A recent discussion with a "buyer" in the electronics industry confirmed to me that many in the market will continue to include independent distributors in their list of potential sources. They do so for various reasons but they are also emphasizing the issues of quality, pricing and availability. These concepts run across the industry -- doesn't matter whether or not the partners are franchise or independents.
I think there's a great point in here... look at the companies/organizations that have known about, been warning, and have already instituted policies on counterfeits, BEFORE you freak out and make fear based decisions.
We do that in every other area of our life don't we? We do our own research; look at what other people who have been dealing with it do. If I were married and found out my wife is pregnant, we should all agree it would be silly of me to go to friends who don't have kids and ask for advice or look to them for how to prepare. Especially, when I people who experienced the process and deal with it on a daily basis I can go to.
While the analogy may be poor, I think it proves a point. We need to look at people who have experience and have been dealing with counterfeits for years, instead of looking to people who are reacting to it for the first time...
When I first got into this business, I decided the same thing (out of fear), "We should only buy from Authorized Distributors", then as I learned more about the industry and counterfeits, and the steps being taken by certain independent distributors, I slowly pulled away from that belief. Companies that use the services that ERAI and IHS offer, and adhere to standards IDEA agrees upon are in a completely different class than those who don't and shouldn't be lumped in to the same category by any means.
Mark - there is a place for independent distributors. It is right in line after the fully authorized sources. The electronic component market is as much about people (or more) than about the value an independent brings outside that relationship. Reputable independents have their customers and take care of them. Good for them and as well they should! That doesn't mean those customers are attempting to purchase from authorized sources first. They go to who they know that they trust and try there first. The market value of component sales serviced by independents is not in itself justification for independents as much as it is a testament to the number of relationships they have fostered over the years. I don't think you say "we sold $x of components therefore the market needed $x from us". When it comes to "component testing" by independents, I have to step in and say that anything visual is a half-hearted or tiny step in validation of product. True dynamic testing with high fault coverage on a genuine product tester while measuring edge rates, timing and power really get the heart of whether a product is genuine or not. Expensive you say? No, that's authorized.
E-Waste is only part of the problem......there is also the fact that when you make die for a component, a certain % of the die is deemed defective or not up to 'snuff' to be packaged into an ic. that % is 'supposed to be disposed of properly and destroyed. if this known bad die has a $$ value if it were to make it's way back into the supply chain as the 'good product' then u can bet dimes to dollars that a counterfeiter has a contact on the inside of that semi mfg to get his hands on the bad die and have it made into the 'good' part. Bad die is not classified as 'e-waste' because it is assumed that it never made it into the market to eventually become a part on a pc board that becomes e-waste. Bad die theft / buying is rampant in Asia. Put a bad die under a microscope and chances are good that u will c markers that lead u 2 believe that u have a valid part........bad die is good biz for the counterfeiter.
Great Question...what value does an independent distributor play in the supply chain. How do you quantify their value. Here are some first hand stats:
1. The marketplace is $3B worth of transactions from OEM/CM's to brokers/independent. This means that thousands of companies see the value year after year of using independents. Their reasons vary but almost always come down to one theme: The independent channel serves my need best for this particular part.
Now for some specifics:
1. I know that during the last allocation we helped one publicly traded OEM hit their quarterly numbers that would have been otherwise impossible if they waited full lead time. The slight premium they paid us to make that happen was more than offset by being able to hit the analysts projections. The missed deliveries could have resulted in tens of million in lost shareholder value.
2. I know that after the tsunami, our company helped secure product for mid-size consumers of hard drives. They were left without product b/c the larger consumers (PC clients) got first crack at any available inventory. Without that product many of these clients would have no product to ship...Period!
3. We have successfully extended the lifecycles of fully functional projects ranging from municpal lighting, aviation, and industrial autoamtion products. Many of these products were designed years ago and have plenty of life in them if a supplier can help service and support the business with quality repair parts.
4. A critical flaw in the flow of product from distribution and manufacturing is that it is a one way trip. Many OEM/CM clients are left with stranded material and no recourse but to try and recapitalize it through an independent distributor.
Hope that helps answer your question....Thanks for the feedback! Keep it coming!
@Mark You make an excellent point about the difference between"fear-based responses" and "wise practices." One has to consider a rational approach with feasible solutions.
I really hope some of these companies take a good hard look at everything and think before they over react. If they stop using brokers, we could have some serious issues in the supply chain. Costs will rise along with lead times and inventory. If these companies would take a second and stop panicking they would be able to figure out there are solutions.
Nemos, The point many in the industry are making is that sometime the "broker" is also the "criminal." But as Mark pointed out, manufacturers shouldn't apply the broad brush of "criminal" to every broker in the market simply because they are not franchise distributors. Unfortunately, that's what has been happening so far.
For many people in the industry, if a company operates as an independent distributor or broker, it must also be a criminal, hence the view often expressed often that buyers should only purchase parts from franchise distributors. It's going to take a major push by industry players to change this mindset. It will also require that more brokers adopt many of the actions suggested by Mark in his article.
If they take a strong stance (like your fear based examples) it wil eventually force the suppliers to get in line.
@FLYINGSCOT, I agree with your observation, but the bigger question is what is a company loosing by not dealing with suppliers ? Am curious to know what role the intermediate suppliers play.
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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.
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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.
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