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Can forming a strong partnership with an

independent distributor help to manage sourcing concerns? John Cronin, general manager, North Shore Components Inc, explains how it can

OEM/CEM buyers today have much to concern themselves with in addition to keeping their production lines running: counterfeit components, conflict metals, inventory management and vendor reduction just to name a few. As companies try to reduce cost and staff reductions continue, these concerns become more difficult to manage.

Partnering with an

independent distributor may be the best solution for many companies. Although there are numerous independents in the marketplace, only a few are qualified to help manage these concerns. These distributors have the counterfeit mitigation equipment, experience and expertise to provide quality product. They have strong inventory

management programs to assist with excess product and last­time buys. Their expertise in obsolescence management is extremely valuable in locating product and BOM cost reduction has always been a benefit of their services.

By choosing an independent partner, companies can reduce their

overall supplier list by assigning one­time buys, multiple vendor orders and MRO purchases to the distributor. This distributor partner acts as an extension of the company’s procurement team. This partner will handle all those tasks that detract focus from the primary responsibility of the buyer, while reducing costs and providing additional time for these core responsibilities.

Finding the right partner may take some work upfront but the long­term benefits will be well worth it. Companies will want to

make sure their partner has all the necessary systems, quality certifications, inventory programs, inspection equipment and experience to successfully perform the services needed. This will, in most cases, require a site visit and inspection, which may effectively begin the process of building close ties the OEM/CEM is looking for.

General manager, North Shore Components, Inc, John Cronin

As with many of these types of partnerships, companies utilize the other’s expertise by having employees work closely together. The company may have its quality engineers work out a specific inspection or packaging plan to help streamline receipt and inspection at the production facility. Its procurement team may set up a queue for the distributor to work from to reduce e­mail or call traffic time. Accounting departments can arrange date­specific invoice billing and payment to reduce the recurring process time of accounts payable and receivables. An agreement could require the distributor to perform such services as DNA marking or similar measures to comply with forthcoming requirements. Negotiating testing costs up front and ensuring a fair warranty period will provide the company with product and price protection. The company may also want to ensure that its partner has a program of continuous improvement and is always updating and adding equipment that maintains the highest levels of quality.

The last valuable piece to a strong partnership is a margin control

agreement to remove negotiation time and pricing uncertainties. This type of agreement also provides the trust and security that both parties need to fully cooperate and integrate with each other. They can be simple or tailored toward specific types of purchases or they can be based on order value or component storage time and delivery schedule. Either way, the OEM/CEM will find cost savings not only in its purchases but also in its processing time.

In this constantly evolving business environment, most companies

will find that a real partnership with a strong independent will change the independent distributor’s role in the supply chain to one of true and long­lasting value. February 2014 | 23

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