Texas Instruments seeks optimal role for chemical distributors
By Staff -- Purchasing, 3/13/2008 6:00:00 AM
Texas Instruments (TI) is a global semiconductor company that designs, manufactures, and sells high-tech electronics in more than 25 countries. For Bryan Vonfeldt, manager for chemicals and gas procurement for TI worldwide, distributors are an important, even vital part of his chemical purchasing. And he relies on them for many specific capabilities. But the word "partnership" is not yet part of the vocabulary.
Vonfeldt, who handles a bewildering array of procurement tasks in support of his company's manufacturing processes, says the decision to use a chemical distributor rather than buying direct from the manufacturer is made based on several factors. "Sometimes the purchasing decision is made for us when there is no choice in the matter. For example, there are certain materials we purchase that are only available through a distributor," he explains. Those substances include isopropanol, sulfuric acid, nitrogen trifluoride gas, silane, and tungsten hexafluoride.
Vonfeldt says where the option exists, TI will usually use a distributor, particularly if more value-added or special services are needed beyond what the manufacturer can provide. Examples of those services include maintaining local inventory, performing additional analytical services beyond the basic services done by manufacturer, repackaging to provide a suitable container size for TI's specific applications (for example, 55 gallon drums vs. bulk), and assisting with questions and application issues that arise in the course of manufacturing operations.
According to Vonfeldt, one of the newest value-added services, offered primarily by larger, traditional chemical or gas distributors, is often referred to as TGCM (total gas and chemical management) services, a combined "one stop" approach to handling the broad set of chemical and gas materials and services required for the electronics industry. TGCM services can vary and be customized to specifically meet customer needs. Vonfeldt says these services are frequently offered in a "cafeteria" style, allowing customer like TI to choose which of the services they need and bypass those which they do not need.
Of course, in the cost-conscious world of high-tech electronics, bottom-line issues are always top of mind, particularly when it comes to volume discounting. "We find that if we can consolidate the purchase of multiple products through one source, particularly in cases in which both distributors and manufacturers compete for business, we can leverage total price," says Vonfeldt. Furthermore, he says, a distributor can frequently save TI money if it acts as a consolidator, too. "The intent would be to lower the distributor cost through consolidated volumes enough to allow the distributor to make a margin and still offer savings from current pricing to the end customers," he explains.
Still, despite looking to distributors as a solution to many problems, Vonfeldt admits that it hasn't meant distributors getting the lion's share of business. In fact, he estimates about 85% of his chemicals are still sourced directly from manufacturers.
"Materials that are true commodities are often sourced through distributors because the manufacturer of such materials has to be very large to compete in the worldwide market and often do not desire to have sales, customer support staffing, and smaller-size packaging capabilities in their portfolio," he says. In addition, if the customer is a relatively small consumer of the product, the manufacturer may not be interested in supporting them directly, Vonfeldt explains.
Although more materials are taking on commodity status, Vonfeldt says TI does not have plans to simply increase the volume of materials purchased through chemical distributors—unless there is some significant service value or better pricing.
Vonfeldt says for TI, the distributor's role is constantly evolving. To stay in the running, distributors must demonstrate that "continuous improvement is a way of life; and ethical conduct as well as environmental and social responsibility must be the foundation of all processes."
"It is congruent values and practices that make relationships between distributors/suppliers and customers succeed," he adds.
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