Designers are hungry for distribution channels that better represent their interests

October 21, 2015 // By EDN
America II
Today's business pace is faster than ever before and with competitive market conditions and rising consumer expectations, designers are striving to get their products to market quickly and efficiently.

This process is often not as simple as it should be. In fact, at America II, we’ve noticed that although engineers may be producing better and better designs, they continue to face hurdles in sourcing key components to bring their ideas to life.


A designer’s first choice will usually be to develop the 'perfect’ design in-line with their specific product’s requirements. However, too commonly designers are forced to build-in compromises to deal with supplier issues. These compromises may involve attempting to minimise the risk of sourcing from different suppliers, or of building in design-level contingencies to mitigate the risk of the sudden non-availability of critical parts.


This problem is most keenly felt, I would argue, amongst ‘mid-tier’ OEMs. This is the strata that most seem to experience delays in getting their products to the mass market because of obstructions in the distribution chain, misalignment of their needs against the capabilities of the suppliers, or, simply, by not being big enough to be a priority for ‘tier one’ distribution companies.


Designers at these ‘mid-tier’ OEMs/ODMs tend to look for a very specific mix of capabilities in their distributor.


A fitting distributor


Unless you’re developing the latest iPhone or other such mass-market device, the fact is that many OEMs/ODMs are unlikely to be buying-in components in vast quantities, so as to enjoy huge bulk discounting. Chances are many mid-tier designers, producing devices of limited small runs, yet seeking to minimise the additional risk of exposure to multiple suppliers, will seek distributors that are geared to deliver High Mix Low Volume (HMLV) economically. Frankly, that rules out half of the distributors in the market immediately.


What’s more such OEMs/ODMs may not be sourcing the latest, fastest parts. A number of the opportunities that smaller OEMs/ODMs want to capitalise on, (and within IoT in particular), are not necessarily the most demanding in terms of their processing needs. As such, the main requirement for the mid-tiers in this example becomes price-competitiveness, not the ability to source the very latest model of microcontroller.


And then there’s balancing out the risk of obsolescence: In most cases, this will involve a distributor that can supply obsolete components through their franchise lines, or one that has the expertise to offer open market capabilities. This is a rare thing to find alongside substantial franchise line exposure.


And finally, these mid-tier OEMs/ODMs are often more susceptible to changes in market conditions and therefore many cannot afford to keep hold of stock on their premises. This lends itself to another characteristic they look for in their distribution partner – namely that they can offer inventory management abilities, allowing components to be sold back to the market if necessary.


The need for change


Until now, most distributors have adopted a business model that services their shareholders and undoubtedly, this means favouring high-volume, profitable supply. At the other end of the spectrum, there are fully ‘independent’ distributors that cannot guarantee the reliability or volume that scheduled business requires.


For these OEMs/ODMs, distribution models have so