As the boundaries between design engineering and purchasing have blurred, the electronics supply chain has shifted. What is commonly referred to as the design chain now caters to engineering as well as purchasing, but the transition hasn't been easy. The supply chain can't always deliver what engineering needs.
Traditionally, engineers haven't had to worry about how a component reaches a design. But cost issues, environmental concerns, rapid obsolescence, and outsourcing have forced engineers to consider the practicalities of a design. Companies targeting engineers -- component makers, distributors, and various third parties -- are reaching out to lend a hand.
Engineers spend a lot of time online, research has found. Companies have been aggregating pertinent data -- spec sheets, design tools, compliance information, and reference designs -- onto a single site, with hopes of securing a sale. Supplier sites have a wealth of data, but usually don't show competitors' products. Distribution has tried to fill that gap in a variety of ways.
Catalog distributors, for example, have a vast selection of components and stable pricing. These sites tend to organize selections by supplier, part number, and performance specs. Parametric search capabilities are particularly strong. Most sites provide tools developed by suppliers, kits, CAD software, applications notes, and sample designs.
Technical support is provided in the form of videos, webinars, call centers, live chats, and peer groups. In many cases, information is provided directly by suppliers, so end-of-life (EOL) and compliance data is up to date. The idea is to make the engineers' experience as seamless as possible -- and keep them on the site as a purchase is likely to follow.
Third party sites provide the same amenities and an even wider component selection. These sites tend to be more agnostic than distributor sites, since they aren't tied directly to suppliers. Users can check inventory from a variety of distributors (as opposed to a single catalog) and purchase from distributors or suppliers.
From the supply chain perspective, though, the setup isn't perfect. A successful design will eventually reach production, meaning purchasing and logistics issues kick in. Catalogs and aggregators typically don't engage in volume relationships. Those that do are selective about their engagements. The qualities that make catalogs work -- a wide selection, stable pricing, and fast delivery -- don't translate well into volume production. In most cases, companies will transfer their production business to another distributor.
That's where broadline distributors fill the gap, reaching deeper into engineering as well. By assisting engineers with their designs, they hope to capture volume orders when a design goes into production.
Online, broad line distributors offer most of the same design accoutrements as catalogs and aggregators. Technical assistance is provided in the field as well as online: FAEs may meet with customers face to face.
A few aspects of the design chain business, however, don't sync well with engineers.
Since distributors have to keep track of volume orders across the globe, a lot of information is required from customers at the design phase. For example, engineers are asked to register a design with a distributor so the distributor can handle fulfillment of the bill-of-materials (BOM). A lot of things may change between the design and production, and engineers may be called upon from a manufacturing facility to OK a part substitution because of a delivery glitch or an engineering change order (ECO). Issues typically handled by purchasing now involve engineering, and vice versa.
Distributors are adapting to the engineering culture. Suppliers train distribution salespeople and representatives. Broadline distributors have established catalog-type units within their overall businesses. Avnet Express at Avnet Inc. (NYSE: AVT), and leading competitor Arrow Electronics Inc., are venturing deeper into the embedded space, providing reference designs, and even IP.
For designers, there seems to be a lot of choices for design assistance. Suppliers, however, sometimes complain of neglect. In order to maintain a profitable operation, distributors may focus on designs requiring high-priced, high-margin components. Since the channel has begun hiring engineers, the cost model has shifted. Salespeople generate sales, and engineers assist in the effort. Engineering salaries add to distribution costs, but are a necessary competitive weapon in the market.
The distribution channel has managed costs by moving a lot of support tools onto the web, and relies heavily on suppliers to provide materials, training, and other forms of support. For the front end of the supply chain, distributors are becoming a one-stop for much of the research material engineers need. This model has become an essential element for establishing an effective supply chain.