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Independent Distributor - Supply Chain's Best Friend or Worst Enemy?

I started earning my living brokering electronic components in 2001. I quickly learned that the term “broker” came with some very negative preconceptions, such as the idea that brokers were unscrupulous liars, cheaters, etc. While much has changed about the component industry, much remains the same.

As independent electronics distributors come under increased scrutiny, I am often asked about the changes I have seen since my early days in the industry. Generally speaking, the loudest voice against independent distributors comes--as it always has--from the powerful presence of authorized distributors. This segment of the industry views independent distributors as both a threat to their bottom line and an easy target for the scapegoating of the component industry’s ills. However, due to the fact that high-quality independent distributors are critical to supply chain-wide counterfeit mitigation, I think it is pertinent to discuss the things that companies should consider before working with brokers or independent distributors. This advice is especially beneficial when it comes from the perspective of someone with first-hand industry knowledge and experience. Additionally, I wish to add some insight as to what I believe are legitimate criticisms of independent distributors and what are misconceptions that do not represent the whole story.

To discuss the industry of independent component distribution, some terms must first be defined. A broker is simply defined as “an agent who negotiates contracts of purchase and sale.” This term generally applies to independent distributors who sell parts outside a set arrangement with an original equipment manufacturer (OEM) or an original component manufacturer (OCM). Authorized distributors, on the other hand, have a direct arrangement with a manufacturer, often in the form of a franchise agreement. This distinction is important when it comes to counterfeit mitigation.

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Editor's Note: This column originally appeared in the May 2014 issue of SMT Magazine.