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Doing More With Less

Electronics components suppliers are part of the trend that's driving distributors further down the design chain. As their engineering resources are cut, component makers are focusing on supporting only their largest customers, leaving distributors to pick up the slack.

“Many [of our suppliers] do not have the resources to support the broad and growing customer base and rely on us to do that for them,” says Peter Kong, president of Arrow Global Components. “In turn, they provide us with product information, application knowledge, training, factor resource access, among others. The best suppliers with the best distribution programs recognize and leverage our capabilities.”

Additionally, broadline suppliers, such as the former Motorola Semiconductor, have split themselves into small specialty companies. These suppliers are no longer one-stop shops for a variety of semiconductor products. Customers now can choose among the “best of the best” component technologies but have more suppliers to select from.

Distributors that are franchised by these chipmakers cull through the various product offerings to assist customers in making the best selections for their applications. “Information exists on the Web, but someone has to come in who is non-biased, can cull through that information, and provide the best solution in a cost-effective way,” says Lindsley Ruth, corporate vice president at Future Electronics Inc. “There is so much information available it can get overwhelming.”

However, all this engineering assistance comes at a cost: Distribution is, first and foremost, a sales-driven business model. High-salaried engineers are a fixed cost in these organizations and have to be deployed toward distributors' most profitable opportunities. Distributors are trying to scale their design services toward a highly segmented customer base.

“Arrow's goal is to provide services that will satisfy [customer] needs, and we invest accordingly to deliver our value proposition,” says Kong. “Our large customers typically do not require design support, but need a complex supply chain solution, which could also include services like programming, end-of-life services, and reverse logistics. Our Arrow Alliance model fits this well.”

Distributors can spread the expense of hiring engineers over a customer base that numbers in the tens of thousands. “The middle 30,000 customers require full service and local support,” notes Kong. “These customers are supported by our field engineers and extensive global network. Arrow has a terrific offering for our small and midsized customers that include a host of Internet capability, access to a large pool of inventory, and tailored support. Our suppliers appreciate this approach as it allows us to present their technology to market at all customer levels and help them identify the best prospects for their latest offerings.”

Within distribution companies, engineering resource have shifted from a largely supplier-focused model — a field-applications engineer (FAE) dedicated to Texas Instruments or Infineon Technologies, for instance — to a technology-focused model. FAEs are now analog experts, FPGA experts, or have another type of specialty and are trained through the combined efforts of distribution companies and suppliers. Arrow and Avnet, for example, host several-day-long programs that include suppliers and customers. Programs such as Avnet's X-fest and its Speedway and On-ramp programs are intensive hands-on training sessions, says Ed Smith, president of Avnet Electronics Marketing, Americas.

Arrow hosts its Arrowfest training seminars in cities around the world. “We have developed better, more sophisticated coordination with our suppliers to work together to provide solutions for our customers,” says Kong. “We can assist our customers in every phase of their design, from new product introduction through end-of-life. The best suppliers appreciate Arrow’s capabilities and results, and have developed programs that recognize that in many ways.”

9 comments on “Doing More With Less

  1. saranyatil
    May 24, 2011

    Barbara interesting article,

    I foresee that there will be huge improvemnets to the distribution channel which will enhance the engineering design along with improved lead times and greta facilities.

    “Arrow's goal is to provide services that will satisfy [customer] needs, and we invest accordingly to deliver our value proposition,” says Kong. “

    These goals will put customer service/satisfaction on highest priority hence there will be loads of support to all the engineers. their network is well planned to cater to different needs of both suppliers and the customer.

  2. Jay_Bond
    May 24, 2011

    This is a great article with a little more in depth details about current and forthcoming plans. It appears that Arrows plan has covered most details and should get the job done. It is nice to see Arrow has an excellent support setup for smaller companies. It seems like nowadays if you're not one of the large market companies, you are treated like second fiddle; obviously Arrow doesn't cater their business that way.

  3. Taimoor Zubar
    May 24, 2011

    I think it's a great idea to provide engineering support to your suppliers to enable them to cater to their customers better. It may not be so useful in cases where the products are standardized, however, when the products need to customized, the engineers can play a great role in understanding customer's needs and providing better solutions. There is a cost involved in hiring engineers, but that can be recovered in the form of better satisfied customers and ultimately higher revenues.

  4. tioluwa
    May 24, 2011

    A very interesting article, i particularly appreciate the clear distinction between the needs of larger customers and the smaller ones.

    the move by Arrow is great indeed, but we should remember that these are not just ordinary consumers who patronize electronic components, but they are designers.

    There is a limit to which a distributor can dictate or profer alternatives to a designer, because, he has an end product in mind. In addition to that, an engineer working in distribution company without practical experience in designing, cannot sufficiently proffer alternatives to a practicing design engineer.

    I would feel beyond staff engineers who can handle basic need, like alternative parts on a BOM, they distribution companies may need professional consultancy from practising design engineers if for example a whole design concept needs to be changed due to current market trends or an unexpected shortage of components.

    Not withstanding, this is a great move by Avnet and Arrow

  5. FLYINGSCOT
    May 24, 2011

    Many small to medium sized chip design companies cannot hope to penetrate the larger companies without the help of major distributors.  Winning a socket requires the supplier to first win the technical battle with the customer engineerig team then the (oftentimes) more difficult battle with the procurement group whose mandate is to reduce the number of suppliers.  To this end large distributors can help smaller design companies not only to supply and service existing parts but to define new roadmap products for the larger companies.   Becoming part of the roadmap “inner circle” is key to long term growth.

  6. mfbertozzi
    May 24, 2011

    Even we are speaking about a different sector (in principle, for the fact in reality cars segment involves also electronics and suppliers), I would say “doing more with less” has been perfectly represented by Chrysler miracle. Today they have announced full payback of Govs funds. I really hope other manufactures are going to achieve similar results.

  7. mario8a
    May 24, 2011

    Hi

    “Less is more” slogan is writen in almost every wall in our company, manily focused on programs we called ESA ( Eliminate Symplify Automate ) honestly this programs have save lots of money and enourage innovation in all the development teams.

     

    Thanks.

     

  8. eemom
    May 24, 2011

    The distribution role will continue to grow.  The distributor that can provide value add to an end customer through engineering support or breadth of product offering, will eventually win out not only in one socket but with all the surrounding technology.  Indeed, this benefits the small to medium size companies that do not have the sales force to call in every customer.  In a lot of cases, they rely on distributors to help introduce and proliferate their products.

  9. Mydesign
    May 25, 2011

         One of the drawback in supply chain is mainly the distributors are targeting the big or high end customers. I meant those who are generating higher number of invoices or orders.  When compare with medium and lower level of customers, this can generate high turnover with less effort.  This type of attitudes by major distributors can force the medium and lower level of customers to wait for an indefinite time for the supply of components. More over it can break the supply of components from the manufacture to the assembly units.

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