It should be no revelation to anyone that the electronics supply chain is prone to rough waters and frequent changes in tides, whether it’s tariffs, trade wars or Brexit. But there are tools that can help you navigate and better prepare for what’s on the horizon—a horizon that is definitively global.
While these things are creating short-term waves along with component shortages and the usual boom-and-bust cycles inherent in the memory business, it doesn’t change the rules of the game—this business requires a global approach to customers. That means giving them global visibility of product availability, pricing and trends because it’s the only way to fully address the problems they are facing, even if the tables have turned in some ways this quarter as compared to last year.
How do you roll with the changes?
In 2018, most of our customers were talking about the shortages, emergencies and lead times affecting their supply chain. Fast forward to the end of Q12019, and they’ll tell you their chief concern is oversupply. What’s needed most nowadays is transparency and visibility—a hybrid distributor like Sourceability, which can provide digital tools such as Sourcengine — even if it means watching prices drop because of continued oversupply.
It also illustrates that despite globalization, different regions must be navigated differently given the different languages and maturity of their respective electronics distributors along with manufacturers who used to be limited to where they could do business but now must think globally. Regional differences such as pricing still exist, but this is more visible because of platforms such as Sourcengine, which today captures 1,400 franchise distributors and manufacturers, including their pricing, their availabilities and their lead time. That visibility is available at the press of a button but was impossible only five years ago.
How do you navigate uncharted waters?
Having this information doesn’t making the waters any less dynamic, but it does become easier to navigate.
For example, Sourcengine users can either use the data at their fingertips to place orders with Sourceability or negotiate with their existing suppliers because of the transparency. Some like to stick with their existing suppliers, who they know are reliable, and negotiate pricing with Sourcengine data. Others simply execute orders. Either way, they have a better map to guide them.
This map enables them to change their cycles and workflow because they have a much more accurate view, even if it’s difficult to forecast the next sudden sea change. There’s always the risk of buying too many units or not enough, but with a tool like Sourcengine, it’s much easier to navigate and use the information to improve your own supply chain management.
How do I ride out the storm?
One thing that becomes clear to the more seasoned sailor of the electronics industry is that some storms don’t last very long and don’t have much influence on the weather over the long term. The impact of tariffs, for example, are short-lived, and their ultimate impact is on pricing that products from specific regions, countries and manufacturers become more expensive. It’s a wave that will be priced into the market, but it’s not so powerful that it will drown industry growth.
This year started off with plenty of waves, but none are surprises if you’ve been navigating the industry for a while. The first quarter is always slower than Q2 and Q3, and it allows for some breathing space so that our customers can adjust course with the data and tools at their disposal. They’re able to develop their own catalog and better manage their bill of materials by the generic data from Sourcengine and blend it with their own data to better understand pricing and lead times—whatever they need to know to chart their course—and connect it to their own enterprise resource planning system through APIs or FTP.
The sea changes affecting our customers is influencing how we do business. Not only do they want to mix our data in with theirs, they also want to mix our technology into their own systems. So not only are we further developing Sourcengine as an e-commerce marketplace, we are also customizing it for OEMs and EMS companies who want to be more flexible and quicker in making decisions.
How can you adjust your course to the right horizon?
As much as Sourceability has been helping our customers re-orient how they handle the short-term storms and the long-term challenges in the electronics industry, they are also guiding us.
We realize that Sourceability always doing the fulfillment doesn’t always make sense, so if a customer already has a relationship with a participating distributor, they can take advantage of offers through Sourcengine but have the fulfillment go through them.
Developing new models in which the fulfillment can be done already with existing suppliers if customers choose is an example of how the electronics industry at large is changing. It also demonstrates that there’s an enormous hunger and demand for data—just the data—in a customized format and not just the logistics capabilities that Sourcengine or any other distributor provides.
Accepting that we must evolve our business as the industry evolves is just as critical as accepting that it’s a truly global marketplace. When it comes to forecasting sea changes, Sourceability couldn’t have predicted six months ago that some of our customers may want our technology and business operations expertise rather than rely on our role as a hybrid distributor. Some suppliers are looking to manage their own data in Sourcengine, for example, while small, niche players don’t have to develop their own technology.
For us, it means we become even more of a technology company and shift our investment into developing our platform rather than into warehousing facilities for shipping products—that fulfilment can be done by companies much larger than us. We will remain in the traditional business but will focus more and more on technology.
It’s a major change for our business strategy and, unlike tariffs, trade wars and Brexit, will be a long-term phenomenon rather than a storm that quickly passes.
About the author:
Jens Gamperl, a member of the technology industry since 1983, says his passion for this business "has led me to build a company capable of transforming today’s archaic component marketplace. Our team of industry leaders continue to solve issues plaguing distribution, procurement, and logistics by innovating digital solutions poised to reinvigorate a global business model in dire need of change."