The Electronics Source Book
August 24, 2005
With manufacturing moving around the world – from Pennsylvania to Asia and sometimes back again – manufacturers often turn to distributors to make sure the right number of parts is in the right place at the right time. The logistics services provided by distributors range from filling an in-plant store in a vendor-managed inventory (VMI) program to shipping assemblies to another plant in another part of the world. In the last few years, distributors have competed by fleshing out their logistics services.
Arrow Electronics Inc. in Melville, N.Y, views logistics as materials management – the ability to get the right number of parts to the manufacturing site. “Common to all logistics solutions is determining the short- and long-range flow of materials,” says Paul Katz, Arrow’s VP of global supply. “We use our IT tools to establish the proper level of inventory to meet the customer’s demand. We also put in the pull triggers to determine when more inventory is needed.”
Arrow uses information tools developed through the company’s experience of managing inventory for thousands of customers. “We’re involved in bringing a customer’s materials to consignment locations,” says Katz. “In many cases we build a VMI location inside the customer’s warehouse or we store it at a proximity hub.” The customer handles the receiving and picking of the materials while the distributor handles all of the logistics of getting the parts to the production site.
As well as using the customer’s internal forecasts, Arrow also reads the market as a whole so the customer won’t get caught short if there is a sudden increase in demand for product. “We do some market reading in an aggregate view,” says Katz. “We have some capabilities to test the customer’s forecast. We’re testing and feeding information back to the customer to validate the forecast.”
Arrow also helps customers manage their parts needs across multiple plants in different parts of the world. “Sometimes we collaborate with our customers to determine an optimal configuration of parts,” says Katz. “We get significantly involved with customers as they migrate their supply chain.” That collaboration can involve helping a customer move its entire materials pipeline to a new plant halfway across the globe. “We often deal with customers that are moving their production,” says Katz. “We formulate their global plants and get involved in the tactics needed as they seek global parts. We build pipelines of materials, then move that pipeline from North America to Mexico or Asia.”
Phoenix-based Avnet Inc. offers outbound logistics to its customers as well as inbound component shipping. If a customer finishes a sub-assembly and needs to get the product to another of its own plants or even a customer’s plant, Avnet can help move the goods. “We’re getting into the area of moving goods as subsystems,” says Andy Bryant, president of Avnet Logistics. “Our customers are looking for outbound logistics for their goods.” Bryant notes that Avnet offers shipping services only if it fits within Avnet’s core warehouse facilities and as long as it stays within the electronics industry. “We’re not going to offer logistics for gas, oil or t-shirts.”
Avnet has developed a warehouse system to match the production and consumption map for the electronics industry. “As a distributor, we have an infrastructure and presence in 68 countries,” explains John McGowan, VP of operations and project management at Avnet Logistics. “We typically have a presence where there is the most demand.” He notes that the global infrastructure is appealing to parts suppliers as well as manufacturing customers, since the supplier can use Avnet to supply Asia rather than building warehouses to serve Asian factories direct. “Mid-tier suppliers can capture economies of scale and handle shipments at a lower cost if they use our facilities,” says McGowan.
Avnet can provide logistics services for parts suppliers that can’t afford to ship small orders to second- or third-tier manufacturers. “The typical services we offer suppliers include transportation, warehousing, custom labeling and programming of products,” says Jim Smith, SVP of warehouse and distribution worldwide for Avnet Logistics. He notes that parts suppliers can handle logistics for a large manufacturer that orders 55 pallets of goods. But when a manufacturer just needs three or four pallets, it makes more sense for the supplier to use a distributor’s logistics services.
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