Surplus Parts Firms Sometime Make Sense

In my last article, I discussed electronics surplus houses and their role in the electronics supply chain. This article reviews one specific surplus electronics supply company and how the day-to-day operations take place. (See: Resolving Emergency Components Shortages).

HSC, also called Halted Specialties Co., is located in the heart of Silicon Valley where big distributor names like Future, Schweber, Wyle, Hamilton Avnet, Arrow, and Bell Industries previously occupied much of the local real estate. Along with these behemoth companies, the valley was also peppered with small, specialty niche distributors like Capsco, ISC, SMT, and IPC selling mostly passive components like resistors, capacitors, and inductors.

Digi-Key’s catalog was about a quarter inch thick vs. today’s hard copy version exceeding three inches in girth and growing. Because there was so much R&D and manufacturing in the valley, each of these distributors had well-oiled “Will Call” procedures so that if I needed a part on short order, I could just jump in the car, drive a couple of miles and pick up the needed component at the distributor’s back door.

Those days are gone now as each of the heavyweights moved out of the valley and consolidated warehousing elsewhere. They maintained local sales offices, but parts had to ship from hundreds of miles away and if you needed something quickly, logistics companies, with their very expensive priority service, was only too happy to oblige.

Now, for that quick component fix, HSC becomes a necessary, potential source for R&D parts and materials supply. Since their beginning around 1965 under the name Halted, (Hal & Ted founders), HSC has become one of the premier electronics surplus houses in Silicon Valley. With 15 knowledgeable, and fully trained staff working daily with both walk-in and web customers, HSC’s 10,000 sq. ft. retail facility is a beehive of activity. Let me see if I can give you the typical inventory activity flow.

A contract manufacturer, or a manufacturing company will call HSC to tell them that they have excess inventory and/or test or lab equipment that they would like to sell. HSC will request a list of the manufacturer’s part numbers and inquire about quantities and condition. If the parts are new and in their original packaging, then a site visit to review the inventory may not be necessary, but if the caller just says, “I’ve got a bunch of stuff in excess inventory and it is in a big pile I need to move as quickly as possible,” then someone from HSC may visit the seller’s company to assess the worthiness of the inventory.

In the end, some inventory is just purchased for scrap value, paid for by the pound or ton and hauled off to be forwarded to a third party scrap house who may just grind up the entire lot. But when it is good inventory and in good condition, HSC will purchase the parts or equipment and bring them back to their receiving department where a first level inspection and testing takes place. HSC has all manner of electronic industry test equipment along with factory line production gear as well. A Belgium buyer is purchasing a $1400 microscope and an Australian engineer is interested in a wafer dicer.

Active components like integrated circuits and diodes are sorted by part number and entered into a dynamic Excel spreadsheet listing manufacturer’s name, part numbers, and quantities. If the parts are prime and in sufficient quantity and packaging, they are posted to HSC’s E-Bay store and Netcomponents.com. Brokers from all over the world have access to these parts via the web and as it turns out, most of HSC’s business online is from the broker contingent.

End of Life parts are particularly attractive to brokers, and HSC makes sure that they price the parts low enough so that the brokers can also make a profit. With a $50 minimum for Internet-based purchases, the broker’s purchase amount makes the handling and the processing by HSC worthwhile. When product ships to the customers, it is in static safe packaging and labeled with the manufacturer’s part numbers.

Many of the parts that are not listed on the websites, are moved to the sales floor and stocked into well-marked bins for walk-in customer access. Only about 10 percent of HSC’s business is actually online. The advantages of having a brick and mortar presence includes hands-on and eyes-on access and visibility, Immediate availability, small-no-minimum quantity purchases, face-to-face communications with informed personnel, and immediate return and replacements for any defective or damaged goods.

With 40 percent of component inventory numbers being surface mount, HSC not only meets and exceeds the typical hobbyist demands, but for manufacturing operations requiring approved part numbers set in a company’s Approved Vendor List, HSC can be the supply-house-to-the-rescue more often than one might think.

And, oh yeah, they can be useful too if your excess inventory is slowing things down or becoming a burden on the inventory cost numbers. People don’t want to keep paying for stuff in their public storage houses when the cost of storage exceeds the worth of the contents. Why would you want to keep paying burdened cost for inventory you will never use again? HSC just makes money and supply chain sense.

Douglas Alexander has been working in the electronics R&D and manufacturing sectors for over 30 years. He developed and managed several departments at Digital Microwave Corp. (DMC), including Purchasing, Contract Management, Component Engineering, Documentation Control, Contract Manufacturing, and Prototype Assembly Operations. He also worked at Microsoft Corp.’s WebTV division as the founding manager of its Component Engineering department. He recently served at Transparent Video Systems as the Director of Engineering Operations and Logistics.