Publication date: 02 February 2010
After one of the toughest years that any of us can remember, most suppliers and distributors have weathered the storm, but none have been immune to its effects. With confidence at a low ebb, there has been remarkably little consolidation. The acquisition of Abacus by Avnet stands as the most significant event in distribution.
There is no evidence that the structure of the supply chain has changed, but all have streamlined their businesses. As a result the approach we will see in future is likely to be different.
Most suppliers will undoubtedly look to get more for less as the market recovers. They have fewer employees and less capacity than 18 month ago and as a result can support fewer direct accounts and fewer distributors than today. Perhaps the greatest opportunity will exist for the strong distributors in the field of interconnect, electromechanical and passive products (IP&E) where the majority of suppliers still deal with significantly more customers and operate through many more distributors than their semiconductor counterparts. In 2008, according to Europartners, the distribution share of the IP&E market was only 26%.
I would predict that more of the IP&E market will move to distribution, and that the larger distribution groups will benefit the most from this movement. Although there will continue to be suppliers seeking distribution partners on a country by country basis, they will tend to look to extend the franchises of successful distributors with whom they have established relationships to other territories.
They will expect these distributors to offer not only logistical support, but also the platform and expertise to take products and solutions to the customers. An ability to design in and actively support new technologies to a broad market place is essential. In these cash-strapped times, it will entail a strong balance sheet to fund the people, promotional costs and the additional inventory required to service such growth opportunities.
Avnet Abacus emerged during the worst of the recent downswing, and was therefore in a position to take advantage of integration synergies instead of being pushed to downsize an existing organisation. It is therefore in a strong position to meet these emerging trends.
In every country every salesperson and product specialist has the opportunity to take more products to more customers. The technical team available to work with customers across Europe sits at 55 people working from 45 sales offices across 19 countries. There are 45 pan-European franchise agreements and many others who we support in specific territories to address those market needs giving us a total line up of 189 suppliers.
Our ambition at the outset was to be a pan-European distributor (as part of a global organisation), but with a strong local focus and our linecard, our website and our organisation is now established as such. The Avnet name is backed by $1 billion of cash and provides a great backdrop for our venture.
The market downturn and the general economic recession will come to an end and there have been some encouraging signs over the past few months that perhaps the worst is behind us. However the changes which have been imposed on many will have far reaching consequences as the electronics industry consolidates and restructures to provide exciting new opportunities for those distributors positioned to take them.
