Distributors Supply-Chain Role Grows

Service is key

Component manufacturers are servicing fewer OEMs and EMS providers directly. The manufacturers they do service are very large and most of them have moved manufacturing to Asia or other low-cost areas. Component manufacturers are relying on distributors more to service more of their customers, especially in North America.

“Distributors have become responsible for literally 99% of the customer base,” says Roy Vallee of Avnet Electronics. “Most suppliers we deal with now sell to 50-250 accounts directly. And we are servicing over 100,000 customers.” About five years ago suppliers would service between 1,000-2,000 customers directly, he says.

Suppliers want to reach those hundreds of thousands of customers that distribution services, says Bill Mitchell, chairman and CEO of Arrow Electronics in Melville N.Y. “Our sweet spot is small- and medium-size customers, and suppliers want to partner with us to reach that customer base,” he says.

Many of those companies have between 100-1,000 employees, don't have the purchasing, engineering and logistics staffs or IT capabilities and need a distribution partner to provide those services, according to Mitchell.