Seven advantages of authorized distribution

In this article, Flip Electronics’ VP, Jeff Intel, explains how original equipment manufacturers benefit from sourcing components from authorized distributors

When supply chain disruption threatens, it can be tempting for original equipment manufacturers (OEMs) to source electronic components from unauthorized sellers to ensure shortages don’t shut production lines. The problem is particularly acute when demand for components outstrips fab capacity. With a broad swath of industries reliant on similar electronic components, competition intensifies. 

Shortages and poor contingency planning wreak havoc but balancing inflow against inventory requires a deft hand to get availability and economics right. For example, lead times may be up to 40-weeks for microcontrollers and sensors, while CPUs and DRAMs are in surplus. McKinsey postulates that waves of supply and demand mismatches across chip sizes, industries and production centers are the new normal. Authorized distributors can be an invaluable resource for OEMs, helping them alleviate shortages and balance oversupply/undersupply with high-quality components.

Advantages of authorized distribution

Components are feats of engineering that require precise production and handling. Modern OEM processes are designed to be efficient. Ending up with substandard components or empty promises is frustrating and a serious threat to business. Read on to explore the advantages of authorized distribution for OEMs and the risks of doing business with unauthorized sellers.

1) Guaranteed authenticity: Unauthorized sellers seem like a godsend when parts are in short supply elsewhere. Although an OEM may avoid the financial pain of a manufacturing shutdown in the short term, there are significant risks associated with unauthorized distributors—risks that cause irreparable damage when product failures, safety hazards or recalls are the result. Furthermore, using counterfeit components puts OEMs in legal and financial jeopardy. Unfortunately, fake electronic components abound because scarcity makes them lucrative. From 2021 to 2022, there was a 35 per cent increase in the number of reported counterfeit parts despite global semiconductor sales remaining flat, with analog, programmable logic and microprocessor ICs topping the list. Authorized channel distribution guarantees components are genuine and meet manufacturers’ quality standards.

2) Uninterrupted supply chain: Lead times for electronic components can extend beyond 300-days during peak demand. Authorized distributors help OEMs avoid stockouts and delays with a stable supply chain that guarantees consistent, timely deliveries. This reliability is vital when meeting production deadlines, aligning to customer needs and maintaining a competitive advantage.

3) Technical support and expertise: With expert technical and supply chain professionals on staff, authorized distributors can help OEMs make informed decisions about the components they incorporate into their products. These distributors possess in-depth knowledge and certifications for the brands they represent, letting them assist with product selection, specifications and integration. This support improves product quality, limits design errors and enhances customer satisfaction. It can also bolster environmental, sustainability and governance (ESG) efforts through the judicious choice of repairable, recyclable or reclaimable parts.

4) Quality control and compliance: Substandard components can result in higher failure rates, increased warranty claims and customer dissatisfaction. Additionally, OEMs may be liable for damages caused by faulty products, leading to lawsuits and reputational harm. Authorized sellers adhere to rigorous quality standards, ensuring components meet manufacturer specifications. This reduces the OEM’s chance of incorporating defective or substandard components, thus minimizing production issues and recalls. Authorized distributors also comply with legal and environmental regulations, further reducing exposure to financial liability. 

5) Direct access to manufacturer warranties: Procuring electronic components through unauthorized channels often results in the loss of manufacturer warranties. This exposes the OEM to significant financial risks, as defects or failures in the components may not be covered. Authorized distributors provide direct access to manufacturer warranties, offering peace of mind to the OEM and end customers.

6) Supply chain transparency: Authorized channel distribution enhances supply chain transparency. OEMs can trace components’ origins, verify their authenticity and ensure compliance. This is essential for maintaining a reputable and socially responsible brand image. It also prevents them damaging relationships by running afoul of regulations governing unethical and politically sanctioned sourcing.

7) End-of-life support: While electronic components may be nearing EoL, that doesn’t mean the end products are ready for decommissioning—especially true of multi-million dollar systems. Replacing such equipment is far less preferable than repairing or refurbishing components through an authorized distributor. For example, Flip Electronics leverages its factory-direct authorized lines and employs proactive EoL mitigation strategies to ensure OEM operations remain uninterrupted and products stay relevant in the market.

Partnering with authorized distributors such as Flip Electronics is essential to maintaining efficient manufacturing processes. Authorized distributors guarantee the authenticity of components, provide technical expertise and ensure supply chains run smoothly—and that’s just the beginning. OEMs should prioritize authorized channel distribution and form strong partnerships with reputable distributors to safeguard operations and ensure delivery of high-quality products.