Which Distributors Do You Prefer?

Component distributors are my favorite players in the electronics supply chain. Sure, I've written more about Apple Inc. (Nasdaq: AAPL) than most other companies in the last few weeks -- the company has a great storyline, after all -- but despite their lack of high-level visibility, distributors are still central to the smooth flow of products and services in the industry.

Before I dive into specifics, let me present here my image of the distribution market. Electronics component distributors are the glue holding the industry together. I have often described them as a hardy bunch, but component distributors are also great at deftly handling huge egos, smoothening out wrinkles in the supply chain when suppliers and OEMs/EMS providers clash, and helping to take the pulse of the market to reduce the negative impacts of its nasty boom and bust cycles.

Many of the industry's biggest distributors have also been very successful at reinventing themselves. They have branched away from playing the traditional role of middleman (to parts manufacturers and end-users) and become an even more integral part of customers' operations by adding numerous services.

Through acquisitions in North America and beyond, Arrow Electronics Inc. (NYSE: ARW) and Avnet Inc. (NYSE: AVT), for instance, have grown rapidly over the last decade while keeping to their original concept of representing even the smallest and medium-size businesses globally. Both companies have well over 100,000 customers and represent thousands of component makers.

The smallest distributors with only a few stores in the United States, Europe, and Asia-Pacific can teach us a thing or two about how to survive the treacherous terrain of the electronics industry. Many of these distributors have become highly specialized and skilled in specific market segments, making them critical partners to OEMs in the aviation, instrumentation, industrial, medical, and military markets. These types of companies are known to go the extra mile for customers, who in turn stick by them when the market goes into a recession, as it does periodically.

Over the last 25 years, EBN parent company UBM Electronics has annually conducted a major survey gauging how customers use distributors and which companies in this category are considered "preferred partners" by OEMs and EMS providers. I have always found the results of the annual survey fascinating because they clearly demonstrate the value customers put on the services offered by distributors.

The results of this year's Distributor Customer Evaluation Study will be presented by EBN global director Bob Dumas to executive teams from 20 manufacturers and distributors later this month at the annual Electronics Distribution Show in Las Vegas.

What will you find in this report? The study presents information on the distributors that are used and preferred by engineering, supply chain/procurement, and corporate professionals in North America. Product areas reviewed include semiconductors, connectors and interconnect, passive components, electromechanical devices, and power ICs.

The study reveals how distributors are rated on the basis of patronage (all products and specific market segments) and the likelihood of future patronage, based on current performance. Distributors are also rated on how effectively they provide on-time delivery, the ease of conducting business with them, whether they have competitive pricing, and the availability of products when ordering from them.

EBN readers will be able to access portions of the report by May 26. I will be sharing the results of this study in future blogs, and we will also host a Webast to discuss the findings.