Short and long-term procurement strategies for electronic components

Rutronik suggests megatrends are increasing the importance of distributors in the automotive industry.

Latest development trends in the automotive industry such as electro mobility, autonomous driving, digitalization, connectivity and new mobility concepts are significant drivers of the projected seven per cent compound annual growth rate for electronic components between 2020 and 2030.

This also means that OEMs and tier one/two suppliers have to plan with an increasing number of variants, resulting in more components. Furthermore, vehicles and components will have much quicker development times and shorter product life cycles. All players must adapt quickly to the product itself and production capacities. Anticipated demand growth could cause a distribution struggle for various electronic components leading to a shift in the relationship between customers and distributors.

Traditionally a lot of high-volume business in automotive has been direct business between manufacturers and OEMs and Tier I suppliers and EMS providers. However, the distributor’s role is becoming more important and complex. During difficult times, where parts and components are on allocation and/or have significantly extended lead times, it is imperative for buyers to maintain close relationships with reliable distributors of their choice.

When buyers are looking for options, the following strategies can be pursued.

Search for component availability in different packaging quantity, for example parts may be available under an alternative reel size.

Consider parts with tighter specifications, such as tighter tolerances.

Try a higher quality grade, for example with wider temperature range or more memory, or looking for alternative products, even if a deviation from the OEM/Tier I is required.

The above requires careful analysis of the respective manufacturer part numbering systems. Most distributors offer tools that match components via their in-house search engines. In addition, to find alternative options, distributors offer extensive support and assistance through experienced product managers.

To minimise risks, consider a second source during the design phase, which may require flexibility and a modified circuit board for a second source component. Validate and PPAP two suppliers which, once parts are in mass production, will provide more flexibility later on. For example, components like resistors, capacitors, discrete semiconductors and even integrated circuits come in several different packages, which should be considered during the product’s design.

To help customers minimise cost and freight charges, the distributor must offer sophisticated, globally identical and reliable logistics concepts.

In many successful customer/distributor relationships, the partnership starts a lot earlier, in most cases during the project’s concept phase. The distributor has the market overview, is familiar with the latest developments, can quickly provide an overview of available technologies, reduce response times, and act as a consultant and service provider during the development phase of a product.

A successful example on how such partnerships can work is found in Rutronik’s Automotive Business Unit and the newly founded Automotive Executive Community. The distributor acts as an intermediary and consultant, offering expertise and support.

Distributors should be long-term partners, rather than just a company helping out when running into supply issues. Especially during critical times, it is important to maintain a partnership with a reliable distributor.