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Supply Chain Shifts Demand Service Models that Front Savings and Quality


During the recent months, the industry news has focused on positive disruptions from new growth opportunities. The growth forecasts are based in IoT device expansion coupled with the strategically lower-priced end-devices for consumer markets globally. With price a critical element to the growth opportunities, supply chain shifts and new competition have companies exploring new relationships and service models that improve margins. This week, Smith's Jennifer Kabbara, Trader Development Manager, discussed in Global Purchasing the shift by purchasing managers to the independent distribution channel to realize significant cost savings while maintaining top quality. Also in the supply chain news is the discussion building around the direction of industry standards and quality metrics for maintaining counterfeit vigilance, as Matt Hartzell, Smith's Chief Operating Officer, discussed in Electronics Purchasing Strategies.

IoT growth is about more than devices

While the electronics device market gains in excitement from anticipated IoT expansion, behind this growth are the shifts occurring along the global electronics supply chain (see this IoT growth discussion in Electronics Purchasing Strategies by Smith's Mark Bollinger). We have seen the consolidation in memory benefit DRAM pricing stability which has supported the wider semiconductor markets. Additionally, competition for designs that balance feature demands with lower-priced market targets is realigning how purchasing managers are making sourcing decisions. With attention focused on strategic market opportunities, outsourcing tends to be favored so that core competencies are leveraged through best partnerships. This is the point in the growth cycle that we find ourselves (happily) again. As Kabbara discussed in Global Purchasing:

[…] leading open-market suppliers do more than just provide shortage sourcing in today’s market. Savvy companies are turning to open-market partners for cost-savings services such as purchase price variance (PPV) programs and vendor managed inventory (VMI), among other strategic services. The quest for market share is expanding supply chain relationships and demand for expert services. These services, however, must be backed by supply chain expertise and highly customized to meet unique strategies for addressing shrinking margins, increasingly tight inventory levels, and pricing volatility. Outsourcing to leverage core expertise has been gaining over the past couple of years, and expanding supply chain relationships are supporting growth and differentiation.

At Smith, we have seen precisely this resurgence of service demands to best manage the complexities and price volatility for components in the global market. Importantly though, is the simultaneous attention that is demanded for quality and anti-counterfeiting vigilance. Leading independent distributors offer their customers not only a wide range of services that provide the best cost savings and inventory management solutions, but do so while attending to strict adherence to the highest quality standards that include surpassing industry certification standards, cutting-edge component testing, rigorous supply chain auditing, and strict vendor ratings.

The latest Department of Defense (DoD) ruling contributes new material and new considerations for how to maintain quality rigor and combat the ever-present counterfeit threats, particularly as growth periods tend to see increased counterfeit activity. The discussion of supply chain expansion and opportunities as well as the critical role of industry quality standards are explored in depth in the latest version of Smith's MarketWatch Quarterly, which was sent to subscribers' inbox yesterday (free subscription) and will be live on Smith's homepage the end of the month. We invite you to consider the various aspects of these critical questions and supply chain changes along with us as we work to promote quality while providing agile, customized services to you, our customers.

Lisa Ann Cairns, Ph.D.
Written on Friday, 18 July 2014 11:51 by Lisa Ann Cairns, Ph.D.

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