Electronic Chip Shortage Solution: Look to the Independent Channel

Independent distribution channels offer quality and decades of experience, providing manufacturers of automotives the electronic chips they need to keep production running

Supply chain shortages have become a global issue, adding a stubborn wrinkle to the
fabric that keeps the economy humming. One shortage that has plagued the automotive industry since 2018 is the shortage of electronic chips. In automotives, chips control many of the features of a car, from heated seating to Wi-Fi hotspots, and without them, manufacturing cannot continue at the level consumers expect.

Supply chain disruptions are nothing new; they have become something electronic parts
distributors have come to expect. With low-cost components in chronic shortage and extended
lead times for delivery, manufacturers are considering the use of independent distributors to get
parts on-time at the lowest possible cost without assuming additional risk. For many companies, sourcing parts from the independent channel requires a significant shift in mindset.

“Some companies make the decision to place orders with independent distributors the
very first day they are in operation because they understand our market and how we operate in
it,” explains Mike Thomas, vice president and general manager at Classic Components, a
premier independent stocking distributor of electronic components based in Torrance, Calif. “But
there is an equal number of companies that are hesitant because the chipmakers and franchise
distributors have invested millions over the years to de-incentivize their customers from going to
the open channel.”

Keeping Automotive Manufacturing Running – At the pandemic’s beginning, automotive
suppliers estimated a decline in consumer interest in purchasing a new vehicle and adjusted their projections accordingly. Chip manufacturers followed suit, prioritizing other sectors such as
consumer electronics as they anticipated a reduced automotive manufacturing capacity.
However, demand for new vehicles exceeded expectations, leaving the industry with unfulfilled

The accelerated demand for chips in the automotive sector is going to remain steady for
some time, according to Thomas, due to the current backlog. This means the long-term prognosis for those manufacturing chips for automotives is positive. While things are beginning to slowly return to normal, at present, the price of hard-to-get components like chips has skyrocketed. The shortage has led to major car manufacturers eliminating certain features in newly made vehicles because they are unable to obtain enough chips to ensure full functionality. This is where having an independent distribution plan comes into play.

“If you are a manufacturer, you need to have as part of your supply chain strategy an
independent distribution plan,” says Thomas. “How are we going to engage? We don’t want to
give a broker business and take it away from the franchisor/authorized distributors. But right
now, we are the guys that can be strategic and can get parts that work when you need them at a competitive price.”

Classic Components’ sourcing expertise includes knowing where to find alternate sources
of component parts through surplus inventory, strategic relationships with other
franchise/authorized distributors, and taking advantage of local and overseas markets.
For more information, contact Classic Components Corp at: www.classic-ic.com.

Classic Components

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