The emergence of the virtual supply chain in a COVID-19 world
What happens when supply chains are required to adapt, and what will electronics distribution look like post COVID-19?
Mark Burr-Lonnon, Senior Vice President of Global Service & EMEA and APAC Business at Mouser Electronics, shared his thoughts in a panel discussion as part of All About Circuits’ 2020 Industry Tech Days Virtual Conference.
What is the role of distributors, manufacturers and semiconductor companies in an engineer’s design process?
I think what’s key, from our standpoint, is bringing the latest technology to an engineer. Engineers have to build lots of new products, and the essence of our industry is all about how we help new designs and how we move things forward. All of us have a role to play, but everyone does play a different role — even if you take it back to how a stocking policy works. We put a lot of stock in place for a design engineer to make sure there really is a wide range of parts, from a wide range of manufacturers, with the latest technology. That really helps the engineers with new designs to take things forward, rather than being focused only on the supply chain.
The supply chain distributor stocks very differently — they’re stocking a much more limited range of parts for things which go in volume. So when a manufacturer brings out something brand new, those people are unlikely to stock it, because there’s no demand for it. But as an NPI distributor, we jump on that and say, “The only way to take this new technology to engineers, and to help the manufacturers get new customers, is to roll those parts out through our model.”
Where and how do distributors think their products will be bought and sold in future?
The importance of inventory has always been a big thing in distribution, but it’s been quite bizarre that a few distributors have started to stock less inventory as we’ve gone through time. If you think about it, the amount of inventory that we’re now putting in place and shipping around the world is really helping drive a lot of that engineering buying. You know, the longest it takes to get to Europe now is 2–3 days. And a lot of the local distributors are just not stocking the inventory. We’re able to stock it on a global basis — so if you’re a local distributor in Spain, for instance, you’re going to be stocking a really narrow list of parts for that Spanish market, whereas we’re stocking it for every market in the world, which means everybody has availability of every manufacturer that we have. We’ve got over 850 manufacturers, so if someone’s trying to build a bill of materials, you can get almost everything in one place at one time, and in most places in the world you can get it anywhere from the next day to three days. It’s very efficient, and we’ve got some great logistics partners who help us do that.
Since everybody’s been shut down, have you seen any differences in order values per purchase?
We certainly saw in the April/May/June timeframe a huge increase in medical customers coming to us who probably hadn’t come to us before. But overall, we’ve not seen too much difference. We’ve seen more engineers continuing to build, whether they’re at home or not, and if you look at most factories, they are working. It’s like our distribution centre — our distribution centre employees are working onsite, but some of our office staff are not in the office. Lots of production lines are working, but lots of the buyers are at home. So from an engineering standpoint, we’re seeing more parts being shipped out now than we saw last year.
Is there a science you can use to predict the effects of what’s going on, or is it more about being nimble and responsive?
A lot of it comes down to inventory. If you have inventory, lots of these problems go away. If you can’t supply the parts, it doesn’t matter what’s happening — that’s a problem. So the big thing for us is to make sure we get the simple things right. Now we don’t have the logistics side in our hands, it’s all third-party providers, but even through the pandemic they’ve done a great job for us, even getting into places like India, which was on a total lockdown. We never knew how much product used to go on commercial aircraft, but it’s still getting there, and we’ve had very few people saying shipments are late. It’s just a system that works, with a lot of inventory moving around every day.
What will distribution look like post-pandemic? Is it predominantly going to be e-commerce?
We’d started to see a lot more online shopping before COVID-19, and I think that’s going to continue. COVID-19 didn’t require us to totally change our model. I feel sorry for some other guys out there — I was talking to one distributor who said he had 2000 field people. We have zero, so we’re not having to worry about what we do with thousands of salespeople. We can continue to lay more inventory, we can continue to bring in more NPIs, we can continue to add things to the website to make it easier for the design engineer to find technology on there. Because the engineering community is pretty smart — they can make good designs out of information that’s provided on websites.
How do you want engineers to be using your company?
I think the way the world has changed for the engineer, they have a lot less time. What they want to do is remain anonymous, because if they buy from a manufacturer direct, or they buy an engineering quantity from a volume distributor, suddenly they’ve got people crawling over their front door trying to come in and talk — not during COVID-19 of course, but in normal times. If those engineers buy from us, it’s anonymous. They can just get on, they do their next design, and the whole process is a lot easier. So that’s a real value that’s been added, and it sounds like a crazy value to add, but time is a big thing. It’s not all about components — it’s really about content. Because engineers don’t always start with the parts that they want. They start with, “I need to make this. Which parts do I need?” And then go off and look at websites and start to pull it all together.
What effect has COVID-19 had on global supply chains, and what is your forecast for the remainder of the year?
It has had an impact for sure, and it’s affected different parts of the world at different times as we’ve gone through the year, but I think our industry has come out of it better than most. I think we’re pretty robust, and there are lots of people still making parts even when countries are relatively closed down. The production people are on the frontline working, and the warehouse people are in the warehouse picking parts. So I think we’ve got through it pretty well, to be honest.
Just to give a couple of numbers, we get 370,000 people a day who are coming to visit our website, and that’s 1.8 million page views. So there’s a lot of people out there looking at information, and other distributors will have similar numbers. It’s that type of ilk, of engineers and purchasing people sitting at home, looking for data, looking for parts, going onto websites, and I think as we go through the rest of the year it’s going to get slightly better, and next year I think will be a good year for the industry unless COVID-19 stays a lot longer.
To view the full panel discussion, visit https://www.allaboutcircuits.com/tech-days/summer-2020/mouser-electronics-and-digi-key-electronics/webinars/keynote-panel-emergence-of-the-virtual-supply-chain-covid-19-world/.
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