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Independent Distributors Can Help Solve Electronic Chip Shortages

Supply chain shortages have become a global issue in recent years, adding a stubborn wrinkle to the fabric that keeps the economy humming. One shortage that has plagued the automotive industry since 2018 is the shortage of electronic chips. In automotive, chips control many of the features of a car, from heated seating to Wi-Fi hotspots, and without them, manufacturing cannot continue at the level consumers expect.

Supply chain disruptions are nothing new; they have become something electronic parts distributors have come to expect. With low-cost components in chronic shortage and extended lead times for delivery, manufacturers are considering the use of independent distributors to get parts on-time at the lowest possible cost without assuming additional risk.

For many companies, sourcing parts from the independent channel requires a significant shift in mindset.

Classic Components, a leading independent stocking distributor of electronic components based in Torrance, California, has been in business for over 40 years and remains one of the only independent distributors that is family-owned. The company’s maturity and resources allow it to deliver high quality products with shorter lead times than many of its competitors. In fact, the company can usually deliver parts in two to three weeks that the OEM or authorized distributors may not have access to for 52 weeks or longer.

Keeping Automotive Manufacturing Running

At the beginning of the pandemic, automotive suppliers estimated a decline in consumer interest in purchasing a new vehicle and adjusted their projections accordingly. Chip manufacturers then followed suit, prioritizing other sectors such as consumer electronics as they anticipated a reduced automotive manufacturing capacity. However, demand for new vehicles exceeded expectations, leaving the industry with a demand it could not fill.

The accelerated demand for chips in the automotive sector is going to remain steady for some time, according to Thomas, due to the current backlog. This means the long-term prognosis for those manufacturing chips for automotives is positive. And while things are beginning to slowly return to normal, at present, the price of hard-to-get components like chips has skyrocketed.

The shortage has led to major car manufacturers eliminating certain features in newly made vehicles because they are unable to obtain enough chips to ensure full functionality. This is where having an independent distribution plan comes into play.

Classic Components’ sourcing expertise includes knowing where to find alternate sources of component parts through surplus inventory, strategic relationships with other franchise/authorized distributors, and taking advantage of local and overseas markets.

Investigating Sources

One mistake that some companies make during the chip shortage is being duped by counterfeit products. It is an easy trap to fall into because the counterfeit items available today are impeccably made and almost impossible to distinguish from the real thing. Classic Components retains its competitive edge by taking a good, hard look into any company it wishes to purchase from to ensure both the company and its offerings are legitimate.

An independent distributor can also offer supply chain management along with a rigorous quality inspection process to ensure the authenticity and quality of each component received. Classic Components, for example, utilizes a quality management system (QMS) and holds certifications such as AS9120B, a requirement for distributors serving the aviation, space, and defense industry.

The process includes conducting a detailed risk profile for the customer that takes into consideration the known reputation of the vendor, the part, and the end use of the item. In addition, the customer is surveyed as to the requirements for age of the components (date codes), traceability back to the factory, etc. In the case of Classic Components, the company has developed a scoring system to establish the risk involved in each transaction.

Unfortunately, for the foreseeable future, the automotive industry is expected to continue to experience significant supply chain disruptions. New technology for cars will also continue to increase the demand for chips, particularly in electric vehicles and internet-connected cars.

Classic Components isn’t thinking simply in terms of the immediate future, either. Given the environment, some independent distributors have stopped stocking inventory and are demanding prepayment for components with rigid “no cancellation and no return” policies.

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