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EIDX Distributor Scenarios - Supporting Documentation
General Information and Considerations
Recommendations and best practices that apply to all business processes,
including recommendations for product identification and partner
identification, are found in EIDX Business Models - General Support.
Definitions
Component Supplier - Refers
to a manufacturer that produces component products, such as resistors
that are used in a PC board, PC boards that are used in computers,
etc. Component Suppliers often use the services of a Distributor
to sell their products. See also Supplier,
Reseller, Manufacturer.
Design Win - From a broad perspective,
a "design win" has been achieved whenever a customer,
prospective customer or customer's agent (such as a distributor)
notifies a supplier that its product has been selected for integration
into the customer's product. At this broader level, there
are usually financial incentives involved beyond the securing of
the customer's business. More specifically, "design
win" refers to a program whereby a supplier offers financial
incentives in the form of bonuses, rebates, Ship-from-Stock
and Debit authorizations and/or off book pricing when
its product is designed into another company's product and agreed
upon sales quotas or other conditions are met. If the supplier
is working directly with the end-customer, the supplier's sales
force achieves the "design win" when the customer designs
in the product; the customer gets financial awards in the form of
rebates, debit authorizations and/or special pricing once conditions
for incentives are met; if a distributor is brokering the design
work, the distributor achieves the "design win" when the
distributor's customer designs in the supplier's product, and financial
awards realized when the conditions for incentives are met.
See EIDX Distributor Scenario 2 - Design
Win.
Distributor - A business that buys,
warehouses, ships, invoices and resells; a party that acts as an
intermediary in order and inventory management. Distributors
in high-tech industries also perform some of the same value-add
services handled by Value-Added Resellers, such as device
configuration and/or programming, and systems configuration (postponement).
Often Distributors have a franchise relationship with one or more
suppliers. Component Suppliers often use the
services of Distributors to sell their products. The Component
Supplier may have their sales departments focus on a few big accounts,
and have the distributor manage many medium-to-small accounts.
See also Manufacturer, Supplier.
Manufacturer - A business or person that
produces one or more products. See also Component
Supplier, Supplier, Reseller, Distributor.
Meet Competition Quote - Used
to designate a meet competitor pricing ("meet comp") or
delivery quote. This
quote is the more complex of the quote types.
A meet comp quote is used by the buyer to inquire to a supplier
if he/she is willing to lower his/her price, or make a delivery
to make a sale. This
is used primarily between a distributor and a supplier.
The distributor is asking the supplier to lower its price
in-line with another supplier of a comparable product to make the
sale. This may be after
the product has already been shipped to the distributor.
This is more complex because of the transaction interaction
that is described in Implementation
Recommendations for Quote Processes. It may require
information about who is the competition, what is their price, and
how can their price be verified. special authorized
price is also called an "off book price".
Ship-from-Stock and Debit.
Off Book Pricing - Special prices
quoted to a customer that are different than the "book price"
published in a pricing catalog. Off Book Pricing may be a
reward for a Design
Win, or may the result of a Meet-Competition
Quote or a Ship-from-Stock
and Debit Authorization.
Reseller - 1) A business that buys
goods from a manufacturer and resells them to customers unchanged.
2) Value Added Reseller (VAR) - a business that buys a product
from a manufacturer and adds value to it before selling it to a
retailer or consumer. Value-added features could include adding
software, configuring components into a system, etc. See also
Component Supplier, Supplier Manufacturer,
Distributor.
Ship-from-Stock and Debit - Occurs when
a distributor's margin (profit on a resale) for a product
drops below an desirable level, due to the fact that the distributor
is holding stock for a component supplier, purchased from
that supplier at a price that no longer reflects actual market price.
In order to resell product at an acceptable profit margin, the distributor
requests a post-sales (supplier selling to distributor) reduction
in cost from supplier in order that the resale of the product will
meet competitors' pricing. If approved by the supplier, upon reselling
the product, the distributor sends a claim to request confirmation
that the difference between the distributor's in-to-stock price
for the product and the resale price can be debited from what the
distributor owes to the supplier for other transactions.
See EIDX Distributor Scenario 1 - Ship-from-Stock
and Debit. See also Meet Competition Quote.
Supplier - Anyone whose business
is to supply particular services or goods. Technically, an
organization can be a supplier but not a seller if the organization
supplies services or goods but does not exchange them for money,
but for the most part, the terms supplier and seller are synonymous.
The difference is not as distinct as the difference between
buyer and user (1). See also Component Supplier,
Distributor, Manufacturer, Reseller.
Design Win - Considerations
In Design Win, the name of the game is getting a supplier's component
products designed into manufactured products in order to capture
market share. This secures a customer's business for both
the component supplier and the distributor brokering the design.
Most sources agree that between 80 and 90 percent of the parts included
in an early-stage design end up in a final product that is successfully
moved to production. If a customer designs in a component
and like the results, the component may become that customer's "standard"
for other products, which can result in a substantial and dependable
revenue stream. By the time a distributor or customer
is ready to place a volume production order for a component supplier's
hot new product, the competition for customers' business is already
ancient history.
Distributors and Design Win
Design Win not limited to distributors - component suppliers and
OEMs can work directly with each other. A component supplier
may wish to allocate expensive direct sales force resources for
very complex designs with big deal customers, but lower-cost sales
coverage can be achieved by using distributors as design brokers,
especially for commodities with short design-in cycles. Many
companies who tried disintermediation are now moving to
re-intermediation. Some component suppliers report
that 80% of their Design Wins are achieved through channel partners.
This allows the component suppliers to focus on their core competencies
in engineering and technology development.
Achieving a Design Win allows a distributor to secure customers'
business and in winning off-book pricing that allows the distributor
to sell a component with an improved profit margin.
Design Win Cycles and Process Milestones
A Design Win Cycle is the period of time for which a component
product is eligible for a Design Win, from the time the eligibility
list is published, until the time that the incentive awards expire.
The length of a Design Win Cycle can vary by commodity from weeks
to a year or more. In the Electronic Components supply chain,
the typical Design Win Cycle is intended to last for 6 months or
less. Several milestones may be set, and the component supplier
may specify the time period by which each milestone is to be achieved
in order for an incentive to be awarded. The milestones marked
with an asterisk (*) are ones where financial incentives are typically
awarded.
- Publication of eligible parts
- Customer defines their product
- Customer or agent (distributor) registers the design
- Supplier ships component product samples
- * Customer produces and ships prototype of their product
- * Customer ships initial production order
- * Customer's product achieves or exceeds initial shipment targets
- * Customer's product achieves or exceeds volume shipment targets
Roles and Responsibilities
It is important to note that the distributor's customer's product
engineer is the key decision maker in product design, not folks
in purchasing or sales. Components do not get designed into
products simply based on pricing; choosing a component for a design
can be a very complex process, and pricing is only one factor.
Very often, the supplier's component product is still in its design
phase, and the component supplier wants to achieve the design wins
as early as possible in order to maximize the sales potential.
This means that the means for early "discovery" need to
be available, while at the same time ensuring that proprietary design
information does not get into the wrong hands. The customer's
design engineer needs enough details about the component product
to be assured that it will work in his/her product.
Besides the suitability of a component part, a variety of other
factors need to be considered before a component eligible for a
Design Win gets designed into a new product. A variety of
data is needed for statistical analyses:
- Marketing analyses to predict potential sales of new product
- Data to assess supplier performance
- Previous design projects
- Historical time-to-market
- Production product quality
- On-time delivery history
- etc.
- Data for supplier comparison analyses
These analyses need to be conducted regardless of whether or not
Design Win incentives are available, but since Design Wins translate
into market share and revenue, tools that support pricing rules,
and tools for generating and publishing technical product data,
tools for debit management, opportunity tracking and design registration
tracking, and tools for parametric searches of design and sales
data are vital in competing for Design Wins. See also Technology
(Implementation) Options for Design Win.
Distributor/Component Supplier EDI Processing
- Legacy
This image is a draft being used as a resource model for building
business models and scenarios that are used between distributors
and the component suppliers of the the products the distributors
sell to end customers. The scenarios will be modeled include
Ship-from-Stock and Debit, Price
Protection, Design Win, bill backs,
prices adjustments, and several other distributor/component supplier
processes.
Click here to view a larger image.
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