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Distribution 101: Electronic Component Distributors Need to Add Value to Succeed

Sept. 25, 2020
Electronic technologies constantly change the global economy, and at the core of this transformation is the electronic component industry. This evolution is forcing a paradigm shift in the way electronic component distributors must do business.

By Robert Barnett,
BTC Electronic Components Inc.

Electronic technologies constantly change the global economy, and at the core of this transformation is the electronic component industry. This evolution is forcing a paradigm shift in the way electronic component distributors must do business, now and in the years to come, if they want to succeed.

Some, but not all, distributors have already adapted to this change by providing more than just a product. They have shifted from strictly providing distribution of components and connectors to including value-added services such as just-in-time (JIT), custom design capabilities, assembly and kitting, as well as engineering services.

Changing Roles Bring Benefits for OEMs

There was a time when manufacturer’s representatives were the conduit through which customers were educated on the manufacturers’ product offerings. Today, manufacturers are dramatically reducing their outside sales forces, and so the task of educating the original equipment manufacturer (OEM) is now the responsibility of the distributor. The distributor must be an expert on the products they sell or face the consequences of lost opportunities. OEMs are not always knowledgeable about the products available to them or aware of the latest component technology. When distributors offer value-added service, OEMs and their designers/engineers benefit in numerous ways.

The OEM benefits because a manufacturer does not look beyond its own product line when assisting the designer/engineer with part design. A distributor with a wide range of products and product knowledge is able to offer the OEM viable alternatives they may not have known existed.

When designing an entire system, the designer/engineer is confronted with several challenges throughout the development of the project, and may overlook issues that are crucial to the success of the design. Because the distributor services a variety of customers from various industries, it is exposed to diverse applications utilizing many different design concepts. The distributor can use this expertise to offer suggestions and alternative solutions to the OEM, possibly avoiding costly design mistakes.

Consultative Selling

Today’s distributor needs to utilize consultative selling. It needs to have the knowledge to assist the designer/engineer when troubleshooting problems such as interconnectivity issues or environmental concerns. Will the final product be exposed to gases, liquids, pressure, or even salt spray? What about the size, shape, and configuration of the unit? Design panels do not always allow for adequate space or unusual locations. What about mating? The distributor can offer alternative mating solutions so the OEM is not forced to rely on one manufacturer. The distributor must be knowledgeable enough to evaluate the environment, size restrictions, or obsolescence potential of the components being designed in, and then inform the designer/engineer of any possible issues while offering viable solutions.

Another change taking place at the distributor level is product customizations. For applications where standard products or solutions are not always available or a manufacturer is not willing to work with the OEM on a new design, today’s value-added distributor is able to offer customization services such as plating, custom cable assemblies, and custom pin configurations. Not all distributors have this capability, but those that do add significant value to their relationships with their customers. In return, this creates loyalty, and it is loyalty that keeps the customer coming back.

The New Distributor

Today’s successful distributor must stock a wide variety of inventory to have a differential advantage in the marketplace. They can typically reduce manufacturers’ lead times from weeks to days. Sales through distribution will continue to increase over the next few years. A large part of this is because OEMs depend more on their relationships with distributors than in the past. OEM’s depend on the distributor for their product expertise, as well as design, because redesign today simply costs too much in time and money. A correct solution must be found quickly and on the first go-round.

The electronics industry is constantly evolving, and value-added distributors have their fingers on the pulse of new trends and technologies. They are attuned to industry changes and trends, and usually have the resources to implement, and at times, perfect the idea.

Component distributors cannot always be everything to everybody. What they can do is find their niche(s) and service their customers well. It is important for distributors to provide continuing education programs to their organizations, and keep current on emerging technologies and markets, as well as constantly changing old markets. Whether large, small, or mid-sized, a distributor must offer quality products and on-time delivery. But most importantly, it must add value to the OEM and its engineers/designers.

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