In an interview with Electronics, Martin Ford, Managing Director of Gateway Electronic Components, specialist E-Mech independent distributor, discusses the current challenges and offers his thoughts on the industry for the coming year
According to industry comment the last three years have been tough for the electronics industry, how has Gateway viewed it?
We had our best year of growth in the company’s history during the last recession and although we did notice some impact in spring 2011 we retained our full team of staff through business efficiencies and continued to offer improved levels of service to our customers.
In terms of weathering the storm, has this changed your business strategy?
Our sales programme has always been to use our linecard strength alongside our supply chain and logistics services to maximise the benefit of securing reductions in the total cost of acquisition. We are continuing to secure strategic franchise agreements with some new manufacturers such as CamdenBoss and have extended our relationship with Epcos adding the TDK line.
Do you think the specialist electro-mechanical companies you represent have been instrumental in your success?
Our linecard development programme has changed the balance of our business strategy in favour of the manufacturers we represent. Customers benefit from vendor reduction efficiencies by making use of our Bill of Material fulfilment solution, where we maximise the fit rate of components purchased. We run a technical review of the BOM then recommend lower cost alternative sources. We then help the customer to further minimise its vendor list by augmenting direct franchised supplied parts with supplies from accredited sources of the other approved material on the BOM; with full traceability guaranteed on all items. A logistics supply programme can then be designed to make further efficiencies to help remove cost.
Why do you think that specialist independents can compete so successfully with the global broadline distributors?
In the animal kingdom survival of the fittest happens naturally. The biggest are not always the fittest. In the commercial kingdom fitness is about financial frugality, service versatility, fleet footedness in developing solutions, and reliability in delivering those solutions. The key challenge that we face, and are constantly reviewing, is how to stay focused on all of these factors as we grow.
What are your thoughts for 2012 and how do you see your business moving forward?
We have secured a major new supply chain contract with an existing customer to install a vendor managed Kanban solution across C class items. Having made significant investment in new software and hardware to develop this supply initiative we will be rolling this out to other UK based OEMs and CEMs in the coming months. Many UK based OEMs are seeing growth and this coupled with the new accounts we have developed makes me very optimistic.
You mention that you add real value to a customers purchasing efforts, what exactly does this mean?
Real value does not come solely from the price dimension. Some customers have rather unwieldy BOMs and consequently unwieldy vendor relationships and we are increasingly being asked to look at vendor reduction and managed inventory programmes, stock management and packaging alternatives. With a pull solution driven from Kanban stations there is no need for the customer to raise daily purchase orders either, which can cost as much as £50 per order to raise.
One customer’s purchasing team eliminated raising on average 300 orders per week; which works out to £750,000 each year in savings. Remember the cost of the component is between a quarter and a fifth of the total cost of acquisition, so concentrate on where the major savings can be made.
Over the years there has been much talk on vender reduction, is this is a trend that will continue into 2012?
Undoubtedly, and although there is much justification to select sources that have a broad linecard, this does not guarantee the best service levels or even the best pricing. Over the years we have secured relationships with global manufacturers agency and franchised distribution companies to enable us to maximise the fit rate. In some instances our pricing may be uncompetitive at a line level, but invariably these are more than offset by other BOM savings that can be made as well as supply solution savings.
What trends are you seeing in purchasing requirements into 2012?
Apart from vendor reduction we are seeing a lot of interest in Kanban and kitted supply solutions as well as demand for value added services such as cable assembly, component services, programming and testing. More customers are moving towards electronic trading and our ‘green’ packaging initiatives and vendor managed inventory programmes are becoming more popular.
What are the hot topics that are purchasing departments are talking to you about in 2012.
Purchasing departments will never drop their focus on component pricing, but are now realising that the price of the component may only be a small proportion of the total cost of acquisition. Purchasing managers are continuing to explore supply solutions that deliver component cost down as well as releasing costs elsewhere; such as storage, replenishment, freight, transaction handling, packaging, stock efficiency and so on. They are also looking for relationships with high integrity supply partners that will not let them down on technical specification, product availability or on-time delivery, because these can all add in significant additional costs in the event of failure.
Gateway Electronic Components
www.gatewaycando.com
