Most buyers at original equipment manufacturing (OEM) companies and electronics manufacturing services (EMS) providers purchase at least some of their component requirements from electronics distributors. Some may buy entire bills of material, while others may purchase a handful of parts for design work or small production runs.
Some purchasers may buy strictly from authorized distributors and others may venture out to the open market and make "opportunistic" purchases from non-franchised independent distributors to get a lower price or find parts that are in short supply.
Though most purchasers buy from distributors, not all have a strategic distribution plan in place. A well-thought-out distribution strategy can keep production lines running even in times of shortages and leverage distributors’ capabilities to reduce total cost of ownership.
Developing a sound distribution strategy depends on a variety of factors, including the type of equipment a buyer’s company is building, the volume of units being produced, the location where manufacturing occurs, and the end market for the equipment, among other factors.
To develop an appropriate distribution strategy, buyers need to assess what their companies really need from the distribution channel because not all distributors are created equal when it comes to line cards, services and global reach.
Here are some questions to answer to help develop an effective distribution strategy:
- How many distributors does your company really need? Many companies buy from several dozen distributors. However, buyers can sometimes get better service and sometimes a better price if they concentrate their purchases with a smaller number of distributors.
- What kind of distributor does your company need? If your company buys a variety of semiconductors, passives and connectors in large volumes, broad-line distributors may make perfect sense. But if an OEM or EMS provider is buying more specialized products, such as a certain type of connector or capacitor, a distributor specialist that has a high level of expertise with a certain product may be a better choice.
- Does your company need or could it benefit from distributor value-added or supply chain services? Many distributors offer a plethora of value-added services, ranging from kitting and connector assembly to vendor managed inventory, including consigned inventory and in-plant stores. Such services can reduce the total cost for an OEM or EMS provider even if the prices of parts being purchased are higher than another distributor that doesn't offer such services.
- Does your company build in one location in North America or does it have multiple manufacturing locations around the world? Many distributors, of course, have global locations, but some are regional. A small EMS provider with one domestic manufacturing location may get more attention and better service from a small regional distributor rather than a larger global one.
- Does your company need help designing product? Some distributors have a large cadre of field application engineers (FAE) who can assist with design, offering expertise concerning parts and specs. Other distributors may provide comprehensive information concerning parts on their Web sites and provide Web-based design tools.
- Does your company buy from independent distributors? Independent distributors are often a source for hard-to-find parts, but there is also the risk of counterfeit product on the open market. Some independent distributors are better than others in their buying practices. Some only purchase from known, reliable sources and screen and test for bogus parts. Others are less conscientious about where they buy parts. Buyers should screen independent distributors carefully before purchase orders are placed with them.
