I certainly agreed with Robin Grey's comments regarding the value authorized distribution provides -- and has always provided --in the electronic component supply chain. I further agree that the doubts "some pundits and electronic supply chain entities" have expressed as to the role of authorized distribution in the 21st century have been put to rest. Indeed, the franchise distributor's obituary, like the news of Mark Twain's death, was premature.
However, I think Mr. Grey does a great disservice to the purchasing community when he dismisses independent distributors by saying " ... no one needs the added burden of dealing with unknown entities."
Whereas I do not doubt the results of the poll NEDA commissioned, I would like to know the methodology used and how questions were phrased. Perhaps to elicit the response NEDA intended?
The function that independent distribution gives to the electronic component supply chain is balance. Because we are not linked to one source for product, we can search worldwide for components. By dealing with known and trusted sources, there is no question that parts are genuine and of high quality.
With the imbalance of $9.6 billion in inventory held by EMS providers (EBN Dec. 17, 2001), where does Mr. Grey think independent distributors get their product? From a counterfeit remarker huddled in a cave located in some unfriendly country? By far, the majority of independent distributors have been in business for quite some time (Ramco Distribution Services was founded in 1986) and have an expressed desire to service their customers in times of need.
If we lived in a perfect world, where product flowed from the factory through authorized distribution to the production line, and where all planners' projections were 100% accurate and the public bought exactly everything made, there would be no need for independent distribution.
Our world, however, is far from perfect. Not only that, it is getting smaller. Component factories are ceding more of their customers to authorized distribution. The megadistributors are consolidating and are becoming behemoths. This limits available sources for product and competitive bidding. Power is concentrated in an ever-shrinking circle.
Without a substantial midtier level of distribution to service them, the smaller and midsize OEMs and CEMs find themselves relegated to the nether regions of the uber-distributor's telemarketing operations. Independent distributors are filling this void on a growing basis and providing support to their customers, large and small. In times of allocation we can find product. In times of oversupply we must be even more competitive to earn the business. Independent distribution brings balance to a world of supply and demand that is out of kilter.
Methinks Mr. Grey doth protest too much. Independent distribution, while substantial, poses no threat to the likes of authorized distributors. Or do we?
According to a May 14, 2001, report in EBN, independent distribution provided $12 billion dollars worth of semiconductors during 2000. Of that total, some $600 million to $1 billion was purchased by authorized distribution. I wonder if their customers were aware of the source and struggled with the question: Are the parts genuine?
I do think Mr. Grey's metaphor, likening factory-authorized distribution to "the general contractors of the electronics supply chain," is an accurate one. Anyone who has used a contractor to build a house or remodel their home will sympathize with me and understand.
Brian Folkes is chief operating officer at Ramco Distribution Services Inc., an independent distributor based in Mission Viejo, Calif.