In a mature market such as electronics distribution, start-ups are rare. Would-be distributors face an abundance of OEM and EMS customers demanding a unique value proposition from their channel partners.
Sourceability has spent the last several years investing in a network of global distribution centers Singapore, Hong Kong, and Miami. The company doesn’t call itself an electronics distributor--it considers itself a technology developer –and provides a wide range of service and support without aligning itself with the traditional franchised/independent and specialized/broadline/catalog identities. Sourceability has offices in 16 cities; employs 300 people; and anticipates sales of $160 million this year.
Hailey Lynne McKeefry, editor-in-chief of EPSNews’ sister publication, EBN, recently spoke with Sourceability’s founder and CEO Jens Gamperl, an industry veteran with over three decades of experience.
“I am a child of distribution, and started in 1988,” Gamperl told EBN. “Globalization is putting pressure on distribution to generate more sources of income, so I went to the drawing board to figure out what I would change in traditional distribution. Sourceability is the result of that.”
Previously, Gamperl served as the global vice president of sales and purchasing for Advanced MP Technology, responsible for building the independent distributor’s global sales and purchasing team. In addition to working for a number of distributors, he also cofounded Easy Training, an internet start-up for long distance learning.
EBN: You’ve said that the electronics distribution landscape is changing, taking us from the old model of pure-play franchised distributors and “gray market” independents. What does this new breed of hybrid distributors bring to customers?
Gamperl: When I was developing my business model, I looked at what was most satisfying for the customer. I was surprised that catalog distributors such as Digi-Key and Mouser were on the top as most satisfying. There are certainly bigger distributors, but it proves that the most satisfying companies are not the biggest.
What I learned is that these distributors put logistics first; keep a lot of inventory; and are ready to turn an order in 20 minutes or ship a single part of necessary. That’s a hard model to scale, though. These players also are very expensive.
Meanwhile, big distributors are more in the mass production business and offer compelling terms and conditions. They do fantastic fulfillment for long-term scheduled business with lead times and carrying some stock. Rising costs, though, will make that a hard model to maintain and remain sustainable over the next decade.
In our approach, we negotiate with the distributors and have developed a platform to give our customers global insights on pricing and availability and we let the customer choose what he needs. At Sourceability, we have data on hand now that is filled and fed by our suppliers who want to generate business. They put the data up—but no one can see the seller. We can make it transparent if there is a failure. We can navigate this ocean of data and pick best offers for the customer, put up logistics for customer, and do just in time (JIT) delivery as required.
EBN: What are the key strengths and differentiators of Sourceability? Where do you see your business evolving over the next five years?
Gamperl: One of the frustrations of the traditional system is the huge amount of data that the independent distributor had to work. Large OEMs or EMS had tens of thousands of partners and the customer would want global view of availability and pricing for all of them. We would manipulate the data in a spreadsheet and send it out to suppliers. It could take several days, and we’d spend a lot of time on it.
The interesting thing is that we would get quotes back and they would all be totally different. We’d then have to collect all the data and put it back in the spreadsheet. For 10,000 part numbers, we might get thirty or forty orders—and that data was immediately obsolete. About 80 percent of the business is still done like this today.
The problem is that the spreadsheet is outside the enterprise resource management (ERP) system, which is the heart of the operation for most customers. It is akin to taking data from the heart of the operation and doing surgery outside of the chest. I decided I wanted to stop wasting resources and develop technology that enabled suppliers to put all of its data into a system that was then made available to my customers. (Editor’s note: The resulting digital platform, called Sourceengine, has been available as a beta product to some customers for about six months, according to Gamperl.)
Over the last six months, we’ve developed 1,200 suppliers, all traceable from franchised distributors or manufacturers who are willing to put up their data on Sourceengine. Today, we have about two dozen uploading information through an application programming interface (API), but the majority use a File Transfer Protocol (FTP) to upload and update product data each night. Others send an XML sheet weekly to update lead times. Especially in shortage times, though, any delay carries a risk for us.
Today, Sourceengine contains 15 million unique part numbers and, on average we have 12 or 13 offers per part. The platform is capable of quoting up to 10,000 lines in bill of materials (BOM) in 20 seconds The beauty is that you can fully execute the order from the system. If you like the pricing and lead time, you can push a button that executes the order with a supplier and the transaction will be done and guaranteed through Sourceability.
I would consider us a hybrid of franchised and independent distribution. Right now, we have 18 to 20 lines signed and 15 or 20 in the pipeline. By the end of Q1, we will be franchised for 50 manufacturers. But we also work with authorized franchised distributors buying for requisition. We take the order, consolidate the shipment, and ship directly to the OEM or EMS.
One day, though, we might just be a platform where people transact orders that are then filled directly by the manufacturer or distributor. I could imagine that it would be a licensed based offering or something like the Amazon platform. What we do today is develop the technology so people can transact on a digital platform. Rather than spending money to integrate with every distributor, customers can integrate once with Sourceability. When we started, we talked to the supply people, but it has become much more of a conversation with information technology (IT) people.
EBN: How do you see the products and services that electronics OEMs and EMS are looking for evolving?
Gamperl: At the end of the day, the question is really what demand the customer has. Historically, we’ve had a fragmented distribution environment. In China, there were hundreds of thousands of manufacturers and suppliers were put in place at a time when technology couldn’t make information available. At that point the business became more global than regional.
My customers expect that I will provide the most accurate and updated global data that is available. Forward thinking companies are providing data through APIs, but today, out of every 5,000 companies, there are 4,900 who cannot do that. I offer to develop it for them since I have the technology and can customize it to what the customer needs. Tier two and tier three manufactures are already talking to us.
EBN: How do you see the role of supply chain technology impacting the way you and your customers do business? What do you see as the most promising emerging technologies?
Gamperl: We are working on blockchain and smart contracts. It’s all about traceability, especially for automotive, medical, and mil/aero companies. We are working on a blockchain approach that would combine a physical product with a contract. We hope to have that in six to twelve months.
By providing traceability, we could create a scenario where a customer could take unused product and return it to the open market and monetize it which is very hard to do today. Where there is a change in demand where one customer has increased and the other has decreased the forecast, we can consolidate this information and distribution can take advantage of it. This is a technology we are working on today.
EBN: Product shortages abound. What strategies are your customers using to get ahead of the curve on long lead times?
Gamperl: We introduced some of our regional and global customers to each other where we saw they were using same products. We pooled their demand (with their permission) and created overflow budgets where pricing was volatile. We bought a lot of inventory because we think shortage might come back a little up.
The premium that is paid right now is more like an insurance premium to make sure there is stock and that they don’t risk a line down. They are aware that there are extra costs.
Sourcengine can provide them with global visibility on parts and let them see where we can save them money compared to what they are used to in their local supply chain. We can set the target of premium prices, and whenever pricing is below this level, we go and buy safety stock. We always find product but sometimes the pricing is very painful.
EBN: How do you see the evolution of the tariff landscape and free trade agreements impacting the way you and your customers do business?
Gamperl: It’s mainly right now a problem that impacts our customers in the United States. It reminds us that nothing is a given. It came as a surprise and I think it is a short term: it won’t stay for the next six years even if Trump has a second term and Republicans have control of the house. It might last one or two years. Clearly, he is using it to put pressure on China.
He might have a reason to do so but it is painful for our customers. It means that there is a kind of vulnerability to outside circumstances that we in the supply chain cannot control. If we have tariffs, at the end of the day, it increases our costs. It puts additional pressure on pricing. We as a supplier have a responsibility to find cheaper product for our customer and get our hands on it if it is traceable. This is where hybrid and independents do a much better job than regular distribution.
Certain component manufacturers are taking action and trying to move production into other countries like Taiwan and Vietnam. It will have an impact long term on the Chinese landscape which does 90 percent of the production of semiconductors.