Independent Distributors and Brokers…Villains or Super Heroes?

Yesterday, one of my sales people contacted a customer.  He dialed the number and I could hear the phone ring.  The sales person introduced himself to a new buyer.  After rattling off his 5 second pitch the buyer asked, “Oh…are you a BROKER?” the sales person replied, “We’re an independent distributor of electronic components certified to ISO 9001:2008 and AS9120A plus CCAP-101 certified for counterfeit avoidance. If you have a list of products that you can no longer get from your regular supplier and we don’t have the part in stock, then, of course we operate as a broker as well.”  “Oh…” said the buyer, “Well send me your information”.
 

 If you are reading this blog post it is likely…

A.  You’re an electronic part buyer or engineer who wonders if brokers and independent distributors are villains or super heroes?

B.  As an independent distributor or broker you also wonder if you are a villain or super hero?

C.  You really like comic books that feature villains and super heroes.

My company services upwards of 1,400 different customers depending on the year and the needs of the market place. I’ve always viewed the people in my company as a group of super heroes.   Here’s the thing.  Our industry is entrenched in the electronic part distribution market place represented by industry associations. One group association, representing franchised and authorized distributors, invests a large amount of capital on marketing and advertising campaigns to create the persona that independent distributors and brokers are villains.

Despite this fact, my highly educated electronic component engineers and buyer customers, shake their heads and tell me that we saved their company a board redesign that would cost $250,000.  That service alone elevates us to super hero status.

…but let’s discuss the villains for a moment. 

Every drama worth it’s entertainment value has at least one really good villain.  In our industry, the villains are the bad people with bad intentions who sell bad parts to good people and good companies.  At least on the surface, that is how the story is told.

Recent villain characters in our industry include the late Shannon Wren, who is reported to have taken his own life, and Stephanie A. McCloskey of VisionTech Components, LLC . Stephanie pled guilty to a federal charge of conspiracy to traffic in counterfeit goods and to commit mail fraud, and she subsequently cooperated with authorities.

As part of her plea agreement, she agreed to forfeit to the government the benefit she received from the scheme, a total of approximately $166,141 in salary she earned as an administrator for VisionTech Components, LLC. and other fines totaling $600,000.

Stephanie was sentenced to 38 months in prison for her role in a scheme in which she and others imported counterfeit integrated circuits from China and Hong Kong and sold hundreds of thousands of them to the U.S. Navy, defense contractors and others, marketing some of these products as “military-grade.” This is the first federal prosecution in a case involving the trafficking of counterfeit integrated circuits. Source http://ow.ly/bab1C

Were Shannon Wren and Stephanie McCloskey super villains out to hurt our military and defense?  Certainly, I’m grateful their operation was stopped. I would be remiss to not acknowledge that the electronic component brokerage business has attracted some very colorful personalities.

The barriers we’ve erected in our business to protect our customers and our company are monumental.  Navigating through an industry where the majority of vendors don’t share our same values has been a challenge.

If independent distributors and brokers want to survive in this business then they need to get educated.  The government is watching closely and can you blame them?  They’ve set up undercover operations and ongoing criminal investigations.

Viewing ourselves as super heroes doesn’t preclude our responsibility to educate our customers.  Any engineer or buyer who decides to purchase parts outside the franchised or OCM market place is making a business decision.  I don’t want to sell to an uninformed buyer.  New customers don’t always understand why they have to sign a Declaration of Intent or Export Compliance.

Transaction times are now extended because we have to perform our due diligence.  No longer can our customers stick their heads in the sand and not know the character and quality of the vendors they are dealing with.

OEM electronic component manufactures discontinue product lines.  Engineers faced with this challenge and working within budget constraints often have no other choice but to procure product from independents.  In the real world of electronic manufacturing, board redesigns are a costly business decision.

A classic scenario presented by one of my very large Fortune 100 customers is the fact they were offered a life time buy from their supplier.  At the time the life time buy was offered, my customer decided not to purchase the product.  As time went by it turns out my customer needed the product after all. Now the product is no longer available from the regular supplier.  My customer ran the numbers and the board redesign will cost over $500,000.  I can’t tell you how many times I’ve heard that story.

I agree with the industry association representing franchised distributors and electronic component manufacturers that buyers should purchase from the original supplier.  Going to the original manufacturer or authorized supplier is always preferred common sense.

What happens when the buyer can’t find the part anymore?  Another statement I’ve heard from prospects before they become customers is “I’ll NEVER buy from you…you’re a broker”.  Then they call a week later asking to place a purchase order.  Hey…we’re here when you need us.

Electronic component buyers and engineers who make a commitment to get training on how to navigate the marketplace will better position themselves to find parts from quality independents.  The best independents have connections and relationships that benefit electronic manufacturers when they need us the most.

Are Independent Distributors and Brokers Villains or Super Heroes?  If you perform your supplier due diligence and educate your purchasing, engineering and inspection team on how to avoid counterfeit and substandard product, then everyone who avoids a costly board redesign will be a super hero.

One last thought…if you purchase electronic components from the open market because they are obsolete or hard-to-find, purchase Discontinued Products Liability Insurance.