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The role of distributors has expanded and become essential in the electronics supply chain By James Carbone

When I first started covering the electronics industry in the late 1980s, a manager at a mid‐sized electronics distributor told me that distribution was the Rodney Dangerfield of the electronics supply chain. It did not get any respect.

He said distribution was viewed as the

middle man in the supply chain that bought components in large quantities from component manufacturers and sold them in small quantities to OEMs and contract manufacturers that were too small to be serviced directly by parts makers.

I am not sure how accurate or

widespread that view was at the time, but I know that 25 years later distributors are regarded as a essential part of the electronics supply chain by OEMs and electronics manufacturing services providers (EMS) and by semiconductor and other component manufacturers.

Over the years, its value has been

enhanced and its role has expanded as the need for electronics companies to operate leaner, reduce cost and time‐to‐ market for new products and improve profitability increased.

Those needs have created greater

demand for distributor services, including design, supply chain and inventory management, value‐added and reverse logistics and asset disposition services.

Many distributors expanded their

capabilities and many offer soup‐to‐nuts services for customers for different stages of a customer’s product lifecycle. Distributors help customers design new products and then support those

4 July/August 2014

managing the supply crisis. Many electronics manufacturers

have become so dependent on distributors for such services that they take them for granted because those services have become part of the distribution model DNA.

Component manufacturers have also

James Carbone, contributing editor to Electronics Sourcing North America, has covered the distribution industry for 25 years

products with value‐added and supply chain services once a product goes into production. Some larger distributors provide asset disposition services once the customer’s product has reached end of life and must be taken from the field and refurbished, recycled or scrapped.

In many cases distributors have a

consulting role for OEM and EMS customers. Often they provide market intelligence to customers, apprising them about new technology developments and new products and advising them about new environmental regulations and helping them comply with them.

Many small companies and startups

look to distributors for help in identifying potential new customers and markets for their products.

When parts are in short supply due to

an unexpected surge in demand or because a natural disaster knocks out production of critical parts, OEMs and EMS providers turn to distributors for parts and information and help in

become more dependent on distributors. Over the past 10 years, many semiconductor and other component makers have reduced their direct sales forces and insist that distributors service more OEM and EMS customers and expect their distributors to create demand for their products.

While distributors will always sell

parts to small and medium‐size companies, they are also providing parts increasingly to large global companies including IBM, Cisco Systems and Flextronics to name a few.

Troy Hiner, vice president of global

supply management at EMS provider Sanmina, recently told me that the percentage of his company’s spend with distributors is increasing. He said he values the partnerships that Sanmina has with its distributors and he could not do his job without them.

In the future, distribution’s role will

likely be further enhanced because the need to lower cost, get products to market faster and improve profitability will never go away in the electronics industry. The distributors that can help OEMs and EMS customers the most to meet those needs, will earn the most respect.

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