How demands on electronics distributors have changed over the past decade...
02 December 2019
Today’s managers in procurement roles are feeling the squeeze. Regardless of the purpose for which electronic components are ordered, the managers responsible for purchasing them face multiple challenges – with the scarcity & higher costs of components being just a couple of examples.
This viewpoint was originally featured in EPDT's 2H 2019 Electronics Distribution supplement, included in the December 2019 issue of EPDT magazine [read the digital issue]. Sign up to receive your own copy of EPDT each month.
Given this, the key to success for distributors is to ensure they understand the difficulties their customers are facing and respond to them accordingly. As CEO, Ulf Timmerman tells us, this is why reichelt elektronik recently surveyed 500 customers across software design, technology, development, programming, IT and purchasing. The aim of the survey was to assess what customers need and want from a distributor – and what challenges they are currently facing in their roles...
What challenges are procurement managers facing?
In the planning and execution of electronics projects, project managers face hurdles time and again due to circumstances out of their control. An example of this is if the components required are too expensive, or not available, which presents a huge roadblock to getting the project done. This additional cost, especially on already overstretched budgets, could force the project to be postponed for months or, in the most severe case, cancelled. Around a third of respondents to our survey admitted they had to cancel a project completely due to unforeseen difficulties. This is clearly the nightmare scenario for project managers. If the right components aren’t available at the right time, things will quickly start to fall apart.
Another challenge the respondents faced was development cycles getting shorter as demand for faster, efficient work increased. 47% said they felt time-poor due to short timeframes for delivering their projects. Combined with 42% of respondents who claim many components are not of a high enough quality, and 30% stating ordered goods do not arrive or arrive too late, this could lead to serious knock-on effects to production, and the slightest procurement hiccup may land the project in trouble. Distributors have their part to play to support project managers as they face shorter development cycles.
Issues with manufacturing the components
To understand the exact characteristics of a component or product is essential for managers, to determine if it meets the needs of their project. They would need to know the product down to the smallest detail before ordering, as the wrong information could lead to the wrong purchase, and potentially, the project may end up being postponed for an entirely avoidable bump in the road.
This was a big issue for our survey respondents, with over a third claiming incorrect or insufficient technical information from manufacturers was a cause of project delays. 33% also said a big headache was the distributor replacing the manufacturer, leading to changes in the product characteristics.
Distributors therefore need to recognise their responsibility when it comes to properly explaining the components that they stock and sell, especially in a world where so many components are bought online.
Distributors’ role in procurement – a decade on
The distribution landscape has seen some major changes during the past decade, such as internationalisation and market segmentation. Despite this, 44% of our respondents believe that electronic projects are easier to implement today than they were ten years ago, while only 12% are of the opposite opinion, with 37% seeing no difference in the ease of executing electronic projects today.
According to survey respondents, the relief in managing their projects is mainly due to the following three key factors from distributors:
1. A larger selection of components – 71% believe that the wide variety of components available was the top factor for their ease in carrying out projects.
2. Components are becoming ever more powerful – 61% said advances in technology meant the possibilities in their uses were ever-increasing.
3. Online communities and guides – 50% responded that speaking to like-minded people online and reading technical guides provide helpful answers to questions they have about their projects, or point them in directions of other resources that may be useful.
Expectations of distributors
With more competition comes a greater need to meet the requirements of their clients. The respondents to our survey claimed there are five key requirements they expect of their distributor:
1. 71% choose distributors based on the price of their product. This is understandable, as pressure on budgets results in tightening up the purse strings on everything purchased for the project, so low prices means additional funds can be spent elsewhere.
2. 68% expect distributors to offer high quality products. This is crucial for distributors, as they could lose the business of a client if product quality is not up to their expectations.
3. 65% favour distributors who offer fast delivery, so they can assess the quality of their purchase and use the product quickly in their project. As development cycles get shorter, delivery times must not be a blocker.
4. 52% highlighted good customer service is essential with their distributors.
5. 52% want reliability when it comes to availability of products from their distributor, which points to more business if they can find everything they need from a single source.
What more can distributors do to improve their services?
Listening to customers’ needs puts distributors ahead of their competition, which is essential in a crowded sector. 40% of respondents to our survey said above all else, they want more flexibility in delivery when workloads increase and they need products to arrive quickly. This is why communication with clients becomes more important, so the distributor can understand when they expect a bigger than expected workload to appear, and they can meet those needs efficiently.
36% also want more innovative products from their distributors, and 32% want greater personalisation. This points to a requirement that distributors must offer more bespoke experiences to their customers if they wish to keep and grow the accounts they hold with the business.
Project managers need distributors that they can rely on and that feel like ‘part of the team’. But as our survey shows, it’s about getting the basics right, while also adapting to the new reality that their customers face.
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