One of the industry's largest independent distributors has announced it is moving toward a "blended" model, selling both authorized and non-authorized product lines.
America II Electronics Inc. says it is seeking more of a balance in selling both franchised and nonfranchised semiconductor and passive components. Independent distributors typically source parts from OEMs and other distributors. Authorized distributors source directly from suppliers. America II says it now buys directly from nearly 400 component makers.
Independent distribution has historically been viewed with skepticism by the electronics industry because of its sourcing practices. Sourcing components from OEMs and EMS providers increases the risk of picking up counterfeit parts the OEM or EMS has unwittingly purchased. In other cases, fly-by-night distributors will set themselves up strictly to market in counterfeit goods. Buying from sources other than suppliers is seen as a risky practice overall in the supply chain.
In recent years, however, such independents as America II have been increasing their diligence in inspecting for counterfeits and have secured direct ties with suppliers. “Over the past year, America II has been evolving,” said Dan Bisaillon, America II chief operating officer, in the company's press release:
We’re creating a completely unique experience for our customers by blending traits from the independent space with those from franchise distribution. We still have a team of commodity specialists who source the globe for components daily. But now, we also buy direct from almost 400 manufacturers. We’re truly combining the best of both worlds to effectively serve our worldwide customers.
“We call it the evolution of distribution,” Bisaillon added:
We’re adapting to the needs of our customers. We still do all the things that made us a successful independent distributor, such as offering asset recovery through excess purchasing programs and supply chain management services. But we’re also buying direct from manufacturers and continuing to sign authorized distribution agreements. We’re finding the right balance between independent and franchise distribution to meet the needs of our customers.
America II stocks nearly 4 billion components. It also employs global component engineers and a 57-person team of quality control inspectors.
If the America II model worked so well, why would they become a hybrid? So, on the independent side they will gouge customers and ship counterfeit stock and on the ifranchised side, they will seek normal margins, provide service and ship good stock? Makes no sense.
I think the short answer is they don't want to abandon the customers that have relied on the independent model. In terms of pricing and other concerns: when disk drives were in short supply, prices went up at franchised distributors: this was discussed at length during analysts conference calls.
The distribution industry is pretty much divided up between franchised (authorized) distributors, which have the suppliers' blessing to sell their products; and independents, that aren't authorized. Independents buy inventory from OEMs and EMS companies and often, other distributors. They sell branded products but suppliers may not honor a warranty sold through an independent.
The blending of the two is interesting and has a lot of implications, particularly the issue of cost. Open market buys are market-price driven (can spike upward or downward steeply); franchises have price guidelines. A distributor can't undercut price by too much with a franchise.
Barbara, most of the companies have a similar strategy. They have sales of both authorized components at front door and counterfeit at back doors. When we are looking for a component or device, they will show all the authorized items and finally some counterfeit items at a lesser price. That’s a business strategy, where most of the peoples are compromising for quality at a lower price.
Jacob, "authorized" v. "counterfeit", may be a bit harsh. There are certainly many "non-authorized" independants that buy from OEM's, EMS, and other distributors that are ligit. I do agree though that there are higher risks which could be mediated through more rigorous QC, or perhaps a more reliable identification proceedure to verify a components provenance. There's nothing wrong with a lower price if it's the genuine article.
They're kind of late in the game, however it opens up a can of worms Barbara as to why you'd endorse a single broker, such as America II, which is a contradiction if you ask me to franchise distribution when Avnet has for years had an exclusive interest in America II as their inventory turns partner for slow and non-moving inventory.
Personally- as Arrow acquired Converge in May of 2008 (Another contradiction), haven't seen stories about this or their "Blended distribution model." So the question lies herein, how much is Avnet and or America II paying you on the side to endorse their business model?
hmmm...I re-read my article and faied to see how anyone could misinterpret a straight recitation of facts as an endorsement. As to the franchised distrbutors, do a search of our site for the names Arrow and Avnet and I think you will find far more mention of these companies than America II or other independents. EBN takes its cues from its readers and buyers, and this channel accounts for a significant portion of business. It would be a far worse thing to ignore that fact that these distributors exist.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.