In today’s day and age, industry loyalty is changing. Price stability for raw electrical components vacillates daily and availability can change day to day as described in last weeks article on “Electronics Components Shortages: Worldwide Effects Of The Pandemic”.
In order to operate a manufacturing organization in this atmostphere, you are best served by opening as many supplier channels as possible to grant yourself options during the quoting stages. This also helps to make sure you can continue getting stock in the future by having more options to buy stock. The misconception is that you need to be loyal to a certain number of them. In the commercial electronics component supply industry, there is a predefined hierarchy from component manufacturer to end product. This is due to the fact that much of the material is certified for safety reasons by CSA in Canada and UL in the USA. Every Component begins at the root manufacturer of the component. In electronics, these are companies like Tyco, Molex, JST, Aptiv etc. the ones actually creating the part. Then you have a master distributor. These are companies like Waldom Electronics, Heilind Electronics or TTI. Then sometimes you have a 3rd party distributor whether they are owned by the master, or have purchased their way to becoming one such as digikey, e-sonic, future electronics, Graybar, Arrow electronics or Mouser for example. Understanding the flow of components is half the battle in finding the best prices. Due to changing prices daily, different distributors have different pricing based on when they purchased the stock. It’s not that they are playing games with your price, but a single distributor may have bought an extra million parts at a better price, so down the road they have cheaper stock than others. Your job is to find the best stock price knowing that you may find it on your 6th attempt.
A huge issue we are seeing due to the shortages worldwide is the ability to produce a repeatable product long term. Suppliers today are turning over stock so fast that much of their sales are backordered and shipped as soon as material is available. This creates production movement issues when more than a couple companies have consumed all the available stock but need to keep orders flowing to the end customer. Stock allowance by distributors becomes competitive where the job size determines availability.
A large part of our efforts today are in meeting with suppliers or having conversations with new suppliers about procuring stock PAST the first order. We are asking questions like, “What does availability and stock level look like 6 months from now after we have used all your current stock?”. Manufacturing companies want to do business with you, but they want some kind of guarantee that if they should, they can maintain whatever ongoing deal and price for up to 5 years for most projects. It is great to be awarded a new job through sales channels, but if you cannot hold that line for any length of time, you risk every contract you sell.
How To Acquire A New Supplier
There is a standard onboarding process that most commercial distribution companies and networks follow. It is a fallacy in business leadership mindset that your company is too small or not significant enough to work with the big distributor companies, or that you are not worth their attention. In our experiences, most companies selling a product are willing to sell that product as long as you’re willing to buy it at an agreed upon price. Often, you will find a supplier online who has the part listed for sale online that you need and that is why you landed on their page. The prices shown on most webstores is the highest retail price they will ever sell that product for. It is important that if you are going to enter into an ongoing relationship with the supplier that you do not make your first purchase online at that price. By taking a few extra steps to set yourself up as a client with them, you can receive lower prices, better stocking agreements and long-term deals.
The following is a short list of steps to acquire a new supplier in this way:
- Find
First you have to figure out who has the part you are looking for. This used to mean searching for a couple hours to find each outfit that has some. Today, there are tools like octopart.com to gather listings from many popular distributors and sellers. Knowing where to look saves time. You can get these names from the manufacturer site of the component.
2. Contact
Your next step is contact. You are aiming to find the purchaser or inside sales contact in the company or to start, a direct email contact to send more email to. Usually this requires filling out an online form or cold messaging an info@ address asking for availability of your part, or asking them directly if it is something they would supply you. There will be a distributor who will sell to you, but remembering the hierarchy, the higher up the chain you go, the higher volume you must meet in order to do business with them.
So two things are at play here. 1. Price: The higher up the chain you go, the cheaper the price = better quoting positioning. 2. You cannot over order components for a job and waste profits just to win a contract. Usually this decision is made by the quotation you receive. The quantities that your new client is asking you to quote determines the stock levels you need to find.
3. Credit App
Standardly in the commercial electronics industry, distributors require a verification of your company before they will do business with you. This is because certain electronic components are used for military applications and other restricted satellite and radio frequency uses, and require authorizations to purchase, export/import and even posess/use. Any credit app has some basic information that you should always have available when searching for suppliers. The following is a list to have ready to send:
- Full Company Name
- Address (bill to and Ship to)
- Type Of Business
- Years In Operation
- Business Number/ Tax ID
- Business Contacts (CEO, VP Finance, Treasurer, Office contact)
- 3 Industry References
- Contact Name
- Address
- Relation
- Contact Info
- Banking info
- Bank name
- Address
- Account Number
- Bank Contact & Info
GET YOUR FREE CREDIT APP TEMPLATE HERE…
4.Placing Your First Order
Once the credit app is filled, sent, and hopefully approved, you are ready to order. Most times, your first order will require full payment upfront unless you have negotiated a different deal with your supplier. They are testing your ability to put your money where your mouth is. There is nothing more satisfying for a sale person than taking your credit card info and processing an order right on the spot for you. They spend their day trying to get blood out of a stone, so if you are ready to buy when you call, it is like you did their job for them. This creates a positive first impression for your company to become a solid client. Do this at the beginning of the relation to secure long-term viability.
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