‘Mastering’ a Niche in Distribution

As I sat anxiously at the dinner table, waiting for the last family members to join our Thanksgiving dinner, I thought about how the feast laid out before me reminded me of the electronics supply chain. Rational people may wonder why I had these thoughts at the holiday table. Now that the tryptophan has worn off, I will explain.

The many dishes assembled on the table represented all the main staples of food and drink. Many of these dishes were produced by different people, with some dishes prepared in the home and other dishes delivered directly to the home. Some of the dishes were broken down from larger sizes and the excess stored in the kitchen. At the end of the feast, leftovers remained. The excess bounty would find its way to various places: some would be used in tomorrow's turkey sandwiches, some would remain for later use at the hosts' home or other guests' homes.

The food characterized the wide variety of components used in the production of electronics or industrial equipment, with preparation occurring in a number of locations on-site and off-site.

Distribution of the product to the meal table varied as well, some from direct sources and some through a diverse group of authorized parties. Some excess product was held for use in future production, while other excess was assigned to third parties in the supply chain for undisclosed uses. Of course, some portion of the excess will end up as scrap in the trash bin.

Just as there was room at the Thanksgiving table for all our family members and friends, there is room in the electronics supply chain for all types of authorized distributors. For instance, engineers and designers are well served by several eCatalog distributors. A number of specialized distributors exist that bring technical knowledge and purchasing expertise to a particular range of product. National/global broad-line distributors offer “one-stop-shopping” and strength in logistics management. Local and regional distributors offer depth of knowledge of local markets and local buying practices, particularly in emerging markets. Store-front and walk-in distributors offer a different experience.

Complementary but not competitive to the channel, the re-emergence of the “master distributor” deserves a closer look. Selling only to distributors, there is no competitive threat to the channel and a well-coordinated master distribution strategy can help components vendors create demand, reduce cost-to-serve, minimize risk at the front-end and the tail-end of the supply chain, and expand into new geographic or end-use markets.

Whether the pie is pumpkin, apple, sweet potato, or the TAM of a particular component or industry — we all want a slice. Over the weeks and months to come, I will share my thoughts about how the integration of master distribution into channel strategy complements the supply chain and helps manufacturers of components gain a larger slice of pie.

4 comments on “‘Mastering’ a Niche in Distribution

  1. Barbara Jorgensen
    December 4, 2012

    I'm wondering: how big is the master population in the electronics supply chain? I've always been aware of the model, but I have a hard time naming more than a few companies…

  2. rederringer
    December 5, 2012

    @ Barbara – Like the eCatalog distributors, where four companies dominate in the electronics components space, master distributors are also a limited and unique group. There are only a few companies fully committed to the space – even fewer that have successfully transitioned to become integrated links within a supplier's channel strategy. As a result, some of the traditional electronics components and eCatalog distributors offer some of the services historically provided by a master distributor, but the complementary yet non-competitive nature of a true master distributor differentiates from those that offer only a few items from the menu. Here I am referring to food again – time for dinner!

    Thanks for the comment and the question!

  3. t.alex
    December 6, 2012

    Interesting analogy to illustrate the concept of master distributor. Is it true that when they sell to other distributors, the margin is not as good as selling directly to customers ?

  4. rederringer
    December 6, 2012

    @t.alex – Thanks for the comment and the question. While a different business model than selling products to end users, the business model is much the same as any other business in that a master distributor has to provide value to its distribution customers and its vendor partners. In my Thanksgiving Dinner analogy, all that attended brought something to the table and there was room at the table for all!

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