Managing both distributors and original equipment manufacturers (OEMs) can range from a minimal commitment and online ordering for small companies to forming strategic partnerships with global distribution networks in order to ensure quality and availability to mitigate the risk of manufacturing downtime.
However, there are several common factors to consider when sourcing electronic components including availability, quality, lead times, pricing, End Of Life (EOL) purchases, and obsolescence.
Small companies are usually concerned with price, can readily accept equivalent components, and tend to order from catalog distributors such as Mouser. But, when these small companies experience substantial growth, the biggest concern usually becomes maintaining a stable supply of components as they ramp up production to meet demand.
Allocations and shortages pose a big risk to steady supply and companies are forced to look at multiple sources to maintain production. A quick review of the top 50 electronics distributors shows who the top players are in the current market.
The straight forward solution is to expand the available supply chain to include secondary and tertiary suppliers. The choice of distributors often depends on the size and location of the company and their manufacturing facilities. For instance, companies with locations in the US, EU, and Asia will see the greatest benefits from the larger global distributors such as Arrow, Avnet, and Future. But, in reality, the company will still order from the catalog distributors such as Mouser and other specialty suppliers for ad-hoc smaller purchases, in time of shortages, and for specialty components.
If volumes are sufficient, a natural next step is to approach the manufacturer directly in order to secure both the supply of the parts through Service-Level Agreements (SLAs) and preferred pricing. This will allow for the management of stock liabilities and commitments to minimize lead time or demand time and define performance criteria such as quality and on-time delivery.
On a day to day basis the management of inventory is also a key factor for any off-the shelf component and is vital when obsolescence and end of life criteria need to be considered. Risks can be minimized and stable supply ensured through both supplier consigned and owned inventory. But, fees are often assessed for the supplier to hold inventory, and the financial liability for owned inventory should not be understated. However, when buying-out inventory for end-of life components the liability factor is outweighed by the risk of interruptions to production.
Value Analysis / Value Engineering programs are also often utilized to define the costs and timelines of incorporating the necessary design changes to allow for replacement of the obsolete component and when coupled with Design for Manufacturability (DFM) initiatives can offer substantial cost savings opportunities and extend the life of the finished product.
While the detailed factors that determine the exact risks to supply chain interruptions are determined by the exact blend and nature of the electronic components utilized a small set of key general considerations have a large influence on minimizing risk of interruptions to production and downtime. Availability, quality, on-time delivery, lead times, price, and product obsolescence / end of life are critical to stabilizing the supply chain and can be managed through the development and establishment of long-term relationships with distributors and OEMs.