Electronics distributors say material management services such as consigned inventory and in-plant stores are in great demand because OEM and electronics manufacturing services (EMS) providers need help managing their excess inventories. However, large distributors have also started new information based services that are designed to help purchasers buy, engineers design and OEM and EMS providers manage their supply chain more efficiently.

Their services include parametric searches, product change and end of life notification, bill of material cleansing, cost analysis and online ordering. Most of the information services are centered around extensive databases of electronic components.

The services are different from traditional value-added services and demonstrate how the role of electronics distributors has evolved. Fifteen years ago small OEMs and contract manufacturers would turn to distributors for value-added service such as kitting, cable assembly, just-in-time delivery and parts labeling. In the 1990s, bonded and consigned inventory, auto replenishment, in-plant stores and IC programming became popular with electronics buyers and attracted larger customers. Now the new information services attract even larger OEMs and contract manufacturers although they can be scaled to meet the needs of small companies as well.

Unlike traditional value-added services, buyers don't have to purchase parts to buy the information services. "We service the supply chain from end to end with or without parts," says Greg Frazier, executive vice president of Avnet's newly formed Supply Chain Services.

"We feel that the selling of parts in the overall electronics industry is about 25% of the business," says Frazier. "As distributors, we don't touch 75% of the business. Until now." While major distributors are backing off from the phrase "fee for services," the term aptly describes the new services. Typically the customer pays a subscription fee depending on how much the services are used.

Perhaps the most popular of the services is product change and end-of-life notification. Avnet recently announced a new tool called BOM Manager, a Web-based system that notifies buyers of end-of-life and part change notifications. "End-of-life and product change notification are of most interest in medical equipment, military and telecommunications industries," says Frazier. "Those are industries that tend to have long product lifecycles." Buyers in those industries need to know when a component will stop being produced so they can find alternate sources or have a product redesigned with components that remain in production.

"We combine information that Avnet gets with information from an outside source to give buyers and engineers a heads up when something is changing or going obsolete," says Frazier. "We combine that with a tool that we call List Manager to tell them where it is used on which bill of material and how many are used per each BOM."

End of life notification is one of the most useful information tools, according to Walt Tobin, senior vice president marketing and operations for Pioneer Standard's Industrial Electronics Division. Pioneer offers end-of-life notification with its StaightLine suite of information services.

"Right now there are hundreds of engineers designing products that have already been announced by suppliers that they have been 'end-of-lifed,'" says Tobin. "But they don't know it. That information is put on a supplier's Web site or emailed to distributors or put on the back page of their catalogs," he says.

Pioneer's tools also keep buyers and engineers apprised of parts with long leadtimes. "If an engineer picks an ASIC (application specific integrated circuit) with a 24-week leadtime and all the other components on the BOM are six weeks, the ASIC is going to delay the time to get the new product to market," says Tobin.

End-of-life notification is also part of Arrow's Global Information Business's Connectivity Dashboard, which offers a variety of information services including bill of materials cleansing, online ordering and parametric searches among others. Arrow's supply chain information services centers on its database called Ubiquidata.

Connectivity Dashboard and Risk Manager are ways to get into the database.

"Our tools connect design teams together allowing them to share information," says Chris Henry, senior vice president and general manager of Arrow's Global Information Business.

"However, the tools are more valuable when we connect the design team with purchasing. It gives purchasing a chance to be connected to the project as it develops."

With Arrow's product change notification, a buyer tells Arrow which parts he cares about and what he cares about them: End-of-life notification, a change in packaging, change in test program or a fab change. "Then when there is a change, the buyer is automatically alerted on his desktop," says Henry. "So if a supplier is going to obsolete a part, a message is sent to the buyer's desktop. The service allows a buyer to monitor lists, projects and bills of materials for any changes concerning parts," he says.

The tool will tell the buyer which bill of material the part is used. Armed with the information, the buyer makes a decision of what he wants to do. "The buyer can say 'Ok, this product is going end-of-life, I need to make a lifetime buy,'" says Henry. "Or he can look at his inventory and backlog and see which projects are effected and determine if a project needs to be redesigned or if an alternate source can be found for the end-of-life part."

While the idea of value-added services is to reduce cost, often buyers don't have a clear picture of what their true costs are. One of Pioneer Standard's information tools called Autotran can be used to conduct activity base costing analysis.

"It allows the customer to determine what it costs to design the products, do the bill of materials quoting, the purchasing, receiving, incoming inspection for the parts, the kitting and board stuffing," says Tobin. With the knowledge, the buyer can determine what the savings would be if it used programs such as programming, kan ban inventory or an in-plant store.

"They could compare what it costs for them to do those activities against what it costs us to do them and determine how much their savings would be," says Tobin. "I wish I could tell you that activity based costing has been broadly accepted across the manufacturing and procurement world, but it hasn't."

While the information services are new, distributors say they are gaining acceptance despite the electronics industry downturn.

"We think the biggest opportunity moving forward is in the area of information," says Tobin. "We see customers really needing help in design of product, boards and identification of part numbers." The opportunity is helping customers design, quote, buy, and manage the product life cycle.

However, because of the downturn, the new services have not gained as much traction as distributors would have liked. Many OEM and EMS providers have been faced with high inventory levels and have looked to distributors for help.

Frazier says inventory management programs are in high demand by OEMs and EMS providers. "The number one thing that people ask us to do is help them with their excess inventories," says Frazier. "A lot of customers have a difficult time moving inventory from one site to another." In fact, in some cases an OEM and or EMS company may not know what its inventory position is at different sites. In many cases a company may need a part at one location and it may be in excess at a different company location, but the company may not know it. "A buyer ends up going out and buying materials and sometimes at a high price when that material is within his own company," says Frazier.

If companies can easily and efficiently ship material between their sites, it could save them millions. "About 22-30% of material is usable between sites if they only knew it existed. If you look at someone who has $100 million worth of inventory in excess, more than likely $25 million of that can be used in the company," says Frazier. "If you are maintaining similar product there is a huge opportunity to reclaim dollars that would have been written," he says.

Avnet is setting up distribution centers to help companies ship parts among their sites.