Another year of negative growth will mean more consolidation in the North American distribution industry. Indeed, the latest sale illustrates that even the smallest of distributors aren't immune to the industry downturn, considering what happened this year to the electronic components businesses of both Pioneer Standard and Reptron.

The latest distributor to fall victim to the downturn is Capsco Materials Management, a regional distributor on the West Coast that specializes in passive components. Its sales plummeted from $46 million in 2000 to $16 million in 2002. Top interconnect, passives and electromechanical (IP&E) components specialist TTI Inc. acquired the small distributor a couple of weeks ago to add to TTI's regional sales on the West Coast.

As I see it, if this downturn keeps up much longer, we can expect to see fewer regional and local players in the next up cycle. The problem is that a loss of these smaller as well as specialized distributors could wreak havoc in the supply chain for smaller OEM companies that rely on their local support and services, making it more difficult for them to source components.

This will become a major headache for many engineering and purchasing departments of small OEMs. They have come to rely on their close and personal relationships with these smaller distributors.

But they won't be the only ones to suffer. Component suppliers that use a mix of global, national and regional distributors as part of their overall sales strategy will also lose a valuable part of their sales channel.

In many cases, smaller or specialized distributors put more focus on their slimmed-down supplier lines and service market segments that aren't necessarily being served by top distributors. So, they certainly have their place in the distribution industry.

To whom will these small to midtier OEMs turn when their regional or local distributors close their doors? Certainly not the component suppliers who focus on key global customers, or the top distributors, who also focus heavily on supporting key global OEM and EMS accounts.

Realistically, they're going to invest resources into supporting the big fish that buy components in the millions.

Yet, I admit that many top-tier distributors have started to put more effort into supporting midtier customers as well as startups during the downturn, as their key North American customers have moved their manufacturing to Asia and, in particular, China.

Will smaller OEMs find new sources of supply? Yes, but not without a lot of confusion and headaches along the way.

Gina Roos covers distribution and components for ProductWeek. Contact her at gmroos@aol.com.