Paragon Electronics' Group chief executive, Chris Johnson discusses the pitfalls of global component sourcing, the paucity of safe options for manufacturers seeking rare components, and his exasperation with companies that abandon common sense at the first sign of a shortage.
Since starting my career in the electronic components distribution business over 30 years ago, I have seen monumental changes. Today's component supply industry is barely recognisable. The globalisation of the late 80s and 90s and even up to this day has transformed the customer service experience and not always for the better.
Countless SMEs have gone out of business and there are endless rounds of consolidations. Despite this, one thing remains: when OEMs need a fast, responsive service, or they encounter problems in their supply chain, they need an agile, flexible, proactive, independent distributor to deliver the service levels required.
Since announcing the launch of Vigilant Components, our new independent electronic component distributor company, I'm often asked why we feel that now is the time to establish an independent distributor. There are a number of reasons. The main one is the very real danger to supply chain integrity faced by electronic component buyers. This is down to increasing demand and lengthening lead-times, driven by sound but frustrating production practices by some component manufacturers. And there's an abundance of suppliers of questionable integrity around the world happy to cash in on the needy.
Ultimately, it's simply supply and demand, but with a dangerous dimension. Shortages or extended lead-times leave OEMs with production obligations vulnerable, particularly when trusted supply partners cannot provide solutions. The obvious approach is to look elsewhere – but don't throw out the rulebook in panic. You're in ‘Caveat Emptor' territory now.
I'm surprised that so many companies have no formal supply chain process, or one that they actually follow, when they encounter issues. Common sense is often bypassed, along with carefully conceived quality processes, in a desperate effort to locate parts. Many have discovered that the grey market for electronic components is a jungle. As well as good brokers, there are plenty of others and numerous counterfeiters preying on the unwary and the rise in e-commerce makes it easy for counterfeiters to create an online ‘veil of credibility'.
Okay, this isn't true of the entire independent distribution market – far from it. But I've heard war stories aplenty – failed delivery promises, days or weeks without communication, and frequently no parts received. Recent instances include parts ordered from Internet brokers that passed visual inspection but failed when fitted to boards. Worse still is the spectre of devices that pass test and get into the field, only to fail later. The cost of this can be immense.
Fighting fake components
So why has counterfeiting burgeoned so quickly and why do OEMs or EMS companies ever buy from anybody other than device manufacturers or franchised distributors?
It's all about lack of availability. This is partly due to the cyclical nature of the semiconductor and electronic component business, and how quickly components cease to be available through primary channels once obsolete. To maintain production, support their products in the market and satisfy customers, EMS and OEMs accept the occasional purchase from distributors outside normal channels.
But how to validate the integrity of critical parts sourced this way? Either invest heavily in specialist test equipment, which is rarely viable for just a few parts, or fit the parts and test as best you can. This can be expensive if sub-assemblies fail board test. Though immeasurably more so if they fail later in the field – with reputations at stake too.
These are some of the drivers behind Vigilant Components. Our ambition is to be the UK's leading component sourcing and counterfeit detection service. At Paragon, we've been providing supply chain management services for two decades. We go to great lengths to trap faulty or counterfeit parts. It's a policy that demands investment in specialised test systems, training and watertight quality procedures.
Establishing Vigilant added an extra dimension that companies who prefer to source their own parts can still use. Customers can ship their own parts to Vigilant. Our test resources and robust quality procedures already exist: Vigilant simply deploys them on the customer's incoming parts. And that's the point: it's what the service is all about. As Vigilant is independent, we have no restrictions where we source from. What we care about is giving customers more options and therefore more choice.
One Vigilant advantage is protection against counterfeits. Counterfeiters are getting more sophisticated and cunning. Simple inspection is no longer enough. Chemical marking tests help but cannot look inside the chip. Decapsulation is an effective process but now we have X-ray, which verifies difficult-to-find parts without destroying some in the process. Virtually all X-ray systems geared to PCBA inspection have serious limitations in component verification. Our new system is specific to component inspection with specialist handling equipment allowing inspection throughout a reel, tube or tray.
I believe OEMs and EMS companies need to build and maintain a strategic relationship with an independent component distributor. Then they can rely upon the distributor to man that gateway and locate authentic parts to mitigate supply chain shortages and achieve production schedules.
Within this relationship, distributors should commit to supply only tested and certified parts. Achieving this may differ between organisations as will the degree of certainty and confidence. However, few distributors have an armoury like Vigilant's. So our view is that 100% certainty is worth paying for to get things right first time, eliminate expensive rework and banish the spectre of field failures.
At Vigilant Components, our key objective is to build long-term relationships with customers, integrating seamlessly into existing supply chains and becoming a valued extension of their businesses. With a global supplier network and our experience, we simply get the job done right – first time, every time. If the components our customers require are out there, we will find them. If they're not, which does happen, our engineers can advise on alternative solutions.
Communicating throughout the process is vital. It enables us to keep our promises, deliver the correct components at the agreed price and at the correct time. Our customers rarely like surprises or excuses, but they do like communication – and the foundation for that is a strong and trusted business relationship. OEMs and EMS companies establishing a two-way committed relationship with their independent distribution partners won't get caught out. In short, they choose to restore common sense – how refreshing is that?
www.vigilant-components.com
