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EETE FEB 2016

last word Maintaining a competitive edge in 2016 By Mike Buffham Differentiation and competition between distributors has always been an important characteristic of the industry. However, in 2015 we saw a real widening of the scope of this competition. Not only was this centred on the areas that had characterised 2014 - manufacturing, production, design and volume – but attempts to address new vertical markets moved into the spotlight over the course of 2015. However, as unpredictable market conditions continue into the new year, we expect to see distributors take steps to intelligently consider where to target investment and in which areas to focus their competitive efforts. As always, one of the key areas of competition between distributors will be on their core offering. But it’s no longer a ‘nice to have’ for a distributor to provide a diverse range of products, rapid delivery, and robust after-support; it is now a basic customer expectation increasingly based on consumer experiences. This means that it is becoming increasingly difficult for distributors to differentiate on their basic offering. The key areas of competition in terms of businesses’ core offerings will therefore be in ensuring it meets customers expectations reliably and consistently, and then in finding new areas of differentiation where distributors can exceed customer expectations. This is not necessarily about providing something completely new, but rather placing a renewed emphasis on product range and availability, delivery methods, technical expertise and availability of supporting content. For example, our own strategy for this year features continued investment in agreements with key suppliers. This means we can expand our range with original and exclusive products, whilst continuing to grow our 370,000 strong Community of engineers, who can provide additional pre and post-sales support to customers. This extends to an intelligent approach to targeting resources and customers. Understanding customer segments - and what their specific needs are - will enable more efficient targeting of investment in new services, ultimately encouraging greater brand loyalty amongst that user group. For example, we know that a large proportion of our customers are buyers, therefore reliable deliveries remains a top priority; whereas our engineer customers are looking for a distribution partner that can offer first access to the latest and best-in-class products. Out of this focus on the core business come two other key areas of competition for 2016: provision of data and a focus on the value-add. In recent years increased competition, globalisation of the electronics supply chain, and stringent government regulations have placed intense pressure on customers to be able to trace the life-journey of the components they are using in the manufacturing process. Common queries relating to traceability include: whether the products have been assembled using defective components or conflict minerals; whether distributors can provide a guarantee that no counterfeit components have entered the supply chain; and whether the process used to assemble the components complied with industry standards. In reality, there remain questions over whether compliance with industry regulations is the legal responsibility of suppliers or distributors, as in the case of legislation like The Restriction of Hazardous Substances (RoHS) bill. But chain traceability is already crucial to the military and aerospace markets, which electronics distributors are increasingly competing over. Possession of an AS9120 standard certification is a key requirement for enabling business with these organisations and it requires proven ability to trace supply chains. To give an example from our own business, we’re working to provide full traceability by affixing date and lot codes to more than 200,000 SKUs. Coupled with fully automated, bar-coded product labels and dispatch notes on our most popular semi and passive components, these initiatives aim to streamline factory automation and improved stock control such that greater traceability can be provided - helping to gain a competitive edge in new market opportunities within the fast-growing automotive, medical and industrial sectors. Another area of competition amongst ‘traditional’ distributors in 2016 will be a real focus on value-add services. Crucially, these will build upon the approaches taken to the core-business, characterised by an intelligent, targeted approach. These will centre on areas where traditional distributors can demonstrate their value to customers over new entrants, often the result of many years of investment. Look at this from Farnell element14’s perspective, customisation is an area that we intend to grow exponentially over the next year. This is both a targeted attempt to assist designers in driving down their time to market, through initiatives such as Custom Pi. Due to strategic acquisitions of AVID and Embest, we possess the unique design and manufacturing capabilities that such a service requires, offering a real value-add to the designer customer segment. It’s important that distributors do not fall into the trap of doing all things for all customers at all times. Through careful re-evaluation of the products and services that distributors compete on, they will be better placed to cultivate a loyal customer base and ensure that they have a solid foundation to their business. Only then will they be in an appropriate position to develop additional services that can offer real value to customers and differentiate their businesses from the competition. Mike Buffham is Global Director of Semiconductor and Passive at element14 – www.element14.com www.electronics-eetimes.com Electronic Engineering Times Europe February 2016 49


EETE FEB 2016
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