Sourcing Electronic Components in an Economic Downturn.An economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. presents a time when companies are required to evaluate current business strategies and search for new opportunities to keep up with their competitors. During this current market slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , new sourcing tools have become available that can provide significant benefits to companies. These tools allow manufacturers to identify the payoffs that this downturn can bring to their businesses. The recent economic conditions have forced electronics manufacturers to quickly adjust their inventory and production schedules to soften the market's effects on their companies' finances. Yet business goes on, and, while revenue targets may have been reduced, they have not been eliminated. Additionally, recent forecasts indicate that, by the end of the year, production may once again ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale . If these forecasts are accurate, component demand will be affected earlier, perhaps as soon as the third quarter, and, just as before, the strategic importance of parts sourcing will become a focus. Some important lessons learned during this downturn will serve manufacturers well when business conditions improve, including how to use new Internet-based business-to-business (B2B (Business to Business) Refers to one business communicating with or selling to another. See B2B e-commerce, B2C and B2G. B2B - business to business ) solutions to save time and money when sourcing electronic components. Many of these advances can be traced back to greater levels of component stock liquidity and the high level of market transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. that exist because of the Internet. Companies that know how to use these new tools to their advantage are the ones saving the most money. No public market can adequately serve its participants without sufficient levels of liquidity. Electronics B2B exchanges operate as "net markets" where liquidity means inventory, and the more components that are being offered for sale, the more efficient the market is. This market efficiency allows more benefits to accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. for the market's buyers and sellers. A large portion of the component inventory buildup build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. that occurred last year has found its way to the Internet by way of B2B exchanges. In some cases, the inventory values have reached levels that were not expected until 2003, putting these exchanges two years ahead of schedule in terms of liquidity, efficiency and the number of market participants The term market participant is used in United States constitutional law to describe a U.S. State which is acting as a producer or supplier of a marketable good or service. When a state is acting in such a role, it may permissibly discriminate against non-residents. that can benefit. The Internet has enabled market transparency on a global scale, and transparency improves the efficiency of any market. Imagine a stock market where buyers and sellers lacked any knowledge of the stocks' current market value; they could only transact An earlier e-commerce system for the Web from Open Market that included order capture and secure order fulfillment using credit cards, ecash and other payment systems. It included customer service and subscription administration capabilities as well as an integrated database for reporting based on a published price list. In many cases, participants would be overpaying based on the current market prices or receiving an unfair sum when selling. Today, communication and transparency within the financial world have contributed to a boom in transaction volume. These same technological advances are producing a level of visibility and transparency that is benefiting buyers and sellers of electronic components. Today, one can easily view the global supply and demand for almost any electronic component by simply logging on to one of the industry's B2B exchanges. The biggest B2B exchanges have attained critical mass during this downturn because greater market liquidity has combined with the ultimate vehicle for market transparency, the Internet. A further advantage to purchasing professionals is that any qualified buyer or seller may access the inventory within seconds. These exchanges provide transparency on a global level, with members from many countries buying and selling excess components. Thus, a part that is in short supply and carries long lead times in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. may actually be sitting idle in a manufacturer's warehouse in Asia (Figure 1). A B2B exchange seeks to match these two needs to benefit both companies. In the case described, the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. company sources the parts it needs on time and at a reasonable price, while the company in Asia alleviates an excess stock situation and gets a fair return on its original inventory investment. This clear improvement in market efficiency is occurring sooner and more often than expected, and it is due to the greater level of liquidity that resulted from the market slowdown. The large amount of excess parts being offered on the exchanges has made them valuable assets for well-informed buyers who know how to utilize these tools to save money. To buyers of electronic parts, the combination of liquidity and market transparency means that they can log on to a Website and, within minutes, learn how much inventory is on the market from both franchised and independent sources. Likewise, a seller of excess inventory can learn if he has a supply of scarce parts or one that will reap little or no demand. To these market participants, transparency means the difference between overpaying and striking a fair deal. In many other cases, transparency means the difference between waiting for parts with a long lead-time and receiving them from another manufacturer immediately. Knowledgeable buyers are saving money on parts, and the new Internet-based tools that are designed into the exchanges' Websites also save them time. Internet-based B2B exchanges offer many features that were not feasible without the current technology. Some common features of these exchanges include: -Search for part availability. Buyers now can check stock levels from a variety of sources including their franchised distributors, catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. suppliers and independent sources such as the B2B exchanges. In this case, the advent of the Internet means fewer phone calls, fewer voice mail messages and quicker response times. - Lead time and market price details. Market transparency means that a new level of benchmarking is now possible. If buyers are quoted an extended lead-time on parts that happen to be readily available from another manufacturer that needs to alleviate Alleviate To make something easier to be endured. Mentioned in: Kinesiology, Applied excess inventory, they can greatly improve delivery while at the same time benefiting the trading partner who is selling the parts. The Internet allows real-time benchmarking of part availability for whole component categories or specific part numbers. Likewise, prices can now be benchmarked against the worldwide supply of components. - Part watch. Purchasing professionals can monitor the global market for availability or to achieve a special price on a particular part. B2B exchanges allow members to enter a part number and a desired target price, and the Website will automatically alert them if that part becomes available at or below their stated target price. These features address both price and availability issues and improve the buyer's results and performance. - Bill of materials The list of components that make up a system. For example, a bill of materials for a house would include the cement block, lumber, shingles, doors, windows, plumbing, electric, heating and so on. search and analysis. Using a computer's familiar copy and paste To copy files from one location to another or to copy text and images from one document to another. All modern operating systems and applications have a copy and paste capability that is typically selected from an Edit menu. See cut and paste and Win Copy between windows. tools, buyers can perform many of these timesaving time·sav·ing adj. Serving to save time through an efficient method or a shorter route; expeditious. time functions on complete bills of material, thereby getting a fast picture of the bill's cost and availability. - Quick cross-reference and substitute analysis. Technology has improved the ease with which engineers and purchasing professionals can cross-reference part numbers. If the results of a product search are not satisfactory, it is usually only one or two extra clicks to get a list of substitutes for that part. The cycle begins again as the new list is easily evaluated for price and availability. -Life-cycle information. Some ex-changes offer links to sites that provide comprehensive life cycle information and alerts via email. While some limited data is free, some Internet services charge a fee for monitoring the life cycle of a parts list. - Product data sheets. Another Internet time In the early days of the public Internet, Internet time referred to the breakneck speed with which companies scrambled to gain traffic and market share on the Web. A new business could come and go within a matter of weeks. saving feature includes the increased availability of detailed product information. While this data is typically found on manufacturers' Websites, some exchanges claim to have databases of greater than 13 million data sheets that are free to their members. Conclusion The downturn may be painful, but the optimist's positive outlook cannot be denied: The glut glut pronounced as rut, slut Vox populi An excess of a service or skilled labor in a particular area. See Physician glut. of excess component inventory has produced a new level of market liquidity that is clearly seen via B2B exchanges. Furthermore, the exchanges have demonstrated that, by providing a transparent look into the world's component inventory, savvy purchasing professionals can improve delivery schedules while saving money and time. --- Scott Mack is vice president of marketing with Virtual Chip Exchange, Hauppage, NY; e-mail: smack@virtualchip.com. http://www.circuitsassembly.com Copyright [copyright] 2001 CMP CMP (cytidine monophosphate): see cytosine. (1) (CMP Media LLC, Manhasset, NY, www.cmp.com) Part of United Business Media, CMP is a leading integrated media company that offers a wide variety of publications and services in the information Media LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control |
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