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More than just parts: Distribution in the e-commerce age

Tue, 10/29/2013 - 2:39pm
Dave Doherty, Digikey Corporation

Electronic component distributors historically have simply been an outlet from which to source parts. Not so long ago, customers paged through gigantic catalogs searching for specific parts by category. Then, orders were often placed with multiple distributors selected by order type – a single part or a volume order. Ultimately, the customer was forced to deal with multiple distributors as they navigated the process of taking a product design from beginning to end.

In today’s increasingly integrated world, simply warehousing parts is no longer a sufficient business model. Component purchasers are seeking high-value reference materials, expert technical support, online videos and other multimedia resources, and integrated supply chain solutions. Service has become as important as the components themselves.

Today’s next generation, hybrid distribution model has become the new gold standard in electronic component distribution. Design engineers are increasingly searching for ways to simplify the design process and this type of model provides just that type of streamlining. Engineers can purchase single parts for a prototype, a few hundred for a production run, and eventually can source volume quantities for large-scale production operations. These high-mix, low-volume product runs serve the needs of today’s OEM or contract manufacturer seeking to avoid excess inventory costs and streamline the new product introduction process, reducing the total cost of acquisition.

With this unique model, support of a design from prototype to production is about more than just providing the necessary components. Engineers are beginning to demand a more “full-service” distributor, one who can offer comprehensive technical support, datasheets, reference designs, and other content. Access to this wealth of information and support allows the engineer to keep ahead of the latest technology and make their design faster, more economical, and accelerate their time to market.

To put it simply, five key characteristics distinguish the next-generation distributor:

• Availability – Deep, broad product line, available for immediate delivery
• Content – Access to design-phase knowledge to support the process
• Scalability – Ability to ship high-mix/low-volume orders
• Speed – Able to ship parts for overnight delivery, anywhere in the world
• Service – First-rate sales and customer service professionals, trained to support all types of customers

Supply-chain services also play a significant role in a well-rounded hybrid model. These types of distributors are able to cater to a wide variety of customer sizes and supply chain needs. Whether utilizing bonded inventory to mitigate inventory risk or auto-replenishment to keep your operation on track, distributors are moving more and more towards offering integrated, high-service fulfillment solutions.

In today’s technological landscape, more and more business is conducted online. With the rapid adoption of mobile devices and cloud computing, buyers expect easy online access - anywhere, anytime. For businesses, the possibilities are limitless and, at the same time, the customers’ expectations are at an all-time high. They demand options, speed and knowledge at their fingertips. Traditional catalog
distributors have come a long way from sending out multi-thousand-page product catalogs. Now customers can view millions of parts online, ordering at any time of the day, from anywhere in the world.

One interesting development in moving services online is the use of centrally located “non-field” field applications engineers. Traditional applications engineers do the bulk of their work in the field, coming in person to a business to assist in solving a problem or working to design a product. These traditional technicians would have difficulty amassing specialized knowledge in every area, and so their help could be limited. In the next-generation model, these technical experts work as a team to provide the right levels of support, leveraging their distinct areas of experience and expertise to provide a total solution.

Suppliers are the lifeblood of the electronics industry, and next-generation distributors take a unique approach to the manufacturers they choose. With thousands of suppliers to choose from, distributors must be very selective, making sure to evaluate the quality of the products they are receiving. Providing customers with the assurance that they are receiving only genuine parts, direct from the manufacturers, helps to build customer loyalty and trust. Distributors also have become proactive in working to mitigate counterfeit product by participating in groups such as ECIA, ECSN, and CEDA, all of which were formed with the purpose of developing global standards and guidelines that assist in limiting counterfeit parts within the supply chain.

In addition to contracting with quality suppliers, next-generation distributors also look to provide a wide range of suppliers to offer the newest, leading-edge technologies to their customers. Engineers are continually improving on existing technologies, and as these faster, more efficient, lower-cost technologies are created, distributors look to provide these options to their customers as early as possible.

In today’s ever-changing technology landscape, the needs of the engineer have shifted to a much more comprehensive set of services outside of just electronic components. As online and mobile customer engagement platforms continue to evolve, distributors must take steps to change as well. More and more, distributors are increasing the level of integrated, self-service offerings and transitioning into an iteration of the next-generation model discussed in this article. As these high-service, next-generation distributors continue to see rapid growth, further widespread adoption may be seen in all areas of the industry. Change is on the horizon, and the rest of the decade will be interesting to watch.

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