Independent resellers band together

Barbara Jorgensen -- Electronic Business, 8/1/2003

They've been called brokers; the gray market; a necessary evil; and much, much worse. But now you can call them IDEA.

The formation of the Independent Distributors of Electronics Association (IDEA), Princeton Junction, NJ, is the culmination of a year-long effort to establish an industry association serving the needs of independent, or nonfranchised, distributors. IDEA will also serve as an advocate for this channel, which over the years, members say, has been tainted by the misdeeds of a few.

"Our charter is to represent quality-oriented independent distributors, speak for the industry with a cohesive voice, and educate our members and the public on what independent distribution is all about," says Dan DiMase, IDEA board member and president of SemiXchange Inc., a Warwick, RI-based distributor. "We want to address problems plaguing the industry and be proactive in presenting solutions to these problems."

Such problems include the resale of counterfeit and substandard parts and the behavior of companies that don't live up to their obligations. Independent distributors buy components from factories, OEMs, contract manufacturers, other distributors, auction houses and a variety of other sources. Because independent distributors are not authorized—franchised—by component suppliers to resell their products, parts bought and sold by independents do not receive "pass-on" factory guarantees. Components in the open market can also have expired date codes or bent leads and electrostatic damage caused by poor handling. But many independents don't physically handle the components and resell them in factory-sealed boxes, have stringent quality-control procedures and take back or replace components their customers aren't satisfied with—in other words, they are not good business partners.

But that's not always the case. "Independent distribution is what you'd call a freelance environment. There are no rules or regulations, no code of ethics—it's uncharted water," says Homey Shorooghi, president of Advanced MP Technology, San Clemente, CA. IDEA is developing such a code and requires members to be at least a year old and have ISO certification and no outstanding problems with the Electronics Resellers Association, an organization that flags deadbeat companies. IDEA has also formed a committee to address the problem of counterfeit and substandard components and a group to help weed out fly-by-night companies that advertise goods for sale, accept orders and payment and disappear without delivering the products. "Fraudulent companies can quickly jump into the game and then disappear to set up shop under another name," says DiMase. That practice is largely what gave independent distribution a bad name. Because brokers buy from one another, association members hope the IDEA moniker becomes the equivalent of a seal of approval.

"We want to set high standards for our members and establish that if you have an IDEA logo on your Web site, it means that you are a straight shooter in an industry that hasn't always been that way," says Schuyler Glidden, president of SG Industries Inc., a Beverly, MA-based distributor. "I'm tired of wiring money overseas and not having the parts show up." IDEA accepts and currently has international members.

IDEA (www.idofea.org) is working with government agencies for guidance on how to address the counterfeit parts issue. It's also trying to figure out ways to control the resale of products that were, for example, destined for the scrap heap.