Feature Distribution
The Independent channel: Gaining growth
Anton Wurr at America II Electronics discusses how the independent channel is becoming a fully accepted source to purchase components from and the subsequent impact this is having on the supply chain
ince the beginning of 2013, customer demand within the independent channel seems to be on a steady rise. All signs are pointing to a healthy year of growth, and the results of a recent survey seem to support this.
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Penton's Design Engineering & Sourcing Group recently surveyed design engineers in the U.S and asked how many of them purchase components on the open market. An overwhelming 51 percent of the respon- dents answered ‘yes’, compared to only 39 percent who answered ‘no’1
This
particular question illustrates just how many OEMs use the independent chan- nel and the fact that the engineering community has fully embraced it. But are more people using the channel today than in the past?
. While these two surveys targeted different groups of respon- dents, the variance in the response is too great to ignore. The results reveal significantly more people using the channel today compared to two years ago. We’re seeing tremendous growth in the independent channel over a short time. So not only is the channel alive and kicking, it’s growing at a rather strong clip.
A similar survey conducted in 2011 by EE Times stated that 21 percent of their subscribers purchase electronic components from independent distrib- utors2
This undoubtedly tells us that customers cannot — and do not — rely
on franchise distribution alone. To keep their production lines running, cus- tomers must partner with independent distributors. Authorised distributors cannot service all the potential cus- tomers in a $300 billion semiconductor industry. In addition, OEMs, OCMs and EMS companies need a distribution partner who can help them reclaim revenue on excess inventory.
Making your own success It is estimated that 80 percent of the top contact manufacturers work with independent distributors in some fash- ion. So, there is an obvious need for independent distribution. The key point here is that customers must do their due diligence. They must care- fully vet and approve a preferred list of independent distributors; and they need help doing this. In the same recent Penton survey, 54 percent of the respondents said they needed help identifying quality sources of supply in the open market.3 This again supports the fact that there is a need for independent distribution. If there was no need for independent distributors, customers wouldn’t be worried about finding quality suppliers. So while they need the channel, they’re also indicating that they require guidance in finding reputable distribution partners. Successful independent distributors aren’t successful by luck. They spend years building their brand, refining
Anton Wurr is Marketing Director at America II Electronics
their business, and earning the trust of their customers. Look to these large, experienced distributors when seeking a reliable partner. For example take America II Electronics who has been around for 24 years and over the past several months, advises it has seen this increase in customer demand first hand and remains optimistic about the future. As the distributers OEM base continues to grow, the company has been growing as well.
Knowing that more customers rely on the independent channel, the company has increased its headcount considerably, its U.S. sales department alone has grown by 30 percent over the past six months. There has also been increases in Europe, Asia and Japan, taking total number of worldwide sales representatives to more than 200. The distributor has added resources to its component engineering team and currently employs 59 IDEA ICE-3000 certified professional inspectors. It sees other factors contributing to the increase in customer demand within its channel. As time progresses, the lines are blurring between independ- ent and traditional franchise distribu- tion. The company’s Blended Distribution model is a prime example. Originally established as a supplier focused on the distribution of hard-to- find parts, America II continues its transition to its new Blended Distribution model. Essentially, it is combining the best traits of independent and authorised distribution. It has incorporated hundreds of direct rela- tionships with manufacturers. This is an ongoing initiative as the company continues to add new authorised lines on a regular basis. However this does not mean the company has completely moved away from its core strength, sourcing components from an approved list of more than 4,000 suppliers. Instead, it gives the oppor- tunity to serve as a primary partner for all OEM and EMS customers, regard- less of their business requirements. In the current economic environ- ment, a blended model offers customers the best of both worlds; the value of direct relationships with independents’ flexibility, cost-savings and ability to find hard-to-source or end-of-life components.
So while customers clearly indicate that they need and use the independent channel, it’s critical to emphasize the importance in selecting
the
America II Electronics
www.americaii.com Enter 203
right
distribution partner. Customers must carefully research and choose partners who have the credibility, experience and resources to help them succeed.
1. Penton’s Counterfeit Electronic Components Survey
http://globalpurchasing.com/counterfeit/counterfeit-electronic-components-survey#slide-4-field_images-5891 2. UBM/EE Times Electronic's Distributor Customer Evaluation Study/June 2011 3. Penton’s Counterfeit Electronic Components Survey
http://globalpurchasing.com/counterfeit/counterfeit-electronic-components-survey#slide-3-field_images-5891
12 DECEMBER/JANUARY 2014 Electronics
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