Convergence in the Electronic Component Distribution Channels

Convergence in the Electronic Component Distribution Channels

The electronic industry is changing constantly with new technologies, products, and designs. In recent decades, the application of Internet is changing the way people communicate, how procurement professionals source and find parts, and how a sales order is processed.

Additionally, the fast changing innovation in technology requires engineers and sourcing professionals to adapt the way they search for electronic components. These changes bring opportunities for electronic component distributors.

In the electronic industry, traditional distribution channels are divided between franchise distributors and independent distributors.  With the advantage of a direct supply channel with OCMs (original chip manufacture) and the ability to provide a clear traceability, franchise distributors are favored by many EMS/OEMs. They also have a price advantage with large volume orders. However, when a shortage happens, franchise distributors have limited resources to support their customers.

On the other hand, independent distributors can take the hassle away from customers dealing with shortages or last-time-buy. Within any market condition, independent distributors are able to use their flexibility with suppliers, logistic services, and inventory management programs to better serve the customer. To address the quality issues arising within the component industry, many top rated independent distributors, such as Advanced MP Technology, have established specific ISO 9001: 2008 certified quality management systems to ensure a delivery of quality products. Many have also formed and joined industry quality associations such as IDEA (Independent Distributors of Electronics Association) and ERAI (Electronic Resellers Association International) to establish a standard of guidelines for the industry and to be aware of the latest updates on electronic components.

In today’s changing world where technology updates happen on short notice, engineers and sourcing professionals within the electronic industry are looking for a quick solution for component sourcing requirements. This has brought a change to the landscape of the distribution channel. The traditional franchise and independent model individually would not fit in the quick delivery, small quantity, and short product life-cycle situations. Therefore, we have already seen some convergence in this channel. Many independent distributors are now signing more franchise lines to expand their line card, while franchise distributors are getting involved with the independent channels to grab some market share that otherwise they wouldn’t have been able to grasp.

What does convergence mean for customers?

  • When filling component sourcing requirements, there will be more one-stop distributors to choose from

  • When a shortage occurs, competition for hot components will become fierce as franchise distributors are joining the game

  • There will be an increase in visibility on product availability in the market

Although the convergence is still in the initial stage, it is important for procurement professionals to keep in mind the changes that are happening in the electronic component industry.  As an experienced and qualified independent distributor for over 37 years, Advanced MP’s sourcing, quality, and CRM teams are in place to support your needs in any market condition.