Thank you guys for having me!! My head is spinning from all the questions flying out & my fingers hurt from typing so fast (LOL), but, as you can probably tell, I'm very passionate about the subject and have enjoyed every second of it! :)
@nemos - there are many techniques for identify a reused/remarked part. The first step is visual (we follow the IDEA-1010B inspection standard) -- with the use of a high powered microscope, you can see evidence of sanding. A chemical part-marking permanecny test can identify when a part surface has been re-marked. (For example, an acetone swipe will tell this on some components -- the marking will wipe right off!) It does not work on all surfaces, though. We use other chemicals for advanced detection. Also, our technicain is able to open up a chip via etching with acid & expose the die inside. Through metallurgical scope, he can view the die markings. Yes, x-ray is a good way to inspect a large batch and make they all look identical inside. Electrical testing is the final step. We do fucntional testing on many parts and also pinprint analysis compated to a know good device.
To our awesome audience: thank you for your participation in this discussion--this has been a teriffic discussion, extremely educational and professional. I also want to thank Dawn for her time. We have to stop exactly at 1 today, but I invite you to contact me through the home page for follow up questions or comments. You can also reach Dawn by posting on her blogs.
it's very interestng your point of view about how independent suppliers should be considered in the bussiness model, however in order to "be there when you are needed" should be required to have a good inventory available, what would you say, a ballpark calculation of your inventory turns per year?
@Bolaji - yes, it is true that OEMs need to ensure credentials of their supply chain vendors. Most independents have access to the same materials (more or less). So, for example, if an OEM has 5 reputable vendors that they work with & none of them can find the stock & then another vendor comes out of the wood work with parts -- they should be very cautious. Pretty much any part number can be "painted" in China. OEMs should keep that in mind when procuring in the open market. If something seems to good to be true, it probably is. Aligning with reputable vendors and avoiding the temptation to go with some new/unknown vendor out of desparation of parts is more along the lines of what I am suggesting.
DAwn: This is how I see it: forecasts will never be perfect, so there will always be excess and shortages. Independents provide a service for the movement of these products. It is a fact of doing bsuiness, and has been for as long as I've covered the market
Just crushing out-of-service electronics equipment is not an option, either. Proper disposal under appropriate regulatory supervision is key. The environment will suffer greatly if we just crush, dump and bury. It's not an option. The current system is not the greatest and should be improved but it cannot just be swapped for a worse system.
@TaimoorZ: The fact is, it can't. Most components are tested in lots--evry fifth part is tested--once it leaves the factory. I believe component makers test every single part, which is how they guarantee perfromance.
@Barbara - I know that this sort of fight for market share has been going on for many years now. It does seem like some of the component manufacturers have been more agressive in recent times by forbidding their products to be sold to an independent distributor, for example. Perhaps it is just a sign of the times and the economy? I'm not sure. But, again, independents will never be eliminated. Our services are too valuable and widely needed. I wouldn't mind, however, if some of the "bad apples" were seeded out. That's what really needs to happen
@anna young - great point! I think franchise distributors see independents as a threat, but it's difficult for me to understand why? In my client realtionships, we position ourselves as a supplemental supplier - to fill in the gaps when franchised cannot deliver -- not to take place of that relationship. However, one of my reps actually had somebody from a major component manfucturer tell her at a networking event "you are taking food off my kids plate" because she sells to his client when he can't deliver parts. What does he expect his client to do?? Sit there with his line down while waiting an exorbitant lead-time?? He would go out of business, if so.
Dawn, It seems you are concluding that in order for the system to work and for companies to avoid counterfeits, the OEMs and contract manufacturers have an obligation to ensure proper credentials of their supply partners who should probably indicate they are 100 percent sure the parts are not fake. But wouldn't this mean 100 percent verification of all parts? Is this possible in the industry considering the milions of components shifted around everyday? I can only imagine the added costs to pricing.
@prabhakar - Unfortunately, not so much. Many authorized sources go on campaigns to discourage buying from independents, so they're not likely to pass on leads (although, it would be a great benefit to their client to know of a reputable independent source. They are going to go into the open market anyway - might as well make sure they are protected) At the end of the day, it really boils down to market share, although they will give a variety of other reasons. I think there is plenty of market share to go around and we should all work together in the best interest of the industry and all involved
@hospice: one of the reasons brokers are unpopular is becuase they often offer compoents below market price, or when parts are in short supply they raise prices astronomically. Buyers can justify the cost becuase it is cheaper than keeping a manufacturing line idle
@Dawn: In his blog "Pay No Attention to That Man Behind the Curtain...", Michael Wood concluded with the sentence "At the end of the day, a $20 “Rolex” is never the real thing.". Can counterfeit components be sometime determined/known by its price?
@electrnx-lyf - the origination of the counterfeits is due to unregulated e-waste disposal (old computers, TVs, etc). This electronic waste is shipped over to 3rd world nations, such as Shenzhen China, which is very impovershed. They have elaborarte counterfeiting operations where they pull chips off of old boards, remove old marking, and basically paint new markings on top. It's crazy! Regulating e-waste must happen to eliminate the issue. In the meantime proper part testing and verification are MUSTS!
@mfbertozzi There is a German company that is currently doing this, but I belive the equipment is still in the multi-millions of dollars. The problem with compoennts is you really need to mark evey individual part like this, and it is not affordable. Then, users have to invest in equipment to read the holograms. The system quickly is priced out of reach for small business
Do you know of any form of self regulation or association that binds the independent distributors and how has this association helped to give legitimacy to the group which I am hoping your company belongs?
Dawn, One continuing puzzle for me has been the relationship between franchise and non-franchise distributors. It's almost like we delegitimize one in other for the other to stay dominant. Yet, don't franchise distributors use independents to sell products when cleaning out their inventories? In other words, there's a role for the two. Isn't this the case?
@electrynx I can take that one. Many counterfeits are factory rejects that are stolen and repackaged. Then they are sold to an OEM, EMS or to the open market. In other cases, counterfeiters set up their own "storefront" online and advertise parts for sale. Some contact you directly--I even get those in my e-mail
@Susan - do you mean the ROI on the testing capabilities? I can't really put a dollar amount on it, but we have tons of clients that purhcase all of their obsolete and lead-time parts through us exclusively. They have been burned so many times by competitors that they are ecstatic to find someone that is in their corner protecting them. We provide very detailed lab reports of all incoming parts & notify the clients of any concerns. This has helped us to keep our head above the water, even in a slow economy and with the (likely temporary) "independent ban" that is happening at some big corporations. It's all about relationships & those are built on trust!!
Other than the crooked buyers switching the parts with the faked ones while returing, what are the otherways does the counterfiet components enter into the distributors shelf? More than this I'm quite curious to know about who makes these fake components and what sort of infrastructure does this crook companies?
Dawn, your example is spot on. In one case, a franchised distrbutor took returns from a customer and discovered they were counterfeit. Now, this distrbutors does much of the same testing you cite on its returns. That kind of situation adds expenses throughout the channel
@Bolaji - Unfortunately, yes that has been the case with some major OEM companies. They are so frustrated with receiving bad components that they have completely banned purchasing from independents. I believe that this will be a temporary ban as they really can't thrive without independents. Parts are constanly going obsolete due to advancing technology and a board re-design takes a lot of time & money. I think they are taking some time to evaluate thier current procurement processes. Once they get a handle on it, they will be back to buying from the open market. I think it is SO important to practice safe procurement. When buyers take quotes at face value and dont do enough research on the company quoting and/or have parts tested --- that's when the trouble happens.
@anna yougn - Great question!! While I have never personally received a counterfeit part from a franchised source, there are many documented cases of this happening. The way this takes place is when a "crooked" buyer buys from franchised and then requests a return. Typically, franchise will just put them right back on the shelf without any incoming QC inspection. Therefore, there have been cases of good parts switched out for bad & then put back on the shelf. Absolutely, even franchise distributors need to put some measures in place to prevent this from happening.
Dawn, You mentioned in a previous blog how some parts of the industry have written off independent distributors. They refuse to do business with them no matter what. If this remains the case winning customers would be extremely difficult. I realize your company is finding a way around this but what else needs to be done on an industrywide basis, after all we can't just completely take indies out of the supply chain?
@WaleBakare: right, I'm with you; opportunity trade off could bring considerable advantages. Going further, cloud potentially avoids to invest in common platform, leaving CAPEX and OPEX for proprietary plats and more focused on corporations' mission.
@nemos - It always comes down to quality & service. We care about our clients & there problems are ours to solve. Part one is finding the parts that they need to keep their production line up. Part two is to make sure the parts we find are authentic and without quality concerns. That is where we provide the most value
Dawn, If Independent Distributors should have testing facilities to detect counterfeits, are franchise distributors obliged to do the same or do we all assume fake components cannot enter the supply chain through the big franchise distributors?
@Nemos--independent distbutros are also known as the "spot market" which means they often have inventory available to ship right away, whereas a franchised distributor may quopte a leadtime. Or an independent will find what you need. This is why they are attractive to buyers, especially when buyers are in a pinch
@Barbara interesting b/c I'm working on a blog about a knowlege base (more comprehensive than a data base) that is being put together by scientists with cloud technology. I hope to learn more about how they agreed to use a cloud for it.
@electrnx-lyf @hospice-houngbo - Yes, it is costly to open up a testing facility, which is likely why not all independent distributors are willing/able to do so. However, the investment pays off in customer retention and loyalty when they know they have a partner that can get the hard-to-find parts they need, without the worry of counterfeits.
@mfrobertazzi--that is exactly the kind of use the cloud is intended for. Right now, most inventory information is shared through proprietary links. There is no one database that everyone can access. That said, the cloud seems risky to me
@Bolaji, yes I meant only for a large enough number of supplies and suppliers to find matches more quickly. Covering everything is virtually impossible. Not every retailer works with Amazon, though many do.
Dave Sasson, RFID may solve the problem of counterfeiting but it would only be a matter of time for someone to counterfeit the RFID tag itself! There are fake Apple stores in China right now as Barbara warned in one of her more recent blogs. Counterfeiting will always be a problem. Companies like SolTec just have to be one step ahead and stay on the alert all the time.
@Dave--there used to be a website where compaines could post notices about counterfiet parts. The last time I tired it is was subscription-only. I think an organization of independents, the IDEA, is trying similar measures
@anna young @mario8a - I dont have an exact count, but we have well over a million unique part numbers in our database. This includes parts on our shelves as well as parts available to us through our approved supply chain network. We work closely with hundreds of vendors from all over the world
Ariella, Absolutely. I agree. Most companies, SolTec included, have information on their parts. As Dawn noted, this is available and searchable. I assumed you were asking about all available-to-sell inventories in the Open Market. That's what I referred to as being extremely difficult.
@nemos - Yes, counterfeits are a huge industry concern. My company has invested heavily in test equipment, qualified personnel, and obtaining quality certifications as part of our due diligence to keep counterfeits out of the supply chain. We also offer our testing services through SolTec Labs to our competition so that they also have tools available to them to keep sub-par materials out of the marketplace
@Dawn: On average, how quickly are you able to get back to the buyer once he submit a requests for parts? Does it depend on the kind of parts the buyer has requested? In many cases, the time factor is very critical I guess especially if the buyer has pending orders.
Dawn, I noticed the question asked by Ariella. Does the industry have an outlet that offers a general database of all available inventories through the Open Market? SolTec's database may be available and searchable but does it link to other sources or is this limited to data on SolTec's inventory?
It is true that counterfeit parts enter the open market becuase the buying and selling is often done online and there may not be longterm relationships established between suppliers and component buyers. However, counterfeits have also cropped up in the authorized channel through product returns. This is why the traceability aspect is so important to suppliers
@Bolaji, of course it wouldn't be possible to cover every single part available unless everyone who has such parts registers it in some way that is accessible. But I should think for Dawn's business, it would make sense to keep an updated data base on the companies she deals with and their stock in order to be able to find what is needed quickly.
@Taimoorz - Absolutely! You can search our database on www.soltecelectronics.com - which shows all the parts available in our warehouse & through our vast supply chain network. You can also submit an RFQ online, or contact us directly with special needs.
@electrynx: I can answer that one. Suppliers franchise authroized distrbutors to resell their products which means that the manufacturer's warranty carries through. In order for suppliers to back their product, they want to be able to trace it back to the original source, that being the factory. Once something is sold in the open market, that traceability becomes difficult
Ariella, There are outlets that offer extensive information on what is available in the market. However, for the Open Market this would be more difficult. I don't believe any one company would want to stand up and vouch for the information and parts being hawked by all participants in the sector. If this happens and you vouched for a counterfeit part you would then be liable. Of course, the industry organizations that Dawn discussed in her blogs have certified members and this may be a starting point. For other sources, I would suggest looking at third-party companies such as datasheets.com, a service that I blogged about today. It's one of the more credible sources out there although they primarily represent suppliers and franchise distributors.
@Anna young - oftentimes, when excess materials are sold, the CofCs do not go along with it. So, typically, excess material does not have the traceability. This dove tails nicely into Barbaras request to go into some of the risk mitigation. The main ones: align with reputable vendors (with quality certs in place and good reputation -- check references), and make sure the components are properly inspected and tested to identify potential QC failures. There are different levels of testing available, depending on end-user. For example, Military/Aerospace tend to require full-functional testing when traceability is not available, whereas consumer electroncis might have some lower level testing, such as curve trace.
Hi Dawn, thanks for the opportunity of learning more ab out this topic.
My question is in regards to new leagislations coming up every year for environmental and certification compliance on components, let say RoHS compliance, if Soltec bough a component before 2006 if should not meet RoHS, so now in 2011 it will be a risk to use, how Soltec is preventing for future legisaltions in EU or North America?
@Ariella - are you referring to a parts database or supplier database? In either case - Yes! We have a massive database full of supplier and part date. Knowledge is power in doing our jobs over-the-top well.
@Barbara - Some view the open market as risky because there is not always traceability back to the original component manufacturer. Since the electronics industry can be lucrative, counterfeiting is a huge concern. However, these risks can be mitigted with proper proecedures and testing in place
Ariella, I don't believe any one single company has information on everything that is available through the Open Market. In many cases, this is a competitive advantage information and companies may prefer that a potential buyer visit their websites or call them directly. That's part of the dynamics of the Open Market.
@ Barbara/all: I was wondering how Internet services could help in better qualifying non-franchise distributors and allow them in reaching right outstanding. Once community's discussion is gone, maybe Dawn could report to us her experiences.
Hospice_Houngbo - Unfortunately, yes, as I've been involved with this industry for over a decade. However, at SolTec, we have very strict AVL (approved vendor) policies in place to keep the "crooked" ones off our list. We also protect ourselves by testing and asking for net terms or escrow.
I believe the term Open Market might also tend to have a negative connotation to it. This shouldn't be the case but it is currently. Part of what needs to happen is the legitimization of the so-called Open Market. Is that possible considering (1) the negative image and (2) the tendency on the part of some other players in the industry to prefer to stick participants in the Open Market with the negative image because it works in their favor?
Hi Everyone, In order to maximize the use of Dawn's time, some of the more general questions will be answered by EBN editors Bolaji Ojo and Barbara Jorgensen. (Any other specialists online welcome). We'll prefer for Dawn to focus on the more substantive and engaging questions.
Absolutely, Barbara - SolTec Electronics is an independent distributor of electronic components. Our clients come to us when they can not find the parts needed for their production (obsolete parts or long lead-times, for example). We are able to go into the open market & find the exact part they need, or some other alternative that might work in their application. We also have a subsidiary, SolTec Labs, where we are able to detect and avoid the counterfeit problems.
Sure! Thank you Barbara & EBN for inviting me. In the world of electronic components, the open market is where OEM/EMS companies are able to re-sell their excess materials to other manufacturers who need the product for current production. There are currently billions of dollars of surplus electronic materials available in the open marketplace. (As opposed to purchasing directly from the component manufacturer or franchised source).
I'd like to welcome and introduce Dawn Gluskin, founder and CEO of SolTec Electronics. SolTec is a distributor that works in the open market. Our first question for Dawn: could you define the open market?
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.