Electronic component buyers have it rough. Do your job well and no one notices. Slip up even a little, and the world comes down on you like a ton of bricks. One of the toughest parts of the job is fulfilling shortages. Research tells us that while component buyers at large manufacturers spend only 1-2% of their annual component budget on shortage requirements, it takes up to 40% of their time.
Imagine how much more could be done in a buyerâ€™s daily work if shortage purchasing could be a little more efficient. Every step of the purchasing process is filled with challenge, and making it safely through one step doesnâ€™t help with the next. Following the process through from start-to-finish, I like to begin with the overarching theme of trust:
1. Establishing Trust
When youâ€™ve got a shortage, you donâ€™t always have time to do all your research on a supplier. As supply chains get faster, requirement windows get tighter, and the buyer needs better information faster. The Internet is a key tool, but how can you ever be sure who is behind that website or what is actually in the warehouse? Past performance helps build confidence somewhat, but for the right amount of money, a lot of shady suppliers in the secondary market may try to take advantage of your trust. Fakes, knockoff, refurbs â€” it is a scary world out there.
2. Speed of Search â€” Who to Call?
When you go looking for parts in the secondary market, youâ€™ll quickly find a whole list of companies who advertise parts but insist that you call for quotes. Even franchised distribution catalogs publish high prices so that you will have to call. You donâ€™t want to advertise your shortage too broadly or else youâ€™ll have 20 brokers searching on your behalf. And you donâ€™t want to depend on just 1-2 brokers when you need those parts quickly.
3. Speed of Search â€” Whatâ€™s the Real Deal?
When you finally find someone listing the part you need, it often takes far too long to get a complete answer out of them. Some independent distributors have warehouses in other time zones, but some just claim to be â€œchecking their overseas warehouseâ€ to buy themselves more time. It can sometimes take a full day or even longer to get a real quote from someone.
4. Speed of Filtering â€” Hereâ€™s What I Really Need.
Your search is over. The independent distributor or broker finally locates your desired part, and now it can get hard. To get you to close the sale, some less reputable brokers will make Date Code, RoHS or other misrepresentations. Your shortage requirement isnâ€™t getting any younger, and you have to waste time playing Twenty Questions to make sure youâ€™re really going to get precisely the parts you need.
5. Speed of Filtering â€” Whatâ€™s it Going to Cost Me?
One of the most frustrating parts about shortage buying is that the more urgently you need the part, the higher the price goes! After all the effort to locate the part you need, you have to haggle your way through the price negotiation. Buyers may not have many options, so a bad deal is better than no deal. Brokers know this too, so they will open up high and try to get the most they can out of you before coming to terms.
6. Executing the Order â€” Tell Me What I Need to Know.
Weâ€™re getting close. The parts are located, terms are negotiated, but thereâ€™s always a catch. Customs fees, handling fees, last minute glitches. Is it an alternate part? I need to know ASAP, so I can get an approval from my customer.
7. Fulfilling the Order â€” This Had Better Work!
The components are on the way, and everyone is happy â€” but the shipment gets held up. Who knows why? Maybe your broker didnâ€™t actually have a source lined up, or maybe the shipment to your broker got stuck in customs? It doesnâ€™t matter. Maybe the parts arrive, and they are in the wrong package type? Perhaps itâ€™s an incorrect part number? Just pray the parts you just purchased for your customer donâ€™t turn out to be counterfeit.
Component purchasing is stressful and unforgiving. Global, lean, high speed supply chains bring great speed and efficiency to manufacturing, but, like performance motorcycles speeding down an icy road, those high-speed supply chains can lose balance when decision makers don’t know what’s coming next. Shortages force buyers to go outside their normal channels, and when they deviate from the plan, buyers can get themselves and their companies into serious trouble by not understanding the risks they face. The smart motorcyclist understands the risks of riding and will prepare for them. Let’s hope the smart component buyer is no different.
John P. Brown is co-founder and VP of Marketing and Strategy at Verical, an emerging online electronic component marketplace. He brings a wide range of experience in operations, supply chain, marketplace design and anti-counterfeiting. A term member of the Council on Foreign Relations, John focused on information management and infrastructure protection at the Department of Homeland Security and holds a BA, MPA, and an MBA from Harvard. Learn more about Verical at https://www.verical.com/, blog: http://blog.verical.com, Twitter: @verical, and email John at email@example.com. Seven Challenges for Electronic Component Shortage Buyers