Tag Archives: Electronic Component Procurement

E-Commerce Increases Opportunities, Risks in Electronic Parts Procurement

As e-commerce opens up the electronics market to a growing number of suppliers, this shift in how companies get their components opens up new opportunities and challenges that they’ll need to carefully navigate to get the best value. Differentiation of the electronics supply chain means that electronic component procurement professionals have more options, but not all of those options are good.

Buying and selling components online has quickly usurped the place of traditional electronics component procurement. Today, 50 to 75 percent of all new business and almost half of total sales volume in the industry derives from e-commerce. This change has disrupted the electronics components industry, creating greater competition, but also introducing greater uncertainty into the market.

A Larger Sales Area

The rise of e-commerce platforms has provided sellers of electronic components with a global marketplace. In the past, electronics component manufacturers were often confined by geography and communications limitations to one country or region, unless they had a huge sales force traveling to make connections and sales. Today, all companies desiring to purchase electronic components need to do is get online and do a brief web search to find several companies worldwide offering the parts they want.

This increased availability of components has created a more competitive market in terms of price, but has also created some challenges for manufacturers and electronic component procurement professionals alike. Because e-commerce has globalized the market, manufacturers and buyers must work out compliance and tax issues as components move from country to country. Not all countries’ regulatory schemes are alike, and ensuring that components comply with the law is important to avoiding fines and penalties. Providing adequate communications is also a challenge, as buyer and seller may be on opposite sides of the world and speak different languages.

Perhaps two of the largest challenges created by e-commerce’s differentiation of the components market place involve customer support and counterfeit components. Electronics component procurement professionals are used to a high level of support for making purchases, and online sellers may struggle to deliver the 24/7 support presence a globalized market requires. Providing adequate proof of authenticity of electronic parts is also a key challenge for component distributors in a globalized marketplace.

The Support Challenge

In the old model of electronic component procurement, support was simple. Buyers called their parts vendor, who they often had a longstanding relationship with, and requested the information they needed. This was done during regular business hours, or maybe involved a little scheduling to accommodate vendors and buyers who were in slightly different time zones.

E-commerce flipped all of that on its head. Suppliers and buyers are often on opposite sides of the globe, and buying and selling online has taken much of the human contact involved in procurement out of the equation. Buyers still want a high level of support – particularly those purchasing EOL or obsolete parts – and companies that can provide 24/7 support have a distinct advantage over those that don’t. Providing online options for tech support, such as the ability to chat with support technicians can help bridge the gap, as can online tools that answer common questions.

At Procure International, we have a model that works well for providing component buyers with the support they need for active parts, as well as EOL and obsolete parts. Sales staff members are trained to provide support to design engineers, procurement engineers, and other consumers. The company also goes the extra mile to provide clients with means to authenticate the provenance of their components, assuaging any worries about counterfeit or bogus parts.

Stopping Counterfeit Parts

An unfortunate side effect of the rise of ecommerce in electronic components sourcing is the rise of unscrupulous parts suppliers. Electronic component procurement professionals logging on to the Internet to find parts can often have a difficult time distinguishing legitimate parts vendors from fly-by-night websites that offer bogus credentials and a slick online storefront to trick buyers into purchasing substandard parts.

The proliferation of counterfeit parts cannot be understated. It is wide and impacts many industries. IHS, an information and analytics provider, reports that about 10 percent of all technology products sold worldwide are counterfeit. A 2011 Pentagon report found that 1 million bogus electronics components had been sold to the Pentagon. The Semiconductor Industry Association reports that electronics component counterfeiting costs that industry $7.5 billion per year.

There is a huge market for counterfeit and bogus electronic parts. Counterfeiters have a wide variety of methods to acquire and make bogus parts. Some retrieve parts from industrial waste to use as a template to create counterfeit parts. Others salvage discarded parts from electronic waste storage facilities, refurbish them, and rebrand them so they can be sold as new, legitimate components. Another common tactic involves taking lower cost, lower quality parts and rebranding them as higher-end components.

The problem of bogus and counterfeit parts is especially pronounced in the markets for EOL and obsolete parts, where buying options may be limited. IHS reports that one out of every two obsolete electronics components is counterfeit.

The consequences of buying pirated or counterfeit electronics can be huge for manufacturers. These substandard parts can malfunction, causing the products they are used in to fail, creating not only a bad consumer experience, but also the potential for legal liability if the product failure causes injury or other damage.

Online sellers are taking steps to separate legitimate vendors from sketchier dealers in electronic components. Legitimate sellers are stepping up efforts to present credentials to buyers and to provide online tools they can use to trace the origin of components.

Although the explosion of e-commerce in electronics component procurement does have some drawbacks, the increase in availability and competitiveness it injects into the market vastly outweigh these disadvantages. With a good dose of wariness among buyers and increased steps to provide reliable authentication and customer support by electronic components manufacturers, these disadvantages can be greatly mitigated.



Inventory Control Methods to Manage Your 3M Interconnect Solutions Parts

Electronic manufacturing firms have several different inventory control methods to use for managing their 3M Interconnect Solutions parts and components inventories obtained from electronic component procurement supply chain. Deciding which method is best for your firm depends upon the types of finished goods your company produces. There are benefits to each method, and some firms use a mix of the various methods to guarantee they can produce the goods required by their customers.

The first inventory management and control method some firms use is called “Just-In-Time” or JIT. This method is ideal for manufacturers who have limited inventory storage space or who are trying to streamline inventory carrying costs. Using JIT, a manufacturer would receive all of its 3M Interconnect Solutions parts and components with just enough time to complete the production and ensure on-time delivery of the finished goods to its customers.  Without large inventories of parts on-hand, companies employing JIT not only achieve cost savings but are also able to maintain a competitive edge in in product design by adapting quickly to newly available technologies without the burden of large stocking levels of legacy products.

The next inventory management and control method used is called “First-In-First-Out” or FIFO. Employing this method, a manufacturing company would draw from the first 3M Interconnect Solutions parts and components received into inventory. As inventory is replenished with new items from your electronic component procurement supply chain, they are placed behind the current inventories. As a result, companies using the FIFO method ensure they always deplete the oldest inventories first.

The third inventory management and control method is called “Last-In-First-Out” or LIFO. LIFO is where the last item in is the first to be used. This method is less commonly used in electronics manufacturing.  In an environment of rapidly changing prices, there may be a benefit in better matching current materials costs to current pricing. Where prices are steadily increasing, carrying older lower priced inventory and using newer higher priced inventory can reduce overall inventory carrying costs using the LIFO method.

Using Multiple Management Methods with 3M Interconnect Solutions Parts Inventories

Some manufacturers use a mixture of JIT with either FIFO or LIFO to manage their 3M Interconnect Solutions parts and components inventories. The reason they use multiple methods is to ensure they are capable of responding to their customer needs in a timely manner. For example, JIT is beneficial whenever you have a planned production run and know exactly how many units of finished goods you are going to produce. However, if you receive an emergency or rush order from a customer, you need to fill it quickly. This is why some firms supplement JIT with FIFO or LIFO, and carry small inventories of parts and components to manage these types of customer orders.

To obtain 3M Interconnect Solutions parts and components, or other items you require for your electronic manufacturing firm, contact us at 321-773-9991 today.


Get the Parts You Need with Electronic Component Procurement

One of the biggest challenges facing electronic product manufacturers is being able to find the correct parts, integrated circuits, and other components required to build their products. Further adding to this challenge is when components become obsolete or scarce, making it more difficult to find exactly what is required. Any time this occurs, manufacturers are left either dealing with paying higher prices for those items they require, or having to adapt their product designs to function with more readily available components. Electronic component procurement is one method for preventing part scarcity and ensuring there is plenty of stock available, even in cases where the parts are obsolete.

When an electronic product manufacturer takes advantage of the services available from an electronic component procurement company, they are able to ensure a regular flow of parts and components for the entire production run. The first step is to determine exactly what items are required to build and assemble the finished product. After developing, designing, testing, and approving the final design, the next step is to order the correct inventories of each component and part. Procurement firms normally give manufacturers different options, like reserving a large number of required items and shipping them in small batches as needed, or ordering large quantities in a single order.

Electronic Component Procurement Methods

There are advantages and disadvantages to both procurement methods. Large batch ordering means the manufacturing firm has to set aside space within their facility and carry inventories of every single component and part they require. The firm has to invest a large amount of money into parts inventories upfront, which may be difficult for smaller operations. The main drawback to stocking large inventories of parts is if updates are made to product designs and specific components are no longer required, or if the product is discontinued. Unless these components and parts are used in multiple products, the manufacturer ends up with leftover inventories of items that are never going to be used, not to mention wasted company resources.

Reserving components and parts, and having them shipped in smaller batches, ensures the manufacturer is receiving only what they require, when they need it. Normally, as soon as the parts arrive, they are used, so there is very little inventory to stock. In the event the product’s design changes or is discontinued, most electronic component procurement firms work with the manufacturer, so they do not have to accept any remaining parts and components from the reserved batches that have not yet been shipped. The disadvantage to this method would be if the manufacturer did not reserve the right number of parts and components and, later, the parts became scarce or obsolete. Then they either would have to modify the product design, or pay more for the parts and components because they are not readily available.

For assistance in finding and procuring the rights parts and components for your electronic products, including hard-to-find, obsolete, and discontinued parts, contact us today at 321-773-9991.

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