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“We use in‐plant stores, consignment

inventory, supplier managed inventory," said Wan. She said such programs help SMTC reduce lead times.

“The percent of spend with distributors has increased compared to 10 to 15 years ago,” Connie Wan, vice president of global procurement & supply chain for SMTC.

Understanding needs

He said with partnerships, Sanmina and distributors work together to understand each other's needs and the needs of customers.

“Our distributor partners know that

Sanmina needs the best price, immediate material ability, the best service and support, and the best quality of product if we are going to help our OEM customers compete," he said.

Hiner said that Sanmina's key

distributors "do a great job listening to us and focus on putting in place the support structure and pricing that will allow our customers to aggressively compete and grow their businesses."

He added that said distributors are

also important during supply shortages. “Anytime there is a short supply of material we’ll engage our distribution partners for help,” he said. “Close partnerships come into play during these times. When I need material I always want our partners thinking about Sanmina first," said Hiner.

He said that he “highly values the

partnerships” Sanmina has with preferred distributors. “I couldn’t do my job without them. Our preferred distributors are the best in my opinion,” said Hiner.

More spend with distributors

Distributors have also become more important to small and medium‐size EMS providers, many of which have increased their spend with distributors over the years.

For instance, Connie Wan, vice 30 July/August 2014

“EMS is a very big customer base for Digi-Key,” said Chris Beeson, executive vice president sales and supplier development for Digi-Key.

president of global procurement and supply chain for EMS provider SMTC, based in Toronto, said her company buys about 50 percent of the components it needs for production from distributors.

“The percent of spend with

distributors has increased compared to 10 to 15 years ago,” she said. One reason is that sometimes distributors “have better competitive pricing because they are buying a huge volume of components,” she said.

But another is that component

manufacturers are selling more products through distribution rather than selling direct to customers.

“More manufacturers tend to use

distributors as their marketing arm to help them sell their products. Many of the big brands shut down their sales teams and moved product through distribution,” said Wan.

She said consolidation in the industry

has also contributed to distributors selling more products. As a result of consolidation, distributors are carrying much stronger line cards.” It’s possible to buy a lot more components from one distributor than in the past,” she said.

She said although SMTC's buy with

distributors has increased, the EMS provider is using about the same number of distributors it was about 10 years ago.

Wan added that

SMTC uses distributor value‐added and supply chain services at its facilities in San Jose, Mexico and China.

An engineer performs a visual inspection of a printed circuit board assembly at EMS provider SMTC. Wan said while SMTC buys most of the

parts it needs from large global distributors, in recent years it has added some regional distributors to support its facilities in Asia.

EMS importance grows

Distributors say that EMS has always been an important customer segment, but it has grown in importance in recent years.

“EMS is a very big customer base for

Digi‐Key,” said Chris Beeson, executive vice president sales and supplier development for the distributor. He said that most EMS providers are Digi‐Key customer to some degree and many are small to medium‐size North American based providers that have global manufacturing.

Digi‐Key, based in Thief River Falls,

Minn., has historically been a catalog distributor providing relatively small quantities of parts to engineers designing new products. However, over the past 10

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