NEWS
bound by regional price constraints. With a comprehensive global network, the independent distributor can make purchases in local markets that currently offer the lowest prices and pass the savings to their customers.
“By using regional quality centers and logistic hubs, we have the flexibility to purchase components from any country in any currency and then ship them to anywhere they are needed,” adds Thomas. To ensure the authenticity and quality of each part, the independent distributor offers a rigorous inspection process of each component received, along with timely supply chain management. Classic Components utilises a quality management system (QMS) and holds certifications such as AS6081, a requirement for distributors serving the aviation, space and defense industry.
Financial Services
Like a bank, a premier independent distributor can offer a variety of financing options that can facilitate securing the required chips. One example is a “buy and sell back” program for companies with excess inventory. “We can purchase your excess inventory, store it and then sell it to your authorised EMS partners as needed over time,” says Thomas. According to Thomas, many manufacturers are sitting on excess inventory due to stockpiling parts and ordering from multiple sources to ensure delivery. If it is true dead stock, an independent distributor can help liquidate the electronic components while maximising your recovery and get them off the books through various types of arrangements.
The company has provided this type of service since 1985, which can be initiated with a simple email list of surplus items along with the original price paid. Classic Components then searches its database to see if any other customers use those parts and can broker a deal between the parties.
Figure 2: OEMs in critical sectors like medical and automotive, are considering strategic “chip banks” to ensure a reliable supply without tying up capital.
“We have a global customer base and lots of information about the materials they use,” says Thomas. “So, if a manufacturer has excess inventory, we can often find an opportunity to sell it to one of our other customers.”
Classic Components can also list and sell surplus inventory on consignment, with or without taking physical possession of the inventory.
“Essentially, after coming to a consignment agreement, the list of items is uploaded to our website. We offer complete transparency throughout the consignment process. As we receive inquiries, we share the information so you can decide whether to sell surplus at the offered rate,” says Thomas.
Classic Components may even opt to purchase the inventory outright to resell it later. The distributor also offers transition services, which can benefit OEMs holding electronic chips in inventory that will be shipped to third parties, such as an EMS that will do the actual
manufacturing. In this case, an independent distributor can purchase, warehouse and distribute the chips and later sell the inventory to the third-party.
Cautioning Against a False Sense of Security
Today, the memory of pandemic related chip shortages and sky-high pricing is beginning to fade. Chip manufacturers successfully ramped up their manufacturing capabilities and eventually caught up on orders. Now that the supply has stabilised, many OEMs and EMS may have a false sense of security. “Manufacturers were often forced to wait 52 to 80 weeks for chips when the economy softened,” says Thomas. “The parts finally became available and now there is a good supply. However, as soon as demand heats up for any reason, they will face the same constraints. For some of these parts, the lead time is still 52-60 weeks. Nobody’s that concerned because the demand isn’t there yet.”
Figure 3: The electronic chip market is susceptible to price fluctuations due to geopolitical tensions, shortages, and natural disasters.
Any number of destabilising events could tip the global chip supply into a severe shortage, whether a future pandemic, global warming related natural disaster or political tension boiling over into conflict. Some are even predicting a tech boom in the next decades. Ideally, OEMs would have access to a strategic reserve of the chips they require that could protect them from unexpected market shocks. As chip demand rises to supply myriad technologies in the latest tech boom, OEMs that work with independent distributors to secure low-cost, quality inventory over the long term will weather the inevitable, unexpected disruptions far better than competitors.
JUlY/AUGUST 2024 | ELECTRONICS FOR ENGINEERS 11
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