YES some electronic components are next to impossible to find! YES they are expensive! But if you must overcome those obstacles, here are some imperative suggestions to make sure you are successful in your search and purchase. Are you tired of working with a distributor for days to find and negotiate a reasonable price on parts, then when you place the order the parts have vanished or doubled in price? After months of helping manufacturers lock up parts, we have learned which processes work and which don’t. We have discovered an effective method of getting the parts our customers need with a very high success rate.
Similarly to buying a house in a seller’s market, you’ve heard that you have to move quickly with a strong offer to win the bid. There may be 10 other offers competing with yours. If you’ve ever gone through this you are aware that there is a lot of preparation involved to come in with a successful home purchase offer. Steps include; getting pre-approved for a loan (budget), finding a well-connected and talented broker, and minimizing any contingencies you might have to make your offer most attractive. It’s not so different in today’s electronic component shortage market. We are finding that our customers are losing stock on parts that they urgently need to deliver products to their desperate customers. Here are some tips to help your company successfully get the parts it needs.
- Find a well-connected, talented, high quality broker for your company to partner with. Solidify your relationship by establishing credit, sharing your company’s special requirements, etc.
- Organize and train a nimble shortage specialist team.
- If your company doesn’t usually purchase the chips for your products, be prepared to buy the parts for your subcontractors. You cannot locate the parts, then push the purchase off to your subcontractor and expect them to purchase chips the same day from a new supplier.
- Remove all of the layers of the approval process. Decisions need to be made the same day to get parts that are heavily allocated. Hard to find parts will be sold to the other 10 companies that are desperate for them if you don’t buy them on the spot.
- Predetermine a generous budget. Your shortage specialist team has to have a high budget allowing them to make quick decisions without the approval of senior management. Figure out exactly how large a price variance each of your products can withstand ahead of time. Work with your customers to get allowances for increased pricing on your products, explaining to them the consequences if they don’t.
- Figure out a way to get your broker the paperwork they need to secure the order. If you are procuring expensive parts, a broker will typically not buy the parts from their suppliers without something in writing, assuring them of your order. If it takes 2 days to get a large purchase order printed from your system, then work out another order process that is acceptable to the broker, enabling them to purchase from their supplier with confidence. For example; a signed quote.
- Don’t try to make major price negotiations. If you ask for a price that the broker can’t absorb themselves without going back to the supplier, the deal may get pushed a day, increasing the chances of losing the parts. Most brokers are putting a fair margin on the components, but are at the mercy of their suppliers who know they have gold. Sadly, when we ask for a discount from our suppliers, prices often go up instead of down. It’s much safer to just send over the PO at the price they quoted.
- Don’t ask for extended terms. If your company plans to buy large amounts of components, the accounts receivable for your company will grow quickly. Don’t get your company on credit hold by demanding 90 day payment terms and using all of your credit up in the first 30 days.
Keeping your production lines moving is our #1 priority. By utilizing these tips your company will be in a much better position to lock up the parts they need, making your customers happy. AERI’s Search Experts are ready to help you navigate these steps. Go to www.aeri.com and submit an RFQ or call one of our global offices to get the process started.
Robb Hammond is the President of AERI and the former chair of the Aerospace Industry’s Counterfeit Electronic Components Mitigation Standard for independent distributors, AS6081, which has become one of the industry’s most respected documents, as well as being adopted by the Department of Defense. Robb is one of the foremost thought leaders in the industry on counterfeit detection and speaks regularly at conferences around the globe.
