components or solutions.
“In this environment you get a lot of face-to-face contact because they are struggling” to find parts, said Yasmine. “We have to support those customers that have been good at communicating their MRP requirements.” With many customers, “we sit down and we talk to them directly part by part to understand their needs,” he said. Future tries to make sure it has the inventory of parts that the customer needs “to keep lines running,” he said. “It’s a tough situation but we’re spending more time than ever on the phone with customers” about shortage parts.
“The mandate from our ownership is, success coming out of this market environment by means of all regular customers being taken care of,” said Yasmine. “Number two is if we can pick up additional customers through support with our inventory programs without impacting our loyal customers” then Future will do that. But the priority is regular customers.
The same is true will smaller distributors. Montez said during the current shortage, Integra is getting calls from buyers at many companies that it has not done business with before looking for parts.
“We went from the back of the Rolodex to the front of it,” he joked. Buyers seem to say “we haven’t called these guys before so let’s give him a shot.” But Integra focuses on its existing customers. “We want our customers to understand we are going through this with them, we want to be in business with them when everything is said and done,” said Montez.
Yasmine said with current tight supply market conditions, “we’re spending more time than ever on the phone with customers” about shortage parts and some customers “are open to second sourcing and alternatives and that requires a lot of conversations.”
One particular problem area is multilayer ceramic capacitors. MLCC supply is tight and some manufacturers are not taking orders. Some are discontinuing production of capacitors in larger case sizes in favour of smaller case sizes which are more in demand.
Often distributors have inventory to meet the needs of their regular customers. However, in instances where a part has been discontinued, a board may need to be redesigned and distributors suggest alternate parts for the component that’s going end-of-life (EOL) .
However, another solution may be just changing suppliers. For example, there are extended lead times for some microcontrollers from certain manufacturers. In some cases, lead times are out to 36 weeks. However, similar parts from other manufacturers have more traditional lead of 8 to 10 weeks, according to Yasmine.
“Everything is not on allocation. You can’t say that all technologies of one type or another are on allocation. You need to get down to the vendor, and the package to understand where the issues may be,” he said.