I agree, Bolaji--there should be a term beyond "distributors." The problem is, almost any new phrase is more cumbersome than the original. "Contract manufacturer" became electronic manufacturing services provider. The "channel" is nice and compact, but maybe too inclusive. Wordiness aside, the scope of services distrbutors provide is expansive and I would expect to see that continue.
Whatever became of the acronym VAD (Value Added Distributor)? Never did sound very high-tech as literally anybody could be carry the title even if they simply packed an order with twice the ESD wrappings. On the other hand, it was consistent with where the industry was heading as value added service revenue expanded beyond its early boundaries.
Tvotapka, my personal opinion is VAD of which mission should be to put value on top of goods or products, have faced (and are still facing) as per other players in the market, in general, strong limitation in their actions due to financial crisis; as consequence, they have had to introduce considerable costs' cut then value added is becoming very small and sometimes, not perceived.
TVotapka, The description value-added-distributor (VAD) is not any better than plain distributor. These companies began adding value added services more than 10 years ago but they've obviously gone far beyond that (Please see the comments from Alex). I believe they'll continue to integrate extra services as demand increase from customers, many of which either cannot afford these or just want a one-stop provider for non-core offerings.
Interesting post, Bolaji. Besides absorbing the functions of OEMs and retailers, distributors have also created many new functions and roles that never existed before in the supply chain. I think it would be a good idea to shed light on these as well.
I think there's something about maintaining QA. Additionally, in competitive markets, vertically integrated companies have an edge, reducing overhead and being able to lower costs (and maintain better margins).
Alex, Thanks for the comments. I wonder, though, who is driving this brand and service extension by Avnet. Do you see this as something the market is forcing on Avnet or is the company taking the initiative based on customer feedback with programs like this?
I think we have to make a distinction between the systems side of the business and the components side. VAD/VAR is a term that applies mostly to the systems/IT side of the business and, in fact, Avnet and Arrow sell to VADs and VARs. I believe Avnet & Arrow would still be considered wholesalers in some systems markets. On the components side, you'd be hard-pressed not to find a distributor that provides value-added services.
Barbara, I am interested in your opinion on a question Tirlapur asked. Do you foresee a time when distributors might start offering finished and self-branded electronics goods?
How many more OEM and vendor functions can distributors absorb?
@Bolaji, do you think eventually these distributors will start making their own products because they have full access to both component's and design, hence they are in better to position to optimize the cost of the product they build?
Tirlapur, Distributors haven't begun making self-branded electronics equipment but they didn't use to provide so many design services either. The executives will, for now, insist that's not likely soon. I believe this is the case but I won't be surprised either if they jump into OEM business.
@Bolaji @ tiralupur: excellent question. The short answer is no--at least on the components side. Distribution for a short time offered turnkey contract manufacturing services and withdrew from that market because they were seen as competing with their customers (EMS compnaies). While distributors do design and put together reference designs and board-level designs, those are sold in limited quantities as design tools/aids for customers. It's a very sticky situation if you are seen to be competing with your partners, and the channel avoids this.
On the systems side, distributors do assemble and configure entire systems. In this regard, the do overlap with some of their VAR/VAD customers. In those cases, it's usually when a VAR or VAD doesn't offer a product the end customer needs and a distributor can. Also, the brand will always be IBM, or HP or Microsoft--distributors wouldn't sell a system under their own brand or as a "white box." They never want to be seen as in direct conflict with a supplier or customer.
It's a very sticky situation if you are seen to be competing with your partners, and the channel avoids this.
@Barbara, I totally agree with you. I think this is the same case between Apple-Samsung. Earlier samsung was giving service to Apple, but when Samsung released its own handsets Apple not only moved away from Samusng but they are also fighting legal battle.
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.
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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