How Has Online Shopping Changed the Way Businesses Source Electronic Components?

While the total value of procurement of B2B electronic components worldwide reached US$ 400 Billion+ in 2023, digital channels including online search engines, component portals and other buyer-seller meeting aggregator websites and mobile applications accounted for nearly 60% of total buying influences and subsequently are transforming the business environment in which relationships are developed and managed in the B2B electronic components sector.

The Collapse of Traditional Distribution Models

When components were sourced, the processes were often siloed into hierarchal layers with original equipment manufacturers ( OEMS) utilizing the full breadth of their authorized distributors to source required components. These distributors provided lengthy printed catalogs often with a minimum order quantity that far exceeded the requirements of the individual project for which the component was needed. Design engineers spent hours on the phone acquiring quotes that sometimes were never returned and days waiting for basic questions to be answered.

We have previously had a lot of friction with our customers, primarily small to medium sized manufacturers and prototyping companies. They would get stung with a higher cost to purchase the components through retail electronics stores or have to wait weeks for the part to be ordered as a special.

Inefficient. Expensive. Frustrating.

Digital Platforms Transform Access and Transparency

The online marketplace has knocked down old walls when it comes to parts purchasing. Now, with one click of a mouse, hours that once were wasted looking up component specifications and pricing can be put to better use. Engineers can now instantly compare multiple parts across multiple distributors in minutes, a task that would have taken hours and numerous phone calls in the past. Additionally, having access to real-time inventory makes waiting for a part to arrive due to days-old inventory information a thing of the past.

The biggest impact of the new era of price transparency for electronics is not necessarily having your component prices exposed to the world, although that is a dramatic change too. In the old days of component pricing, there was often little transparency into the actual selling price (to anyone but the buyer!) and that price would often fluctuate greatly based on the personal relationship of the buyer with the distributor as well as the volume at which the distributor was purchasing that part from the manufacturer. Now online search makes multiple layers of pricing information available and you can make the best purchasing decision possible based on current market prices.

Engineers can now search for semiconductors using a number of technical parameters. Very technical queries with specifications such as microcontroller voltage, package and memory can now be searched. The user can search for multiple specifications at the same time.

Inventory Revolution

Speed Sourcing is different from conventional sourcing approaches. Exceed expectations without the large minimums and up-front investments in inventory that sit idle for months.

By implementing an online procurement system, companies are able to truly implement a just-in-time strategy. The large inventory available online at the Fusion Worldwide online shop does not put individual companies under pressure to maintain their own warehouse with stock, lowering dramatically the needs for working capital and the risk of stock becoming obsolete.

The economic burden of minimum order quantities for small batch purchasing has been dramatically decreased. As a result, Prototyping teams can now purchase the exact quantity of components they require, significantly increasing the opportunities for faster product development, reduced scrap and improved business efficiency.

Risk Mitigation Through Diversification

Thanks to the internet, companies can now purchase from suppliers on the other side of the globe. When a component shortage effectively brought much of the automotive industry to a standstill in 2021, companies that had formed online relationships with their suppliers were back up and running sooner than their peers. But their counterparts were left idle for even longer.

Online commerce is amazing. But it has its limitations. While digital technology makes it possible for companies to participate in a global supplier network, it also can make the resulting inefficiencies and bottlenecks worse.

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Quality Control and Authentication Challenges

Democratizing component access to semiconductors brought a huge quality risk into the system as parts flooded the market as counterfeit devices. Online marketplaces scrambled to implement part authentication as well as robust seller verification processes to maintain buyer trust.

As traceability has increased in complexity, buyers have required suppliers to prove that components comply with regulations and have been sourced from ethical and legally acceptable sources. Many component distribution platforms now provide full provenance of components potentially dangerous to use should failure occur as well as formal authenticity certificates.

Although these issues were problematic only a few years ago, more effective platform governance and industry standards have improved the way online retailers supply the market so that online suppliers now considerably outperform traditional distribution methods.

Speed and Agility in Product Development

In today’s online enabled world, design teams have become accustomed to quickly and easily accessing component data along with price online. This has significantly impacted design cycles, enabling engineers to quickly iterate internally and with partners to select the optimal component for next-generation devices—often within a much shorter timeframe than the weeks once typical when seeking pricing and availability from part distributors and original equipment manufacturers (OEMs).

Global sourcing is no longer a specialized task. What was once left to large corporations has become a standard process for startups and innovators. Instead of having to source a part made in Austin by a supplier in Shenzhen being exotic, it is no more difficult to source that part from the supplier in Shenzhen than it is from a local factory.

The Data Revolution

As more companies move to digital procurement, companies are able to benefit from more detailed analytics on the purchase, supplier and market, which offers a number of opportunities for cost optimisation. It is also possible to identify upcoming shortages early to avoid any clashes with production. The automated repeat order function within Octopoint Procurement Management automatically processes repeat orders for electronic components from the procurement department, relieving the designer of a large administrative task.

Solutions can be integrated with a majority of existing enterprise resource planning systems. Data transfer begins from the product design phase through to production.

Change is everywhere, and the transition to the new world is all but over. Traditional distributors must decide whether they can evolve to a new version of distribution in the digital world or be replaced by newer, faster growing competitors. Those distributors who successfully incorporate online procurement tools into their businesses efficiently and transparently are driving the current market while still meeting their customer’s quality expectations.