Three of the industry’s biggest distributors – Arrow Electronics Inc., Avnet Inc. and Electrocomponents plc – have withdrawn from the Electronic Components Industry Association (ECIA), marking an historic, structural change in the 9-year-old trade organization. A new group, the Global Electronics Distributor Association (GEDA), will be formed within the next 90 days, according to an Avnet spokeswoman.
Aligned with current global industry needs and opportunities, the spokeswoman added, GEDA will provide its members with a cost-effective membership focused on what is important to the electronics components distribution industry today.
ECIA was formed in 2010 through the merger of two industry groups: The National Electronics Distributors Association (NEDA) and the Electronic Components Association (ECA). NEDA -- established in 1939 -- was comprised of distributors; ECA represented component manufacturers. Arrow and Avnet have been NEDA/ECIA members for decades as have Electrocomponents' Allied Electronics and RS Components brands.
ECIA’s membership now includes distributors, manufacturers and independent reps of all sizes. The members tend to be concentrated in the Americas because many small firms don't engage in global commerce. ECIA has alliances with other trade groups in the EU and Asia. GEDA will include leaders from the electronic components distribution industry, according to Avnet, and its associated manufacturers who will be dedicated to advancing the interests of GEDA members.
Arrow said it does not speculate on matters such as post-ECIA plans. Avnet confirmed its withdrawal from ECIA effective October 25.
The move is a blow to ECIA in several respects. Membership fees are scaled by size of the organization, and collectively, the three distributors represent $50 billion in global revenue. The distributors also post their inventory on ECIAauthorized, an exclusive aggregator for the authorized channel. Non-authorized distributors are considered at higher risk for counterfeit components.
Arrow and Avnet hold an expansive array of inventory based on customer forecasts; "on-hand" estimates; consignment; and opportunistic buys. Allied Electronics and RS Components are specialized, low-volume distributors; Electrocomponents is a fulfillment, or high-volume, business. This is a significant amount of stock that will no longer be listed on the ECIA site – Arrow and Avnet each reported inventory assets of roughly $3 billion in their recent earnings statements.
Bill Bradford, CEO of ECIA, said the association does not have any public comment relative to members disengaging from the association. “As of July 1, we were at record high numbers of members from all three categories – distributors, manufacturers, and manufacturer representatives,” he said. “We continue to engage this active membership to promote and improve the authorized sale of electronic components and have several initiatives in the works toward that end.”
Insiders say collaboration between two associations isn’t out of the question. ECIA has key committees working on global industry practices, statistics, standards and marketing; and tackles issues such as anti-counterfeiting, tariffs, cybersecurity and conflict minerals. All are relevant to the global supply chain.
The separation is time-sensitive: ECIA memberships and fees are renewed in the month of October. The ECIA Executive Conference, the organization’s flagship convention, begins on October 20. Sources said conference sponsorships and attendance from Arrow, Avnet and Electrocomponents have been revised.
The new Arrow/Avnet/Electrocomponents consortium reportedly will be more distributor-centric than ECIA. Although the fate of suppliers and distributors are inextricably linked, the two groups are often at odds with one another. Component makers have been cutting back on demand-creation programs in which distributors are rewarded for pursuing OEM designs. Without such incentives, suppliers retain a higher profit margin.
There are also various arrangements between suppliers and distributors that are problematic for the partners. Distributors are required to get approval from suppliers if they increase or decrease component prices beyond a certain point. Those price differences are managed through a debit and credit system that is complicated and inefficient. Customer “ownership” is often in contention because distributors “touch” customers on their suppliers’ behalf. Suppliers have moved customers out of the channel to manage them directly.
Other suppliers are deeply involved with distribution, channeling more than half of their volume through their partners. Global component makers face unique challenges in the supply chain: prices differ across regions; franchises may not apply to every country; and the U.S.-China trade war has added expense and complexity to logistics. Distributors, which manage many thousands of international customers, are well equipped to handle these issues.
Working through such challenges is a large part of ECIA's charter. The association recently reorganized its board of directors with equal representation from distributors and suppliers and to include manufacturers reps. The board consists of four distribution council members; four supplier council members; and one from the council of manufacturers reps. The councils are made up of 12 executives from member companies with responsibility for suggesting association priorities, while setting and overseeing their council’s specific agenda and initiatives.
The Distributor Council, the Manufacturer Council, and the Independent Manufacturer Representative Council were launched at the ECIA's fall 2018 Joint Council Meeting. This structure “provides a venue for each of the constituent groups to discuss their specific challenges relating to our industry and the authorized channel,” said ECIA. “More importantly, it provides the joint forum to bring the groups together to address the important issues that can only truly be solved by bringing all components of the supply chain together.”