fetch Solutions supplies to the Electronic Components Industry a Suite of Technology Tools to Support all Supply-Chain Partners

Distributors Support Innovation


The continued buzz around high tech consumer electronics transferring manufacturing, marketing and even some design operations offshore may leave some with the perception that the United States is no longer the mecca of innovation and opportunity that it once was. Luckily, perception is sometimes far from reality.

In fact, 2006 was a record year -- the United States Patent and Trademark Office (USPTO) reports there were some 443,000 patents filed and 183,000 issued. And though not all of the patents issued pertain to the high tech electronic sector, the USPTO reports that on the strength of Silicon Valley applications, California was the leader for the country, securing more than 23,500 patents.

Unfortunately for those with hopes of becoming the next Steve Jobs or Larry Ellison, the road from basement brainstorm to manufacturing floor is much tougher than it has ever been. Faced with global competition and rising costs, today's high tech start-ups must find increasingly more creative ways to fund their product development and manage their supply chains. For more and more of these companies, the solution is coming from what some still consider an unexpected source - component distributors. "Many start-up companies are not familiar with the breadth of services offered through distribution," says Robin Gray, executive vice president, National Electronic Distributors Association (NEDA), Alpharetta, Ga.

Not only can distributors provide access to the most current technologies, but they can also help steer customers toward the most reliable sources and will often extend credit to enable start-ups to build the inventory they need for manufacturing, Gray notes. Working with distributors means that start-ups can avoid some of the pitfalls that come from being funded by external sources such as venture capitalists, adds Greg Frazier, Avnet Inc. executive vice president, Supply Chain Services. "Venture guys do not value companies the same way the owner of a company may," Frazier says. Rather than having to give up a percentage of the company to a venture capitalist, start-ups can partner with a distributor, whose only motive is to build a strong, long-term customer.

For example, Frazier explains that he is currently working with a small company that has developed a new peripheral for laptop computers. The company had lined up a contract manufacturer (CM) in China to build the product, but the CM wanted money up front to cover the bill of materials. The company turned to Avnet as a fulfillment partner. Avnet recognized the potential in the company and its design, and decided to supply the necessary components with extended credit terms.

It was a relatively simple, low-risk venture for Avnet, but the move enabled the start-up to proceed with its initial manufacturing schedule without having to seek additional funding. Currently, the company is producing about 50,000 of its peripherals per month, but Frazier notes that he expects that number to jump to between one million and two million in the very near future.

As the start-up's virtual supply chain manager, Avnet also helps keep the production lines flowing by guiding the OEM's bill of materials to suppliers that will represent less liability when it gets to manufacturing, Frazier adds. "If they don't make informed choices, that is the ball game for them.

In offering these services, Frazier says Avnet allows start-ups to concentrate their time and resources on developing their products instead of worrying about developing their supply chain. "We allow them to laser-focus on what is going to get their product to market and make it successful, as opposed to worrying about who is going to build it, the inventory liabilities, etc.," he notes. Start-ups with limited resources may also turn to distributors for engineering support, either in the form of field application engineers (FAEs), or through educational offerings such as Avnet's Speedway design workshop series and Nu Horizons Electronics Corp.'s Xpress Track training.

Dave Bowers, president, distribution division, Nu Horizons, Melville, N.Y., notes that in recent years the company has been investing heavily in customer engineer training. Nu Horizons maintains 10 sites in North America and a handful in AsiaPac that have in-house training facilities fully equipped with workstations and development tools. "In this industry there is a continuous churn by new companies with great ideas," Bowers says. "And we continue to see that large, established companies are not necessarily the ones that are first to market with new products and new technologies. To run a successful, growing business, we need to be engaged with emerging companies that want to get their products to market."

Nu Horizons also supports customers' development needs through a network of design services partnerships. "We will provide customers with FAE support, but if they are looking for more, such as writing code or hardware and software debugging, then we refer them to our partners in their local markets." Nu Horizons will be formalizing its design services partnerships with the formation of "Nu Horizons Network," which will include a network of third parties the distributor has engaged to extend its design services offerings. The Nu Horizons Network will be introduced to the market by the end of February.

And while start-up customers may require more hand-holding than established OEMs, they represent tremendous potential to distributors, concludes NEDA's Gray. "There may be a few failures before they hit it big, but when they do, they will remember who stuck by them."