Four Ways to Buy Electronic Components and the Pros and Cons of Each

Estimated reading time: 7 minutes

Whether you are manufacturing in-house, or you have already outsourced to an EMS provider, you understand how important having a stable supply chain in place is. 

When you buy electronic components, there are a number of different supplier types available to you or your EMS partner. From dealing direct with an electronic manufacturer through to using brokers, there are benefits and pitfalls associated with each.

Throughout the lifecycle of your product, chances are you will need to use a combination of supplier types along the way. In this article, we look at four different options and explore some of the pros and cons associated with using each.

Direct with the Manufacturer

Electronic manufacturers design, manufacture and brand their own devices. They are responsible for releasing new technology to the market and phasing out older products when demand starts to decline. Unfortunately, the latter can cause original equipment manufacturers (OEMs) pain if they are not notified in time of planned obsolescence or don’t want to invest in a potential re-design.

Electronic manufacturers tend to sell their products two ways; either direct to the end user (providing the spend levels are high enough) or through a number of authorized distributors. As a buyer, dealing directly with the manufacturer is usually the most desirable way to purchase electronic devices. However as mentioned above, it’s not always possible to do so unless your company has significant levels of business to place.

Pros:

• Shortest possible supply route. Dealing direct with the source reduces the risk of component issues occurring within the supply chain.
• Direct technical support and after sales service.
• Authentic and genuine parts. The parts you receive will be new and will have been handled and stored correctly.
• Full product traceability. The supply chain is short and with direct access to the manufacturer you know exactly where the parts have come from.

Cons:

• Dealing direct often requires significant spend levels in order to qualify as a customer.
• If lead times go out, or a part is placed on allocation, larger authorized distributors may get priority over you during times of disruption. 

Authorized Distributors

Buying electronic components through authorized distributors is one of the most common supply routes for purchasing professionals. Electronic manufacturers work in close partnership with authorized distributors who in turn distribute their products out within the wider market.

Strict supply agreements usually exist between the manufacturer and distributor and will detail conditions around pricing, stock holding/levels, targets, territory etc. Although the supply chain extends slightly, many of the benefits associated with buying through authorized distributors are the same as dealing direct with a manufacturer.

Pros:

• Greater flexibility for the OEM or EMS provider as they have the ability to buy from multiple authorized distributors and are not tied to just one source.
• Reduced spend levels/expectations. Linked to the above, although authorized distributors may still require a certain level of spend to open an account, it is usually much lower than the expectations of a manufacturer.
• Full product traceability back to source. The distributors buy direct from the manufacturer and therefore have visibility back to source.
• Technical and after sales support. More and more we are seeing authorized distributors offering extra value to OEMs and EMS such as 'lunch and learn' sessions, technical webinars and demo days in an attempt to differentiate themselves from the competition i.e. other authorized distributors.

Cons:

• Manufacturers can revalidate their supply chain strategy in line with their business objectives, resulting in franchise agreements changing with short notice. 

Catalog Suppliers

Catalog suppliers (RS, Farnell, Mouser, Digikey, Rapid, etc.) have become increasingly popular with electronic component buyers over the years. As the name suggests, in the past these suppliers relied on OEM engineering and purchasing staff flicking through hard copies of their catalogs when they needed to design new components into their products or buy them. Holding a vast range of product lines, all in convenient quantities, available for next day delivery, catalog suppliers still play a vital role in the UK electronics manufacturing sector today.

Whilst you might still find a well-thumbed catalog on a hardware engineer’s desk, the internet changed the game and most, if not all, of their business is now carried out online. This type of supplier is a great solution if you need to buy components in a short lead-time or when you can’t commit to minimum order quantities (MOQs) or large pack sizes imposed by authorized distributors and manufacturers. But this service does come at a premium, and like most things that are ‘convenient’, the unit price you pay is often inflated.

Pros:

• Large amount of stock lines held in small batch quantities. So, if you need a handful of parts the same day to prevent a line stop, catalog suppliers are a great option.
• MOQs are not usually implemented, therefore catalogs may be more economical if smaller quantities are needed for production.

Cons:

• Premium prices. However, if a relationship is built up and a stable account is put in place, it may be possible to access preferred pricing (discounted) as part of your supplier strategy.

Brokers

Brokers are neither manufacturers, authorized distributors nor catalog suppliers. They are independent suppliers that usually don’t have any ties to a particular franchise. They ‘specialize’ in sourcing hard to find and obsolete parts. Unfortunately, buying outside of franchise can introduce a high degree of risk, sometimes with little technical and after sales support and of course, potential gaps in traceability.

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