In a market still clogged by excess inventory, independent distributors who are liquidating excess inventories are also making inroads with major OEMs and contract electronics manufacturers (CEMs) as valued suppliers. Clearly, the job of the independents has been to help customers liquidate or find components any time there is an imbalance in supply. But the term "independent distributor" no longer means parts broker or gray marketer, although you can still run into these types of companies in the industry. Brokers are typically used as a last resort to locate hard-to-find parts during allocation and are often seen as companies that gouge customers on pricing when components are in short supply.
The current surplus inventory situation has made independent distributors much more valuable this year. Even with all the independent distributors buying up as much as they can, there's still too much inventory in the channel for companies to keep buying, even at rock-bottom pricing, said one independent distributor I recently spoke with. The amount of inventory that he sees in the channel today is more than what he's seen during the past 20 years.
His company is setting up consignment agreements with larger OEMs to sell their excess component inventory at market price. They typically get a much better return than if they were to sell it at pennies on the dollar.
Historically, franchised distributors have had issues with buying components from independent distributors, but that is changing.
In addition, independent distributors are starting to become a core part of the sourcing strategy of OEMs and CEMs. Many of them are procuring a small percentage of their bill of materials from independents to gain better visibility into the spot market, because independents aren't constrained by geography or line card. And now many independent distributors are embracing the franchised distributor's business model in terms of quality, on-time delivery, customer and technical support and maintaining inventory in stock.
One independent distributor said that reputable independents are giving the industry a better name, and that is now being reflected in the industry's dependence on them for selling excess inventory, locating hard-to-find parts and even supplying volume production. He said just about every OEM has a particular sector in which it deals with independent distributors. "They don't look at us as a gray marketer. They use us as a source of supply when they can't get stock from a franchised supplier," the independent distributor said.
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