Distributors Grow Line Cards Even as Supply Chain turmoil Deepens

Distributors continue to add line cards to expand offerings even as they initiate inventory reduction actions to support suppliers as global demand weakens.

As the electronics industry went through another one of its supply chain disruptions over the last two years, component distributors responded with critical supply chain management moves that included the addition of new supplier line cards to help ensure they could continue servicing customers through the crisis. All the top distributors reported additional agreements with suppliers of semiconductors, passives and electromechanical components in addition to other partnerships and inventory management actions.

Today, as suppliers report slowing demand in the face of global economic malaise, distributors are stepping with strategies to deflect the worst of the market downturn. They are helping to whittle down inventories and to reduce the impact of dropping average selling prices on profit margins and supplier cash flow. Many suppliers rely especially on distributors for regular inventory level updates to enhance the management of their internal productions and foundry commitments.

Companies like Mouser Electronics said they added dozens of suppliers in recent years and have continued even amidst signs the industry was beginning to experience another downturn. This is the extra value that distributors provide to help smoothen the industry’s wild cycles, they said. By increasing the number of companies, they ensure that customers can see them as one-stop service providers. This was problematic during the period of scattered shortages, but most OEMs still appreciate the opportunity to source components from a single provider before branching out to supplement procurement operations with offerings from second tier sources.

In addition to widening their roster of suppliers, distributors also provided value-added services to suppliers and customers by expanding technical literature, hiring more field application engineers and by beefing up digital services. Mouser, for instance, increased line cards, but the company also added technical information to its websites and increased opportunities for designers to educate themselves about the components ahead of procurement contracts. Mouser said it also uses other avenues to reach out to customers, including newsletters, whitepapers and other technical documents on its website and via presentations by its employees.

“Mouser’s customers can expect 100% certified, genuine products that are fully traceable from each of its manufacturer partners,” the company said, in a statement on its website. “To help speed customers’ designs, Mouser’s website hosts an extensive library of technical resources, including a Technical Resource Center, along with product data sheets, supplier-specific reference designs, application notes, technical design information, engineering tools and other helpful information.”

Adds Jeff Newell, Mouser’s senior vp of products, in a September statement announcing the addition of 36 new vendor lines, “Engineers look to Mouser for the latest, most innovative products for their designs, and we strive to meet their expectations by connecting them with leading component manufacturers in our ever-expanding line card.”

The company said it now has more than 1,200 suppliers offering a broad range of components. Companies added this year to Mouser’s line card include NAND flash and SSD technology supplier Solidigm and Allegro MicroSystems, which makes power and sensing products for motion control and energy-efficient systems. Labforge, a supplier of smart cameras, also joined Mouser’s supplier roster during the year, the company said.

Bulking Up

Line card addition activities have been especially robust in the specialized distributor segment where companies distinguish themselves on their ability to support customers with offerings that they may have problems sourcing elsewhere. In October, Heilind, a specialist in connectors, relays, sensors, switches and other components, increased its offerings with the addition of modular hybrid connectors from JAE. It added JAE’s KN06 series connectors used in heavy equipment by industrial OEMs and semiconductor manufacturers. Heilind earlier this year introduced additional components from Amphenol, Hirose, Omron and Panduit, among others.

Tier-1 distributor Avnet Inc. has also been busy beefing up its supplier list. In September, the company reached an agreement to represent Andapt, a supplier of programmable power management semiconductors. Avnet said it would begin offering the Irish company’s products immediately to customers worldwide.

“Andapt’s programmable PMICs have a potential to be a game changer for the industry much like programmable logic devices (PLDs) and FPGAs integrated discrete logic components,” said Alex Iuorio, senior vp, business development at Avnet. “Andapt’s programmable PMICs will provide Avnet customers with similar benefits as PLDs/FPGAs such as increased design flexibility and configurability, reduced part count and board space, and quicker time to market.”

Earlier in the year, Avnet rolled out ADAS sensing solutions from LeddarTech, adding to other deals made since Phil Gallagher took over as CEO two years ago. The Avnet boss had promised “to build on Avnet’s core distribution business by leveraging our talented people and strong relationships to deliver profitable growth.”

Perhaps the most significant deal Avnet struck this year, though, was its collaboration with Amazon Web Services to support OEMs in the IoT market. The agreement would connect Avnet’s IoTConnect platform with AWS’ portfolio and leverage cloud offerings for design engineers in the connectivity space. Avnet would be able to access a range of AWS services, “including IoT, machine learning, analytics, and compute services,” the companies said.

Avnet said the agreement would enable OEMs to focus on design activities, including the design of applications, and accelerate their time-to-market by tapping into the distributor’s network of systems integrators and software developers.

“Avnet lives at the intersection of connected technology by regularly working with leading hardware manufacturers and building our expertise at the edge and cloud,” said Lou Lutostanski, vp of IoT at Avnet. “With our help, OEMs don’t have to go it alone to deliver simple, fast and secure IoT implementations. Our collaboration with AWS will help OEMs design, build, deploy and manage cloud connected devices, applications and solutions at scale.”

Outreaches like these were essential to staying nimble and responsive to customers at the height of the ongoing supply crisis despite strains on resources from the outbreak of Covid-19. Employees at many distributors were impacted by the pandemic, which forced companies to adjust operations and shift some workers to home locations. Ongoing efforts to source components for OEM customers also crimped resources although distributors said they complemented operations with digital services that helped to reduce the pressure.

Online distributor Digi-Key, too, has increased the number of products on its line card this year. It recently added Schneider Electric, a vendor of electrical and automation products. The agreement in September covers North America, according to Eric Wendt, director of automation at Digi-Key.

“Digi-Key and Schneider Electric are going the extra mile to provide the absolute best possible customer support,” Wendt said. “Digi-Key customers can now access much of Schneider’s portfolio of high-quality products for a wide range of applications and markets, ranging from industrial automation to power management, and many solutions in between.”

Inventory reduction

As the industry transitions to a new growth phase marked by a weakening economic environment, distributors are also modifying their strategies and focusing more on inventory reduction activities. With manufacturers reporting sharply lower sales forecasts, distribution executives said they must be ready to support customers in the downcycle as they tamp down on production. Supportive actions here would include more frequently disseminating information on inventory levels, actual consumption and expansion of sales into adjacent markets.

In a sign of the changing times, Arrow Electronics in its Market Trends report noted that it was monitoring order cancellations at suppliers and foundries, noting that the industry should prepare for a “a period of more orderly growth,” according to the report.

“Against the current background and trends, distributors as the intermediate link of the whole industrial chain have big room to leverage their role,” the report said. “Although they cannot directly regulate the chip market, it is nevertheless possible for distributors to play their role as a ‘reservoir,’ strengthen communication with manufacturers for updates and capacity information, and strive to obtain more supply support from them, meet customer needs and get competitive prices as much as possible.”