Unhappy sales guys? Perish the thought...But you are right, SP. Although most of the personal contact happens at the field level, the contracts are negotiated at HQ. The tough part is, it makes sense: If you are an OEM, why not consolidate the purchasing?
One of the ways distributors used to work around this was to have an account manager at the corporate level and at the field level. That kind of personnel is a luxury nobody can afford any more. It's no surprise that someone in the equation ends up unhappy.
Hawk--I agree 100% with your assessment. The Apple example you cited is a classic case: Apple likely has a "global" price from its component suppliers that is unique to Apple. But Apple's EMS partners--in this example Foxconn--may get a different price from those same suppliers because Foxconn sources in such huge volumes. If Foxconn's price is lower, do they "refund" the difference to Apple? Does Apple "refund" the difference to its customers? I doubt it. And you are correct--Apple sells the iPod for the same price no matter where it was manufactured.
Barbara, It seems the global supply chain can be "global" sometime only in name alone. Your article discussed component pricing but there are other elements of the supply chain that have similar pricing issues, including contract manufacturing, logistics, after-sales services, etc. A company that wants limited variations in global component pricing would also be likely to insist on the same for services provided by other parts of its supply chain. For instance, if Apple's iPod is manufactured by Foxconn in China and Vietnam, would Apple have to negotiate pricing based on where production takes place or should it negotiate one flat pricing and leave the electronic manufacturing services provider to decide where to make the products? Labor rates may differ substantially in the two locations yet Apple will likely sell the iPod at the same price in, say, the United States, notwithstanding where they were manufactured. Any thoughts?
Well this is exactly the reason why the sales guys sometimes get unhappy when engineers contact their headquarters to source component instead of contacting local guys. Its all the profit margins.
I think the answer to the last question depends on which link of the chain you represent. For component makers, prices are never high enough; for distributors, suppliers' prices are too high and customers want to pay too little; and for customers, prices are always too high whether they are ordering from the supplier or from the distributor.
At the same time, the channel has become better at understanding cost vs. price. As long as suppliers, distributors and customers recognize the costs associated with manufacturing, storing and moving components around the world (and are willing to pay for those services), all will come closer to protecting their respective profit margins while moving toward a price that all can live with.
This is why it seems the electronics supply chain can sometime seem like a delicate dance with complex steps on the edge of a cliff. That the industry always manage to pull off this intricate negotiations without shutting down sporadically is a testimony to the expertise of the players - or the knowledge/wisdom of their lawyers! Each part in the chain or network, as some prefer, is seeking profit motives while balancing the interest of its suppliers. How does a company get the best pricing it wants globally for components without at the same time appearing to be gouging its suppliers?
The supply chain is really less global than one would think. At the same time, there are a few companies that have established a global published price (which leaves room for actual negotiated price) and one company I hear is really trying to unify prices for their whole product line. I will spend some time over the next few weeks interviewing the principals involved in this effort and sharing what I learn. I know the industry as a whole favors the idea--it makes a lot of transactiosn easier. If the supply chain pulls together on this, I think it has a chance of succeeding, but that is still a long way off.
After reading throgh your two posts i wonder: can a supply chain be handled globally?
taking into consdirations the factors you've raised, i think once we have to cross international boundries, expecially across continents, the issues need to be addressed regionally.
The internet and communication systems has really turned the world into one single global entity but when thing leave the cyber world, and we face reality of the market and national differences, we realise that we are not yet "global".
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.
Archived Dialogues
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.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
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.
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