Hand wringing over the issue of excess inventory in the secondary market is rife within our industry.
Parts once sold to OEMs and EMS companies by suppliers and franchise distributors are being redistributed through the supply chain at costs that are below market prices. Many players within our industry deem this practice by independent distributors "unfair."
Still, others realize the business practice is not a question of fairness, but a reality within our industry. Independent distributors and the benefits they offer serve a vital role in the electronic component supply chain. Just ask the many companies that use independent distribution to release their excess inventories into the secondary market for the sake of alleviating the financial burdens created by carrying surplus.
Or, ask the customers who have learned they can buy factory-boxed product at discounted prices without compromising quality or reliability thanks to the secondary market. They will all tell you independent distributors are here to stay.
Compare the practice of buying and selling components in the secondary market to the process of buying and selling a car. Why would you scrap a vehicle that still has value when you have the option to resell or trade it and recover some of your initial investment? There also are plenty of drivers willing to buy a vehicle on the secondary market at a discounted price, provided it was properly maintained and in good quality.
Similar to the process of selling a pre-owned car, the company chooses to channel its excess inventory into the secondary market to recover a portion of its original investment instead of scrapping it. Like the process of buying a car, many end users look to the secondary market for discounts on products that demonstrate quality and reliability.
OEMs and EMS companies that hold unused inventory of the same quality as new components should consider recouping their expenses by sending them back into the supply chain in a timely fashion, so others can put the products to good use.
The fact is the secondary market is here to stay. Independent distributors perform a critical role in the component distribution supply chain, including keeping manufacturers' shelves stocked and their production lines running in times of shortage as well as providing an outlet and means of asset recovery for OEMs and EMS providers in times of surplus. Through it all, independents create the opportunity for all customers to take advantage of discounted product without compromising quality or reliability.
Ron Myers serves as Vice President of Strategic Business Development for America II Electronics, Inc. and welcomes your feedback at email@example.com