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distributors in North America and globally,” he said.

Risk and distributors

Hnatyshin said that distribution “plays an important part as one element of what we have in the toolbox. From a risk point of view one of the values that distribution brings is typically a reduction in lead times from the factory because of the supply chain programs and inventory they put in place,” he said. “Distributors often offer consigned and bonded inventory, auto replenishment programs and in­plant stores that help EMS providers reduce inventory levels and risk.”

Jabil purchases from authorized

distributors as well as from non­franchised independent distributors. Authorized distributors and semiconductor suppliers often say that buying from independent distributors is risky because counterfeit parts enter the electronics supply chain through independent distributors and parts brokers.

“We are aware of some of the challenges

concerning counterfeit from an industry point of view, but counterfeit parts is a non­issue for Jabil, even though we sometimes purchase components from independent distributors”, said Hnatyshin. He added that the independent distributors that Jabil uses have been qualified and scrutinized to ensure that the parts they sell are genuine.

“Independent distributors are

evaluated closely from a quality perspective,” he said. “We have an

32 | February 2014 Consolidating the supply base

While counterfeit parts are a risk issue for the electronics industry, so is supplier consolidation. Electronics buyers always prefer to have multiple suppliers for a part. A robust supply base with multiple suppliers generally means increased competition, more competitive pricing, shorter lead times and better service. Consolidation often means fewer choices, less availability and less technology development.

Jabil deals with consolidation similarly

to the way it manages risk. It has forged close relationships with the leading technology companies that have the highest quality and best performance. Such companies are most likely to be acquiring other companies rather than being acquired.

Hnatyshin said that, as the

A technician tests a subassembly at Jabil’s facility in Reynosa, Mexico

individual process that is very robust, to ensure the distributors do not have counterfeit issues and have very tight control on who would be qualified. It is a channel that has a very specific quality system and an approved vendor list that has allowed us to mitigate risk to our customer,” he said. Hnatytshin added that when Jabil purchases parts from independent distributors, customers sign off on the purchase.

semiconductor industry consolidates, “it is important that our business relationships on the technology side as well as the commercial side be coupled with the supply base and with OEM customers”. He added that it is important to invest in supplier relationships at multiple levels in multiple organizations.

He noted that, “consolidation often

occurs in the maturing parts of the supply base. But we also have an expansion in the supply base in some of the newer technologies as well.”

Hnatyshin believes that supplier

consolidation can actually be a positive thing for an EMS supplier or an OEM. “The consolidations that we've seen recently such as LSI and Avago, and certainly Texas Instruments and National, were major events in the industry,” he said. “However, those consolidations don't pose any negative attributes to us from a purchasing and supply chain point of view. In fact they are positive because we are getting higher quality technology companies as a single entity with improved commercial capabilities”.

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