Global supply chains are always susceptible to the bullwhip effect, which causes severe disruptions that lead to excess or depleted inventory, lost sales, and shuttered production.
Nowhere is this storm of disruption more keenly felt than in the electronic components marketplace, where current chip shortages have left manufacturers with half-finished products and idle capacity.
The global semiconductor crisis first began to bite in mid 2020. It was triggered primarily by surging demand for consumer electronics to use at home, and the sudden rise in demand for cars as people sought to avoid public transport due to the COVID-19 pandemic.
This severe demand fluctuation has created an exaggerated bullwhip effect disrupting the global chip supply chain, with the effects being felt across other areas including the electronic components marketplace.
For electronic manufacturers, having a volatile supply chain is not good because it results in inaccurate forecasts, expensive production delays, inventory risks, and longer lead times. And with experts warning that the global chip shortage will persist until mid-2022, electronic manufacturers should work towards a secure supply chain with a consistent stream of components and suppliers.
When it comes to purchasing electronic components, OEMs and EMSs can choose to deal directly with authorized distributors or use brokers.
However, each option has its own share of benefits and pitfalls especially in emergencies like the ongoing electronic components crisis. Finding new and alternative suppliers will be critical for manufacturers as they move forward.
Here, we look at different supplier types that you can use to buy electronic components, highlighting some of the pros and cons of each solution.
Electronic manufacturers usually use two ways to sell their products: selling directly to the end-user or through several authorized distributors (discover the list of important things to consider when changing suppliers/distributors).
The latter method is the most feasible from the manufacturer’s point of view since it ensures there is a guaranteed significant spend by large distributors, unlike smaller customers.
Under the agreement, electronic manufacturers work in close partnership with franchised distributors who in turn re-sell their products to the end-user.
Examples of top franchised distributors in the electronic components industry include Arrow, Avnet, Digi-Key Electronics, Future Electronics, among others.
Pros
Cons
Brokers are independent suppliers that usually don’t have an affiliation to any particular brand or franchise. They source components from the global market, particularly hard to find, or obsolete parts by leveraging their own vetting systems and trusted sources for the supply chain.
However, using brokers can introduce a high level of risk, such as little to no technical and after-sales support and difficulty tracing the source of the products.
Buyers should consider selecting a core group of brokers that they can audit regularly in order to minimize supply chain risks.
Pros
Cons
Catalogue suppliers like Farnell, Mouser, and DigiKey have moved their businesses online to take advantage of the booming e-commerce industry.
These suppliers hold and sell a variety of components often in small volumes and with no minimum order quantity (MOQ) requirements. Some even boast next-day delivery. As a result, the unit prices are often inflated to cover costs.
Pros
Cons
Premium prices and lack of transparency can be a major sticking point. However, you can get far more information and better pricing by building a relationship and a stable account with the marketplace.
The most important thing for most buyers is that their supply chain is stable, that their parts arrive on time, and that the pricing is competitive.
A peer-to-peer transaction platform like AIRENC is a unique platform that facilitates the exchange of information and trading of electronic components, thereby reducing costs and streamlining the supply chain for OEMs, and EMSs.
AIRENC’s digital solution is twofold : on the supply side, the platform helps OEMs and EMS buy and resell their components on the grey market to limit the financial impact of the bullwhip effect; on the product side, real-time insights help improve accuracy in terms of demand forecasting allowing OEMs and EMSs to assess electronic components trends and better anticipate their supply needs.
It’s one example of the kind of innovation needed in the face of the challenging supply chain constraints brought by the global chip shortage. AIRENC empowers OEMs and EMS to build a seamless supply chain with a unique platform for buying and selling electronic components at a fair price.
AIRENC transaction platform is better than a franchised broker, a broker, or another catalogue marketplace. Why? Because AIRENC offers the above, and:
So those are the four different ways for buying electronic components. While each supplier has its own pros and cons, effective use of these solutions should help you significantly lower the risks and procure electronic components. Whether you are outsourcing or simply building your products in-house, try the AIRENC transaction platform for electronic components and put your company in a position to succeed amidst the storm, and strengthen your existing supply chain with an additional procurement channel
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