What is a “Trusted Source” of Supply?

Beginning November 15, 2012,  the U.S. Defense Logistics Agency (DLA) requires suppliers who are awarded contracts to supply electronic parts (in the FSC 5962 category) to use SigNature DNA marking from Applied DNA Sciences, Inc. Also, it was announced by the DLA that “effective immediately, only trusted sources who comply with Deoxyribonucleic Acid marking requirement in DLAD 52.11-9074 are eligible to receive FSC 5962 awards from DLA. There are no exceptions.” and that “trusted sources will be reimbursed through a CLIN for ‘Contractor DNA Marking’ in the award document. Those companies will be reimbursed for one license per year.”

In the ongoing effort to combat counterfeiting, remarking and theft, the U.S. Government has contracted with the sole source provider of botanical-DNA based security services, Applied DNA Sciences, Inc.

No doubt the effort to combat bad parts will continue to create many different solutions for OEM, CMs and ODMs.

So what is a “trusted source” of supply? For the purpose of this blog post, sourcing from a trusted source of supply will have to be defined by your organization. If you are a government contractor or subcontractor, guidelines and mandates have already been established. If your business model doesn’t include government customers, it is still worth defining your “trusted source” of supply.

The “Trusted Foundry Program” is managed by The Defense Microelectronics Activity (DMEA). The DMEA was established by the Office of the Secretary of Defense (OSD). The DoD Instruction 5200.44, Protection of Mission Critical Functions to Achieve Trusted Systems and Networks (TSN) requires that;

 “In applicable systems, integrated circuit-related products and services shall be procured from a trusted supplier accredited by the Defense Microelectronics Activity (DMEA) when they are  custom-designed, custom-manufactured, or tailored for a specific DoD military end use (generally referred to as application-specific integrated circuits (ASICs)).”

Accredited Trusted Foundry Suppliers have appointed a representative to ensures the electronic part is trusted from the design, mask, foundry, packaging, assembly and test services.  This chain of protection applies to parts identified as requiring “Trusted Product Flow”. Accredited Trusted Foundry Suppliers are not required to apply these stringent rules to commercial product flow.

Protecting our national defense is a critical goal of the “Trusted Foundry Program”…but what about protecting your company?

Procurement from a “Trusted Source” is quickly evolving into short Approved Vendor Lists (AVL’s) with requirements designed to weed out the uninformed and untrained. The barrier to entry in the aftermarket electronic component distribution market place has risen to great heights with standards and regulations increasing every year.

What have I learned from my customers about the definition of being a Trusted Source of Supply?

The words quality and trusted can be used and overused until it becomes a cliche’. To say we are a perfect supplier would be an overstatement.  I am proud of our commitment to getting it right as opposed to being right. I am proud of my team to make adjustments and provide solutions when you can not get the product you need when you need it.

I (we) have learned to:

  1. communicate and respond to you regarding RFQs, questions and potential issues or recommendations
  2. provide education to you so you can make an intelligent informed decision about your buying choices
  3. continue to be members of ERAI and read the daily alerts for reported bad parts and questionable suppliers
  4. choose our suppliers wisely based on their ability to communicate and respond
  5. recommend testing parts, cross references and other alternatives to a circuit board redesign
  6. stay on top of changes in our industry by attending trade shows and reading industry updates
  7. keep an eye out for the best and latest technology and changes that will benefit you

This list is not all inclusive and my definition may not match up with your definition of being a trusted supplier.  

I’m interested. What is your definition of a “Trusted Source’ of Supply?

You can email your response to trustedsource@iecsolutions.com

Inland Empire Components, Inc. provides customers with safe electronic purchasing supply chain solutions.

www.iecsolutions.com

How We Find Components

How We Find Components

Let me be blunt. If you are the one assigned to find components at your facility, your job may be challenging to say the least.  Everyday we talk to buyers and engineers who are frustrated with having to find components.

Here is a great real life example of what I’m talking about. First, I will leave the name of the customer anonymous for obvious reasons. Several months ago, one of our OEM customers approached us about their need to buy an obsolete part. The part is a popular programmable logic device that went end-of-life.  Our customer made a business decision and decided not to purchase the parts which were announced obsolete.

The result was that our customer ended up needing a significant quantity of the parts. First they went to their original supplier who said  some version of “sorry…no more parts”. Next, they came to us for help.  They called us to find components for them. Flash forward 5 months later…our customer did not purchase the parts quickly when they were quoted and our vendor sold them elsewhere.

Independent Distributors operate from a different business model then say…Avnet, Arrow (which got into the business when they bought Converge), Digikey, Newark and Future Electronics.  Our business model requires us to find components in a fast moving marketplace devoid of scheduled orders and 20 week lead times.

Although we advice our customers to place their orders immediately and not wait, often they have to get multiple signatures just to get the parts purchase. where the franchised and authorized distributors offer new parts directly from the manufacturer.

We continue to source parts for the customer and as we sift and sort the good parts from the questionable, our customers frustration mounts. They operate under the constraints of a bureaucracy that it slow and cautious. We operate from a volatile marketplace sometimes akin to the stock market.  It’s the wild west when you have to find components that are either obsolete or back ordered for 40 week.

Recently a customer asked us to source a very difficult part.  We subscribe to multiple online electronic component trading platforms.  The annual investment to belong to these services is significant.  We have multiple OEM customers who act as vendors when they wish to sell off some of their inventory. We re-market these electronic components when we are confident that the product meets the customers expected standards.

Inventory Stock Checks and the Death of Common Courtesy…

Last week my sales team and I were discussing the nasty behavior from suppliers who answer the phone when we call for a stock check.
Calling vendors and sourcing product is an activity we are very good at.

The majority of our vendors are GREAT people happy to hear from us.

Then there’s the handful who act like they’re selling the last batch of gold that exists on the planet and we are lucky to have them on the phone.

Quite frankly, I don’t really care if a supplier mixes ego into the stock check activity because there is some entertainment value talking to a challenging sales person. If fact, our contract and original equipment manufacturers customers have made comments that talking to us is like a breath of fresh air.

(Check out the testimonials on our website by clicking here).

Many just turn the sourcing activity over to us because…well…they have better things to do than talk to challenging sales people.

Our industry tends to attract the type of sales person that enjoys extreme sports and all night parties (although none of them work at Inland Empire Components, Inc.) This behavior can result in a cranky irritated stock check void of common courtesy.

Selling obsolete and long lead time electronic components is at times akin to running a stock brokerage.

Not that my partner and I have ever owned a stock brokerage but I’ve seen the Wall Street movies and Trading Places is one of my all time favorites.

Our industry is intricately tied to supply and demand. This can cause our phones to blow up with desperate customers being quoted 40 week lead times. Despite this fact, the industry has taken on some of the characteristics of the crashing housing market. (New houses mean new microwaves, televisions, refrigerators, and whole house communication systems).

As most of you know, the housing crash has caused a lot of people to get really cranky. That event coupled with the feeling of uncertainty perpetrated by the media just fuels the fire of the agitated sales person.

The fact is a circuit board redesign is a costly business decision so our customers keep us busy.

Any major interruption in the supply chain makes for frantic buyers and engineers. Like many industries, our market is made up of people with often conflicting agendas and goals. In our business, you have the end customer (buyers and engineers) managing critical and often obsolete component purchases. Their goal is to source product fast and product had better be new and original.

Contrast that with the rare but difficult supplier who thinks they are selling Rhodium. Parts that are being quoted by three other distributors at a nickel are quoted at seventy cents because the stockist perceives to have in their possession the only parts in the universe.

Here’s the problem with that philosophy. I know how many customers are on my list in any given year. I know what a customer is worth. The real money isn’t made on screwing the customer on a one time deal to make a quick hit. Fair honest dealings is not some old-fashioned notion. It is sound business advice akin to the laws of the universe.

The perception that business is “war” is acknowledged. That just hasn’t been my experience over the last 23 years. Granted, some of my competitors have made a lot more greenbacks than me. The majority of my competitors are also my customers so we have a dichotomy here. I sell to and buy from my competitors and they do the same. Really, I’m in one of the greatest businesses on the earth. We really love what we do. It’s never boring and like jumping into a fast-moving river full of rapids everyday.

The real money is made with relationship building resulting in back-end business. Let me give you an example of what I mean about backend business. Depending on the year we can have 1,400 plus customers buying from us. Applying the 80/20 rule of business (meaning we do 80% of our business with 20% of our customers)
results in our top customers placing multiple purchase orders year after year and some for 2 decades now.

Attrition happens, customers go out of business or change their business models so we continue to market our business. We don’t make the majority of our income from the 80%.

Still we can’t predict which OEM or CM will move from the 80% category to the 20%. We don’t know who will connect with us long-term because unless you’ve invested heavily in psychics, algorithms and data…market conditions change.  Purchasing agents leave and get replaced.  The new purchasing contact may hate us because we remind them of their ex-wife or ex-husband. They find another supplier that reminds them of their new girlfriend or boyfriend.

The value is made in the relationship. Will the relationship always be monetized? No. But that depends on how you define monetization. After so many people lost their houses, had their retirements raided and in my case, lost my daughter, the real monetization is in common courtesy.

…and humanity.

It doesn’t mean we won’t stop working our tail off to provide the very valuable service we provide to our customers…supplying diminishing electronic products and asset conversion. And we certainly know how to hold our own against the most challenging suppliers in the business.

But we will continue to do it with elegance and value.

Ridiculous price jacking and outright offensive behavior because a supplier happens to have in their possession a line item that is being affected by supply and demand forces is short sighted. Prices will rise and fall on market conditions. That’s a reality in our very competitive business.

I’m not against making a fair buck. My customers pay for the value we bring to providing a solution to their problem. Typically the problem is their manufacturing will be interrupted if we don’t provide the product they need.

Basic common courtesy is always preferred in any business transaction.

Ironically, I traveled to Atlanta for a conference a couple of weeks ago and happened to be staying at the Omni CNN head quarters. I went on the behind the scenes CNN Tour.

On tour at the CNN headquarters in Atlanta

Here is the view from outside my hotel room at the Omni CNN Atlanta

Check out my pictures. Up on the giant screen in the food court was this crazy video of a bunch of extreme politicians from Greece. One of the men in the video got violent.  Then the news turned to the question “Does Common Courtesy Still Exist in Politics?”.

Just the last two months I’ve traveled to Washington State, Georgia and New Mexico.  I went to San Diego and San Fernando Valley’s Granada Hills.    In every case I can say that Common Courtesy Still Exists in Business and fortunately you can find it at Inland Empire Components, Inc. .

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