“Nature of distribution is changing”

AMAX, founded in 1979 in Silicon Valley, is one of the global leaders in custom servers and storage solutions. It has three key divisions delivering customized solutions to a wide array of industries: the Contract Manufacturing Division, which provides comprehensive custom manufacturing and global logistics services to OEM customers; the Corporate Solutions Division, which is a provider of custom server and storage products; and the Distribution Division, which provides distribution services. ECN Asia recently spoke to Hariom Sagar, Sales Manager, AMAX, in New Delhi, about the changing distribution landscape. Excerpts:

How has the distribution business been changing during the past few years?

With the coming of EMS to India and Asia, and the advent of SMP and lead-free components, the nature of distribution is changing. Earlier distribution was handled mainly by traders. For instance, in India, 70 percent of the distribution was done through traders, and only 30 percent through distributors.

Now distributors handle 65 percent of the distribution, and traders, 35 percent. Manufacturers themselves are setting up offices in key EMS countries to distribute components, because some major component consumers, for instance, Nokia, buy their devices only from manufacturers. A large number of component makers, prominent among them being Rohm, Murata, and TDK, have set up distribution offices in India.

From the customer perspective, which is most convenient: sourcing from manufacturers, traders, or distributors?

Distributors can provide a vast range of value-added services that manufacturers and traders cannot. Manufacturers have very limited number of outlets. Traders will generally keep commodity items. But distributors are fairly widely spread and can provide a large range of items. They can be more supportive to the customer.

What kind of value-added services does AMAX Technologies provide especially to designers?

We help customers in design. Our field application engineers assist designers in zeroing in on the best component meeting their design needs. This speeds up design process. We also provide samples free of cost. For regular customers we build up an inventory after taking forecast from the customer so that we are able to meet his requirements fast.

How is the Internet changing distribution business?

Prices have become very competitive, because customers now have access to prices from various sources all over the world. In India the margin is as low as 3 percent to 5 percent for most components.

Traditionally, the processes from component procurement to the final product took 12 weeks. The Internet has brought this down to around four to five weeks. Generally, the lead time for components is six to eight weeks. But thanks to the Internet the consumers in need of components urgently have access to a large number of distributors globally to meet their requirement of shorter lead time.

Do you find any differences of perception in expectations from distributors from consumers in Asia-Pacific and the West?

Consumers have the same expectation from distributors everywhere. They want good pricing, shorter delivery times, and sample support. However, consumers in India and China are more particular about pricing than elsewhere.