Distributors’ credit practices crucial
By Barbara Jorgensen -- EDN, March 5, 2009
If your company is having a tough time getting credit in the current economic environment, it needn’t stop investing in design. Despite the global credit crunch, assistance may be no further away than a distributor. Credit practices in the distribution channel haven’t changed despite the current economic crisis, according to both distributors and suppliers. “As far as our distributors are concerned, we have not seen any significant changes in … managing credit or in payment terms,” says Eric Sussman, director of distribution, Americas, for connector maker Molex Inc.
Frank Flynn, president of Sager Electronics, a privately held distributor-based company, agrees: “We haven’t experienced any change in behavior within our customer base,” he says. “And we have not modified our behavior in regard to credit.” Distributors’ willingness to extend credit could become increasingly important to the design community as the economic crisis stretches out. Production orders are the first casualties of a slowdown, as OEMs cut back on manufacturing and distributors worry about inventory. However, design and prototype purchases will be the last to go. OEMs and distributors are less concerned about nonpayment on a $500 order than they are about a $50,000 purchase.
This news is good for companies that are small, design-oriented, or both. For distributors, credit decisions hinge more on a customer’s ability to pay than on the overall size of the company.
As risky as the lending environment seems, distributors’ willingness to extend credit is good for the supply chain. “Distributors don’t manufacture anything, so, if they are managing their inventory levels, they can turn their situation into a cash reserve,” Sussman says.
Whatever the economy brings, the electronics industry won’t be suffering an inventory glut similar to the one it went through earlier this decade. “We know distributors that have relationships with large OEMs that go for five to 10 years,” says Sussman. “It’s a good time to place some bets and to lock up business.”
