The Electronics Source Book
September 7, 2005
As manufacturers move their factories around the globe to take advantage of low-cost production, getting parts to the plant floor can become an issue. The few hundred large global manufacturers solve this problem by contracting with their suppliers to deliver the needed parts to production facilities across the far reaches of the globe. But for the thousands of small- to mid-size manufacturers, it’s not as easy to shift the plant from Pennsylvania to Beijing.
Smaller manufacturers don’t have the purchasing wherewithal to source parts globally, and they don’t have the logistics infrastructure to make sure sufficient quantities of parts show up at the right place on production day. So they turn to distributors. Large distributors like Avnet Inc. in Phoenix and Arrow Electronics Inc. in Melville, N.Y., compete to make sure their customers receive the parts they need wherever they may be producing goods. Yet the two distributors source those parts in very different ways.
Avnet tends to source parts within the region of manufacturing. “For the majority of cases, the product is purchased within the region of the plant and deployed regionally,” says Beth Ely, Avnet’s VP of global account management. “For manufacturing in Beijing, the parts would be purchased from a semiconductor supplier in China and sent to our warehouse in Hong Kong or Singapore.”
She notes that in some cases, the transition from one regional manufacturing location to another requires shipping parts around the world rather than sourcing at the manufacturing site. “The exception to sourcing regionally is if the inventory has to be moved to support a customer’s program,” says Ely. “If Celestica is building in Mexico and we’ve been supporting the production in Mexico, and now it’s moving to China, then we ship the parts out of North America until those parts are depleted.”
Ely notes that in some cases, Avnet doesn’t have a particular part sourced in the region of production and thus it will be shipped from North America. “Our franchise and line card may differ by region, so if we don’t represent a particular supplier in the region of production, then the part may be shipped from the United States to the place where it’s being used,” says Ely. “Otherwise, the component buying occurs in the region where the manufacturing takes place.” She notes that in most cases, Avnet’s suppliers are global and the distributor represents its supplier globally.
Arrow tends to use the same supply pool whether the customer’s manufacturing is located in North America or Asia. “Our focus is to keep the supply chain intact and source the material with the same process program and solutions in China as we use on this side of the water,” says Jim Rosenberg, president of Arrow Alliance, Arrow’s program that serves large manufacturing customers globally. “When a customer moves manufacturing to Beijing, we move enough materials to create a buffer in Beijing, so from our customer’s perspective, all the parts are the same and he doesn’t have to find new sources.”
For smaller manufacturing customers, Arrow has a team in place to help shift the materials from North America to Asia. “If we have a customer in Philadelphia that is moving to Beijing, it goes through our central transfer groups,” says Rosenberg. “Our customer doesn’t have a purchasing infrastructure in Asia, so it’s hard for the customer to move its bill of materials to Asia and start sourcing all over again.” Rosenberg notes that Arrow works to make the transition seamless for the customer by shipping the same parts to the factory in Beijing as the customer used when building its products in Philadelphia.
He notes, however, that Arrow is in the process of making some adjustments for manufacturers in Asia that don’t want to source materials from a North American orientation. “Some of our indigenous Asian customers want to buy regionally,” says Rosenberg. “We have a customer building networking products for its customer in China. That customer wants some of the sourcing done in China, so we will source some of it there.” He notes that when Arrow sources in Asia, the distributor uses the same quality standards it uses in its North American sourcing.
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