Component Shortages to Last ‘Longer Than Expected’
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Source: Amazon
AmazonBusiness did not set out to disrupt the electronics supply chain. But that’s exactly what it did.
The most visible indicator of this disruption was highlighted last week at the ERA Executive Conference in Austin, TX, where AmazonBusiness was a featured speaker. An electronic component manufacturer found its devices were selling on AmazonBusiness for below the manufacturer’s cost. Customers, in turn, were using that information to negotiate lower prices with that supplier.
Amazon, tactfully, pointed out that’s not Amazon’s problem. “We don’t control the price,” said Colin Puckett, senior marketing manager, Amazon. “The seller controls it. If someone wants to take a loss on their sale, that’s their business.”
Amazon’s response would have been the same if the item in question was a roll of toilet paper. Amazon’s pricing and resales practices have been disclosed on its website for as long as the company has been in business. And Puckett is not unsympathetic to the dilemma faced by electronics component suppliers, distributors and manufacturers reps. Puckett spent more than a decade in industrial manufacturing and distribution.
Source: Amazon
Amazon’s own research is pointing to the platform’s popularity with businesses as well as consumers (see graphic, left). “People are used to buying from home with a single click and easy payment,” Puckett explained. “At work, they have to send faxes, create POs and it may take weeks to get approvals,” he said. AmazonBusiness has set out to provide the same buying experience as Amazon.com.
Amazon is also aggressively addressing issues that are of particular concern to businesses, such as counterfeiting. Any seller suspected of dealing in counterfeit products is immediately suspended from the AmazonBusiness platform, said Puckett. In the case of electronics components: “We rely on the buying community to tell us if a part is counterfeit,” Puckett said. To further discourage counterfeiting, AmazonBusiness is pursuing accreditation from quality control and standards-setting bodies — such as the ISO -- across all its product marketplaces. “These credentials are important,” said Puckett. “They are a way of establishing trust with our customers.”
Based on feedback from business customers, AmazonBusiness had added several features familiar to electronics components buyers. For example, AmazonBusiness will now reflect customer-negotiated prices on its B2B platform. Other new B2B features include:
Pricing:
- Business/contract pricing: AmazonBusiness provides visibility to, and will honor, customer negotiated pricing
- Processing requests for quantity pricing
- Providing and processing large — pallet-sized — orders through its Amazon fulfillment centers
Buyer features:
- Allows for tax exemptions where appropriate
- Enables invoicing
- Pursuing credential programs
- Enabling procurement integration: AmazonBusiness can be integrated into ERP/MRP/procurement platforms
- Providing delivery flexibility: processing large orders
- Providing analytics: certain POS information, such as customer name, location and contact information
- Spending controls: buyers can set pre-approved spend levels
- Supplier management: customers can download their AVLs
Seller content:
- Providing enhanced content, such as data sheets for electronics components and designs
- Analytics
- Credentials programs
- Profile editor
Source: Amazon
Electronics distributors have been providing all or most of those services for some time. Judging by the audience at the ERA conference, many in the electronics industry consider the AmazonBusiness model as a low-cost competitor (see graphic, left). Buyers have always used published component prices as leverage to negotiate better deals with suppliers or distributors. But in electronics, there’s always been a price threshold that authorized companies won’t breach. AmazonBusiness is not bound by the same restrictions.
At the same time, Amazon doesn’t have the same relationship with suppliers that electronics distributors and reps have. Puckett said AmazonBusiness provides a venue for customers to reach out to suppliers, but Amazon’s customer service personnel is not trained on electronics components and AmazonBusiness doesn’t provide FAEs. The electronics supply chain is so complex that an online marketplace is unlikely to solve all buyers’ problems, industry executives said.
“The electronics supply chain is more complicated than it probably appears from the outside looking in,” said Michael Knight, senior vice president, Americas, for TTI Inc. “I can understand why a company with the scope and ambitions of Amazon would want to get involved, but given the nature and complexity of the industry, and the supply chain that supports it, it seems unlikely that Amazon will be able to apply an existing business or industry model they have to electronic components.”
Companies such as TTI and Mouser have spent more than 40 years developing and perfecting a business model tailored to deal with the millions of part numbers in the industry, Knight pointed out. Many of these devices are possible substitutions for each other, and electronics distributors serve customers who outsource everything from design to manufacture, and whose end customer forecasts are more often erratic and not easily predictable.
“What we sell today is so much more than just a part number,” Knight said. “It is all of the things that get bundled with the parts… DFARs compliance, conflict mineral reporting, 2D barcode labeling, VMI, bonded inventory, technical specs, repackaging services, assembly and test services, etc. While we prudently keep one eye on the competitors we’ve grown up with, and potential new entrants, TTI and its subsidiaries are firmly focused on the evolving, ever more global and complicated needs of our suppliers and our end customers.”
Several sources declined to comment on AmazonBusiness saying there are still too many unknowns about its impact on the electronics industry.
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