2/22/2024

A Tale of Two Electronic

Components Distributors
Hasmukh Gajjar

Role of Electronic Components Distributors

(EDs)
Intermediaries for material and information transfer between
component manufacturers and
Original Equipment Manufacturers (OEMs)
Other companies that used these components e.g. MROs
 Are these intermediaries required in Supply Chain?
How do these distributors add value in Supply Chain?

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How do these distributors add value in Supply Chain?

Value Added Services Offered by EDs

One-stop shop for various component requirements
Breaking Bulk and Mixing
Credit offered to small OEMs
Value added sub-assembly and Kitting
Making sales calls on behalf of component manufactures
Flexibility in deliveries
Willingness to accommodate small order quantities
 Establishing trust by “Playing it clean” practices

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Value Added Services Offered by EDs

Flexible working rules due to non-union workforce
Making low volume-hard to get components available
Locating supplies of obsolete components at short notice
Storage of components in an inert atmosphere
Verification of Pedigree
Keep broad line of active and passive components
Fair Pricing Policy : No exploitation of their customers who are in dire
need of the hard-to-get components

Industry Overview
$23.1 billion industry in U.S. and Canada
Experienced double digit growth over last several years
Grew at over 20% during 1993-95
However, growth was predicted to be close to 11% during 1996
Growth factors
 Rising demand for electronic products
 Shortages or surpluses of various electronic components
 Component Manufacturers’ desire to stick to core competencies
Distributors were differed by
 Range of products they carried
 Number of customers they served
 Kind of relationship between their suppliers and customers
 The size of their typical shipments
 Level of Value-added-services offered

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Current Trends
Consolidation in Industry
Many small distributors had merged with or acquired by large rivals
Revenue of top 100 had grown faster than the industry average
Growth was even more rapid for top 10 distributors
Fifty percent of the industry was in the hands of two large players
Emergence of mega distributors
Balance of power shifting from suppliers to distributors
Small distributors would survive only if they became “boutiques” with high
service orientation
Acquisitions often were driven by pressure on distributors to go global

Performance Measures

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AESCO
 70 people organization serving majority OEMs (Initially to MROs)
Target growth rate : 15%
Located at Akron, Serving 5 states in and around Ohio
40-45 manufacturers  Buy Bulk  Breaking Bulk into small Qty 
Shipping to OEMs
Value added services: Meeting OEMs requirements of small volume,
One-stop shop, Assembly + kitting, Credit facilities to OEMs, Sales
Promo for component manufacturer
Neutrality while dealing with multiple manufacturer selling
same/similar components

ESCI
12 people organization mainly into supplies to defense organisations
Nature of Products: Low volume, rarely available, pedigree check
required
Very few competitors due to exclusivity of the product
Ike Aubrey, CEO of ESCI possessed
a knowledge about the potential source of the rare products and
also maintained good relationship and developed trust with suppliers and
customers.

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Potential Threats for AESCO and ESCI

 Consolidation in Industry
Growth of internet/IT
Globalization of markets and manufacturing
Increase popularity of value-added services
Possible impact of above threats on AESCO and ESCI?
Any specific threats to AESCO and ESCI?
Dilemma for AESCO? Dilemma for ESCI?

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