Independent Distributors Define Their Role in the New Normal

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After a handful of years marked with component shortages, expanding lead times, pandemic-related supply chain disruption and most recently a ground war, “business as usual” is a relative term. The electronics industry has been especially turbulent, but supply chain businesses see both challenge and opportunity.

OEMs and EMS providers have sought deeper supply chain relationships to manage complexity. EPSNews contributor Hailey McKeefry recently spoke with Jennifer Strawn, vice president of sales and sourcing at Rand Technology, which provides services ranging from component sourcing to aftermarket services and asset recovery. A 25-year veteran of the independent distribution industry, Strawn shared her views on current state of the market and where things are going.

EPSNews: How would you describe the electronics industry right now?

Strawn: There are moments in time that we all live for because they are definitive. This is one of those moments. It has become evident that we have gone far beyond what we would call a component shortage — and it’s not going to end anytime soon.  We are in an exciting time of building out the IT infrastructure to drive productivity of the next generation of products and services that will drive economic growth. Current demand underlines the importance of building out technology at a pace that we hadn’t thought possible. We are defining what the new normal of the supply chain will be over the next few years.

EPSNews: Does that change the way your customers are working with you as an independent distributor? Are they partnering with you differently?

Strawn: People are definitely changing their perception of the role of independent distributors and how to work with them. We see ourselves as participating in an ecosystem as an agility partner. Particularly in todays’ market, the customer needs someone working on their behalf while franchised partners work on behalf of their suppliers and vendors are pushing their brand. We help look out for the two biggest business challenges going forward: risk mitigation and supply assurance. Independents need to be talking about what we do and educating customers.

Independents have the unique ability to see trends happen before everyone else because we play in all the areas where we source and sell products. Since we see trends early from ground up, we can help customers identify and mitigate for them. We see OEMs contemplating how much control of their supply chain they want to regain. They had turned that over to outsourcing and suddenly they are back in play with responsibility for it.

EPSNews: What is Rand doing differently in this new market?

Strawn:  Every independent distributor has something that they do well in order to be relevant. We are evolving to meet the needs of our customers by focusing on OEM customer relationships, while others focus on contract manufactures and original design manufacturers. We offer the full breadth of services from new product introductions (NPIs), to production, repair, and asset recovery. We offer data analysis at NPI, spotting gaps before a product goes into production by looking at the supply chain. As part of supply chain assurance, customers are asking what a partnership will look like. We need to think about helping them with vendor management and buffer stock. We’ve moved past feeling comfortable to a just-in-time reality.

EPSNews: In order to get past the reality of component shortages, the industry is working to bring more fabs online, but that takes time. What do you see as the biggest challenge?

Strawn: When you think of all it takes for a foundry to come online, their challenge now is a big mix issue. In the industry, the fabs have the wrong technology mix. There’s a lot of demand for eight-inch wafers, but there’s not a lot of fabs investing in it, but 12-inch wafers are still a ways off. Semiconductor makers are fighting the challenge of building foundries but then they still encounter constraints on the machines in the fabs.

Technology advancements, like hyper scale cloud, are driving demand and those building the fabs will always lean into those. There are always going to be smaller companies that have delays, gaps and other needs. They will be at risk for longer delivery times.  In terms of fabrication, we’ve reached our capacity in human abilities, and it will take time for AI and other technologies to make things faster.

EPSNews: How would you suggest organizations working to leverage the benefits of independent partners?

Strawn: Everyone is facing inventory imbalances, so it’s more important than ever for companies like Rand to create and hold a buffer. We make long-term agreements with semiconductor suppliers to be able o do that. Meanwhile, our customers have to look for a new balance in terms of lead-time, reliability requirements and then need to keep things in production even though availability of inventory will remain a big question that is yet to be answered.

EPSNews: What are the best strategies in uncertainty?

Strawn: Covid has taught us that planning for the unexpected has to be a serious consideration.  If it has taught us anything it’s that there will always be something impactful on the horizon from shutdowns to logistics and production problems. It’s important to have second sourcing options.

A big factor is geopolitics, so it’s critical to have backup geographic areas so that if something happens in one country there’s another place where things can keep going. You have to consider the reality of delays—because we no longer live in a world with consistent six-to-eight-week lead times. That’s the new normal moving forward.