Buying gray could cost you a lot of green

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As a former credit manager for an Electronics Commodity Broker it is key to keep your supplier and customer relationships transparent at all times. It is very easy for the salesman or buyer to get caught up in the sale or buy and forget about the protection of a business' number one asset, the cash. Often the buyer and salesperson are put in a position to make these determinations and this if far more dangerous as often they have their personal interests at heart and not the organizational goals first as they are commission driven. This is not their role but the credit departments role. It is more important now to have credit professionals who understand the ins and outs of the global environment. This is a dynamic arena. It often frustrated me to see companies fail to give the same type of scrutiny to a supplier''s credit, often there was no collaboration between the buyer and the credit professional determining the quality of the product or creditworthiness of a supplier from the purchasing standpoint. If you are scrutinizing your customer to get paid the same emphasis should be put on the supplier relationship. If you are working in a global environment it should not be your purchaser''s responsibility to find out if the supplier''s reputation is viable. In this saturated Chinese market a company simply cannot afford to leave the decision of managing cash or product solely with a buyer or salesrep. It is important to have a valuable credit department on hand. The credit department is the eyes and ears of the industry, they listen to every aspect whether or not it is pertinent to the eminent sale or buy, this is the very information which often holds more then the immediate sale. If you use your credit department wisely you will learn things which are easily missed, a lot of companies fail to see a sale is only completed when the last dollar is in the bank. Sales people and buyers are driven by commission, credit professionals are not and they are very conservative people who manage information and siphon it to the people who need it most, it gives causation to why it is even more important to listen to the recommendations and information coming from your credit professional. As a credit professional I would rather like to be proactive and have done the due diligence of knowing deeply the supplier and customer position within the industry prior to the sale so the reactive piece of insurance is just a cushion and not a lifesaver.

Most buyers avoid the smaller brokers and stick to an AVL of the biggest brokers. the problem is that counterfeit is so good these days, the big brokers have no way of stopping these parts either. Insurance is great, but when you have a looming shortage, you can't be picky. The buyers at the catalog and franchised distributors will buy from brokers too, on occassion, and they will have no ability to screen bogus parts. Mr. Bean is right: who holds the liability for injuries when counterfeit hurts someone?

DGM, The article doesn't protect Newark MS. The article informs purchasing folks of dangers in taking risk through purchasing from lower tier suppliers. It gives a recommendation for protecting your company profitability, and customer trust. Buyer beware...

Wow, that is amazing. Is Newark really that scared about competition from the Gray Market that it now has to publicly bash us? What he fails to mention is that Newark Sales Reps and most other Franchises have the green light to broker parts.

While bogus parts present a "financial loss" variable in the immediate and future equation, there is another factor that was not mentioned. What of the possibilites of real casualties either in property loss or loss of life in mission-critical systems. This opens up an entire new can of worms does it not?

It is easier said than done. For a small company like us, we often have no choice but to buy from the Gray market. The original part manufacturers' capacity are often fully booked by the big MNCs weeks or months in advance. Small players like us will have to wait for the distributor to accummulate the orders before placing the order with the manufacturer. And in this industry, lead time is the key.

interesting point

This article is quite right in the view that not buying from franchise can be dangerous to your line. You should only buy from known, well established 10+ years companies that have a strong financial backing. Also make sure that your Grey market supplier carries "errors and omissions" insurance. It is expensive and will protect your company. These policies are quite expensive and seperate the suppliers quite nicely into the ''''haves and have nots". If your broker does not have full liability insurance on the parts he sells - do not place the order. Like any supplier do the research, talk to others, and get references that are current. The days of buying from some guy out of the back of his garage on his cell phone are long gone.

Bogus parts burn source manufacturers too. We have had customers return "defective" parts that they insisted they had purchased from our distributor only to find the parts had our markings on the top of the package but a mold mark symbol of another company molded into the bottom of the package.