Are Electronics Date Code Practices Obsolete?
by 
Engineers should be thrilled by all the attention they’re getting these days. Component makers, manufacturer’s reps and now distributors have all pledged to be the designer’s best friend. The industry's’ two largest distributors, Avnet Inc. and Arrow Electronics Inc., have invested heavily in field applications engineers (FAEs) and in the maker movement — Arrow has partnered with Indiegogo and Avnet has acquired catalog distributor Premier Farnell and Hackster.io. It’s all about the engineers.
It’s hard to dispute this strategy: Arrow's sales in 2016 increased 2 percent to reach $23.83 billion. Avnet’s fiscal 2016 sales declined 6.1 percent to $26.2 billion; the company has since doubled down on its design and engineering offerings. Distributors that focus 100 percent on engineers -- catalog distributors such as Allied, Digi-Key and Mouser -- tend to outperform distributors that provide both design and order-fulfillment services.
Still, most distributors rely on high-volume fulfillment orders to pay the bills, and engineers are far from neglected. Manufacturers’ reps – engineers’ traditional source for new product information—are holding tight to their customer base. Some component manufacturers are expanding their direct-sales efforts. Although engineers select the components that go into designs, purchasing still controls the purse-strings. Distributors overlook procurement at their peril.
Don’t call us; we’ll call you
Distributors are courting engineers because it's more profitable. Suppliers reward distributors for securing a component's spot in an OEM design (referred to as "demand creation"). But designers aren't seeking more attention. A panel of engineers at the recent ERA Executive Conference – Jean Anne Booth from UnaliWare, Mike Kasparian from Atlas Wearables, Ken Krakow from Roku, and Andy Regimbal from Dell — said they don’t want a lot of help in making component selections. First, they’re pressed for time. Second, they have a pretty good idea of what component they need. Third, if they don’t know the exact specs of a device, they'll turn to the internet. Once a device is selected there are user forums and online tools that can tackle almost any design challenge. Panelists said they’ll pick up the phone only as a last resort.
When engineers decide to place a call, it doesn’t matter whether it’s a supplier, a rep or a distributor that’s on the other end of the line. A few panelists said they couldn’t differentiate a manufacturers' rep from a distributor. If a company has helped them in the past, that will be the first call they place. They want answers to their questions; not suggestions on other components that will work in the design.
Regimbal said he will go to the company that has the most experience in the products he is researching or to the web. Another panelist said he’ll talk to peers; Booth, who works for a small company, said relationships are most important. One panelist said he doesn’t always know the affiliation of the person he calls. “I’ll start wherever I have the contact, whether it’s a rep or manufacturer,” said the panelist. “Not an 800 number or anyone that I have to explain the design to—it takes too much time.”
“We need someone supremely well versed in this product engineers want help from the pros,” a panelist said. “we prefer the manufacturers’ FAEs.”
Engineers don’t look behind the curtain
But customer engagement is critical to reps and distributors. Historically, reps and distributors worked together: reps identified a design opportunity; distributors provided product support. Once the design reached volume production, sales commissions were split. Now, largely because order-fulfillment margins aren't that high, distributors are upping their engineering game. Suppliers reward demand-creation efforts with protected or increased profit margins on volume sales.
But overall, margins have been shrinking. Suppliers seek to retain the margin they had allocated to distributors. Texas Instruments Inc. recently discontinued its demand-creation program in favor of calling directly on customers. Distributors will still fulfill volume orders for TI.
This type of issue is invisible to engineers. “At the end of the day I have to be able to design things into my product and you have to figure out how to get paid,” said one panelist. “Customers don’t see sales channels,” said another. “We see who can do what we need. Once we get to ramping up our product we say 'we’ll build 100 or 1,000 and here’s our forecast.'”
Engineers also seem resistant to component recommendations. One panelist said [a supplier, distributor or rep] “isn’t going to define my product.”
So, within the sales channel, the battle for the hearts and minds of customers has gotten ugly. Reps and distributors say getting "face-time" with engineers is next to impossible. Additionally, designers aren't invested in sales-channel compensation programs, although they are very conscious of cost.
Cost, cost and cost
One of the myths in the electronics supply chain is engineers are not sensitive to price. Engineers typically buy small volumes of a variety of components when they are developing a design. Catalog, or low-volume, distributors typically charge a premium for small orders.
So, what differentiates a distributor in the mind of the engineer? “Cost, cost and cost,” said one panelist. “Cost upfront is the biggest factor. I need to know that now rather than later.”
“Procurement ends up making the final decisions,” another panelist said, “so I’ll have to fight with the procurement person [about cost] at the end of the day.”
Global support is also essential. “I have procurement in California and manufacturers overseas so I need global support,” said one engineer. “Availability is also huge,” said another. The ability to receive component samples worldwide is important.
“We are designing in the U.S. and building in Asia, and we have one Japanese supplier that can’t get us samples. We’ve changed suppliers because they can’t get us samples,” the panelist said.
AspenCore asked engineers where they went for technology and new product information
How to get attention
Suppliers, distributors are reps are clearly struggling to accommodate their customers. Engineers prefer to be contacted by e-mail, according to the panel. If a vendor is familiar with the engineer, mention a new product on the e-mail subject line. “If you know I’ve been looking for a white-on-black display, I will open that e-mail,” one panelist said.
“We will look at custom products and slight variations of standard products,” another panelist said. "In the connector market, FAEs are invaluable. They are one of the few [sales-related resources] we are asking for what they know. They are invaluable when we need someone to talk to. It’s the same for [semiconductor] FAEs – I can reach out to a silicon FAE and make sure we are not missing out on something; or I don’t have the whole design set and [I can tell them] 'here’s what I need.'”
Reps can add more value on products that are coming versus products that currently exist, panelists said. “Reps carry the lines we work with but they won’t tell you what’s coming next or that it will be 3 to 4 years away. The design engineer needs to know what is coming and know the schedule. The value is, at end end of the day, we can make sure we are aligned with the right suppliers.”
The big picture
The ERA panel admittedly was a small sample of engineers, but research conducted by media group AspenCore found designers seek help mainly on the internet. North America-based engineers overwhelmingly prefer websites, webinars, newsletters and videos. FAEs ranked eighth on the list. At some point suppliers, reps and distributors have to secure big orders to generate revenue. Reaching engineers is only part of the equation.
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