Value Additions by Component Distributors

This article aims to provide holistic understanding about the role distributors play in the semiconductor components market. How different are they from other agencies plying in the business chain and how to engage meaningfully with them. It should help organisation heads and their business strategists to reap some benefits -- Arun Sharma

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Quote cells. Quote cells of distributors can be very helpful if involved right from the bidding stage. These quote cells are well equipped to even cross advise the parts when a non-franchised part is encountered in the parts list sent by the customer.

Buffer stock management. Despite the best management skills and processes, it is not possible to run manufacturing setups at all times without any cushion for inventory. As the trust and agreement between distributor and customer builds up, customers can leverage buffer at distributor warehouse rendering reduction in the cost of inventory carrying.

Customer-managed inventory. Using their strong warehouse management software and techniques, distributors can offer an upgraded service. Customers are able to pull the stocks allocated and locked specifically for them.

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Replenishment services. As the name suggests, distributor refills a designated lot of inventory on getting a manual or automated notification. This is an implementation of Japan’s famous Kanban concept of manufacturing in which production is done in the right size of batches.

Lead time reduction services. SCM team of customer works with the distributor to develop forecasting system. Using the forecast, distributor organises the availability of items on required dates of shipment. It is possible to attain shorter lead times after initial first shipment.

Vendor-managed inventory (VMI). Vendor-managed inventory is a continuous replenishment program in which the distributor manages and replenishes stocks at the customer store or warehouse level. This enables the distributor to project and anticipate the just enough amount of stock it needs to organise in order to meet the customer demand.

Project implementation and safe passage. In electronics field, product life span is short. New products and projects pop up very frequently. Every new project requires an implementation that is right for it. Distributors are apt at steering and navigating a safe and effective implementation. Customers should call their intervention right in the beginning stage. More than OEMs, electronic manufacturing service (EMS) companies require this service.

Expertise of servicing OEMs, ODMs and EMS. Distributors do not restrict themselves to a very limited customer base. Their big and small customers fall into various categories, viz, OEMs, ODMs and EMS. They understand traits of each customer type in depth. Specialists for major accounts are appointed since the interaction style and service technique is diverse.

Taping and reeling services. Today’s high-speed machines for electronics manufacturing require the feed lines to receive components in tape or reel form. Not always the components are available in desired packing. This means components need to be repacked in the required packing form.

Programming and re-packaging facilities. Many components are one-time programmable (OTP) or multi-time programmable (MTP) and require to be loaded with software program before mounting on the boards. Distributors enter into agreements with their customers to do this activity at their end before shipping. They ensure that the devices are programmed properly, tested and checked before re-packaging.

On customer’s request, a copy of test report is also sent. Bar codes, labels, laser marking, holograms, quality and inspection certifications and stamps are also provided by distributors on the batches and consignment packs.

Backward traceability. Test data of all devices are kept by semiconductor manufacturers and distributors (for parts e-programmed by them) for a specified time for backward traceability, lest a quality issue arises. Also, many end customers have processes making it compulsory to comply. Distributors provide the customers test reports of components and products supplied by them on demand. Country of origin certificate (COC) is also supplied to customers on request.

Rejection material acceptance (RMA). Distributors and their principals have sound processes to deal with rejections. It is worthy to state here that semiconductor manufacturing has graduated to six sigma and better quality levels. Therefore it is extremely rare to spot RMA cases. However, in the practical world, one can still see rejection popping up with claims made for compensation. Once an RMA case is reported by a customer, they are advised to follow certain procedures through which the proclaimed rejected part is assessed. A case found legitimate is disposed by replacement or monetary compensation under warranty terms.

Green channels. In order to facilitate faster movement of shipments for premium customers, distributors create green channels. It is an internal system to classify customer orders and delivery advices where certain internal approvals are either skipped or processed on priority.

Die-level support. Electronic parts are mostly dies put into standard forms with suitable leads that manufacturing lines can accept. One can understand die to be otherwise a complete electronic or semiconductor part which is too small and delicate to handle and manoeuvre by electronic manufacturing machines. But certain mass manufacturing customers and customers using critical processes may be in position to receive dies, work on them to make their own proprietary assemblies to use further.

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