Converge 2011 Survey Respondents Seek Quality Assurance

Several months ago, Converge conducted its biennial customer satisfaction survey, which many blog readers probably received. If you were one of the hundreds of people who took the time to give us your valuable feedback, we cannot thank you enough. We view this survey as an opportunity not only to gauge (and improve) our performance level, but also to gain valuable insights about the electronic components industry from our global customers.

Converge customers are the innovators of today’s latest technology. They build electronics to fulfill every vertical need from telecommunications to consumer electronics to the industrial market – and beyond. And, of course, almost all our customers work with larger franchises and authorized distributors on a primary basis. But there are times when those normal supply channels become disrupted and a trusted independent distributor becomes the best option for sourcing the parts needed in time to keep production lines moving.

Alternatively, when the market slows and companies find themselves saddled with surplus inventory, they need a remarketing partner that can help them recover value while allowing them to remain focused on their core competencies. So we were not surprised to learn that the No. 1 reason that 2 out of 3 of our 2011 survey respondents say they come to Converge is for shortage solutions, followed by surplus remarketing and then market intelligence.

Keeping these results in mind, we did find it particularly telling that when asked to rank the most important service Converge offers, more than 30 percent chose “quality inspections” and nearly the same percentage chose “onsite anti-counterfeit equipment.”

When more than 60 percent of survey respondents say they come to Converge primarily for sourcing shortage materials, it is little wonder that the same percentage places the highest importance on our robust quality inspection program and our advanced on-site component testing services. Yes, our customers need parts that can be found only on the independent market, but in this day and age, they also know the risks involved in working with “any broker” to procure them. And many of them have decided that working with a distributor that doesn’t have in-depth inspection capabilities is not a chance they are willing to take.

Our survey respondents also told us that order accuracy and on-time delivery are highly important to them. We thought so. And we’re proud that more than 95 percent of them believe that Converge is meeting or surpassing their expectations when it comes to getting quality parts to them in time to meet their deadlines.

At Converge, we really love what we do – thanks, in no small part, to all of our innovative customers. Converge is proud to be your quality-driven partner for sourcing and remarketing quality electronic products in the independent market. We look forward to serving you even better in 2012.

Consignment Visibility Tool Simplifies Surplus Remarketing

Trying to remarket surplus electronic components can be a tremendous amount of work for manufacturers and EMS providers. Unless your company is equipped with market intelligence, it’s not easy to find out how much your excess inventory is really worth or who might be interested in buying it. There is also the danger of finding the wrong buyer – e.g., a broker instead of an end user – whose markups and fees can minimize your financial return. In addition, dealing with product staging and global shipping logistics can be a real hassle when those activities are not part of your company’s core mission.

Converge specializes in helping technology manufacturers solve their complicated surplus problems, while minimizing effort for the manufacturer and maximizing return potential. One way that we make the remarketing process as easy as possible for our clients is through our consignment program. Converge consignment is a turnkey solution in which the customer ships the surplus inventory to Converge, where it is inspected, sanitized, and marketed to our global network of contacts. However, the customer retains ownership of the inventory until it sells.

Converge’s proprietary online Consignment Visibility Tool (CVT) simplifies the process even further by allowing customers to view and manage all consigned inventory via one centralized hub. Some of our CVT features include:

• 24-7 transparency. Customers can log in to see their surplus inventory status at any time.

• Improved chain of communication. Our customers’ third-party partners – such as contract manufacturers – can also participate and access the CVT system, so customers can keep their entire supply chain streamlined and connected.

• Inventory balancing ability. If customers’ forecasts change and they need some of their consigned products back, they can simply look in the CVT to view what is available. Converge will ship the products back at no cost.

• Real-time financial forecasts. Consigners can see how much of their inventory sold, at what price it sold, and how much revenue to expect at the end of the month.

• Flexible reporting. Converge sends regular consignment inventory reports and payments on a monthly basis. Clients can also download information to create their own reports at any time through the CVT.

Many companies struggle to find an effective way to get excess inventory back into the supply chain. Converge can help you return that value back to your bottom line … without all the work that goes with selling your own inventory one line item at a time.

Q&A with Scot Hennessey on Supply Chain Disruptions

Shortages. For OEMs and EMS companies, few words can impart more angst and uncertainty. Electronic component shortages can virtually stop production lines, resulting in substantial loss of productivity and revenue. So what can manufacturers do to keep production (and profits) on track when the supply chain is unexpectedly disrupted? To learn more about supply chain disruptions, we discussed this topic in a Q&A with Scot Hennessey, Director of Sales for the Americas at Converge.

Q: What is the main cause of supply chain disruptions?

A: Supply chain disruptions can be caused by two different dynamics, one being demand-based and the other being supply-based. On the demand-based side, it could be due to new technology that instantly becomes popular, inaccurate forecasts, or seasonal demands. A supply-based shortage is typically due to raw material shortages or capacity restraints. Another prime cause is natural disasters, such as the flooding experienced in Thailand and the earthquake and tsunami in Japan, for example. Supply-based shortages can also be caused by geopolitical issues interfering with the normal business operations of a particular region or by parts going end-of-life. The reality is that no manufacturer can ever know with 100 percent certainty what will happen in the supply chain. It can be very unpredictable.

Q: What can manufacturers do to find the parts they need when the supply chain is disrupted?

A: The first thing most manufacturers will do when they encounter a shortage is go to an authorized distributor to try to find a solution. If that doesn’t work, companies can turn to a trusted independent distributor with market intelligence and a global reach. An exception-based partner that can offer market knowledge, such as Converge, will utilize its comprehensive database, sourcing strategy, and vast network of global partners to find material to fill the gap in a company’s supply chain.

Q: Should customers be concerned about where those parts are coming from?

A: We are. In this day and age, you can’t take anything for granted. That’s why Converge has invested in creating a comprehensive quality control program consisting of a 76-point inspection process and in-house advanced testing capabilities. Before any material is shipped to a customer, it must go through one of three Converge global hubs for screening. We also have an in-depth vendor screening and management process that tracks and continually scores our vendors.

Q: Do all independent distributors operate the same way?

A: In the past, I would have been inclined to say that practices were more similar among independents than I would today. But nowadays, the barriers to entry and the ability to meet industry-standard requirements separate most independent distributors from those that are best-in-class. Electronics manufacturers are looking for a certain level of supply chain confidence that can only be provided by distributors who are capable of making significant capital investments in engineering, equipment, infrastructure, and industry certifications such as IDEA. There are only a handful of independents in each region that can really scale to the quality requirements needed.

Q: So how would a manufacturer seek out a “best-in-class” partner in the independent space?

A: If possible, companies should be proactive and evaluate multiple exception-based partners before supply chain disruptions even occur. When doing so, I would audit facilities in person to verify there is a rigorous quality inspection process. Ideally, manufacturers should work with a firm that has certified component engineers in house so they are participating in the authenticity process. If an independent is not willing or able to make the investment in engineering resources and proper testing equipment, that should be a red flag.

Q: Do independent distributors have any insight on when a shortage is going to end?

A: No one can predict the future. The aftereffects of some supply chain disruptions linger longer than others. Sometimes parts are in shortage for months, and other times shortages resolve abruptly, leaving many manufacturers with surplus inventory after compensating for their shortage concerns by placing multiple product orders. The good news is that if manufacturers have already established a relationship with a trusted exception-based partner, that distributor will be ready to help with excess inventory challenges as soon as the market changes.

Why Working with an IDEA Member is a Great Idea

Have you ever seen an independent electronic components distributor touting its affiliation with a group called IDEA and wondered what that meant? What’s the big idea behind IDEA – and why should you care?

IDEA is the Independent Distributors of Electronics Association. This is a non-profit trade association whose mission is to enhance the quality of electronic products and services in the independent market, and to standardize the techniques and methods used to test and screen parts. Before IDEA was formed in 2006, each distributor had to rely on its own collected information and experiences while inspecting products for non conformance. Since its inception, IDEA has worked with quality leaders from many distributors to create the first reference manual of industry best practices and recommendations for inspecting and testing electronic components in the independent market.

This “standard,” Acceptability of Electronic Components Distributed in the Open Market, was updated earlier this year with the latest industry information (IDEA-STD-1010-B). STD-1010-B offers hundreds of new photos that help explain testing techniques, in addition to more than 400 example photos of acceptable versus nonconformance parts. This detailed inspection criteria, differentiated by product and package type, gives inspectors an enhanced ability to detect suspect parts from any region of the globe. In addition, the standard gives detailed provisions for managing test service providers and advanced inspection techniques. Any electronic component distributor can purchase copies online, and would be wise to do so, and follow its recommended guidelines.

Converge goes a step beyond simply following the recommended IDEA guidelines; we are also an IDEA member. Companies are accepted into membership only after meeting a long list of requirements and receiving a confirmation by the IDEA board of directors, which is comprised of a peer group. It is important to note that not every company that applies will be accepted. The standards are high.

This means that when you work with an IDEA member, you are guaranteed that the company, among other requirements:

• Maintains a demonstrated, sophisticated, and continually improving Quality Management System (QMS).

• Has incorporated IDEA-STD-1010: Acceptability of Electronic Components Distributed in the Open Market into its QMS.

• Holds at a minimum both ISO 9001 and ANSI/ESD S20.20 certifications.

• Maintains product liability insurance at a minimum of $1 million per incident and $2 million aggregate annually.

• Has at least one (1) IDEA-ICE-3000 Certified Professional Inspector at each inspection location around the world. (Converge has more than 30.)

I would hope that those are the kinds of guarantees in a distribution partner that help supply chain managers sleep better at night. I know I would – especially knowing how many independent distributors there are who are NOT IDEA members. In today’s technology industry, you constantly have to ask yourself: who can you really trust? Working only with IDEA members just might be a great idea.

You can read the full list of IDEA membership requirements on the IDEA website.

Download Free Shortage Market White Paper

Sooner or later, every technology-driven company will face an electronic components shortage. After all, the only predictable thing about the electronics supply chain is that it’s unpredictable. So how can manufacturers keep production lines moving when needed parts are not flowing through the typical distribution channels? That is one of the topics explored in the Converge white paper “Finding Components in a Shortage Market.”

This brief white paper also answers the most common questions about navigating the potential pitfalls of widespread supply chain disruption and allocation, including:

• What are the risks associated with shortages?

• What capabilities should you look for in a shortage inventory partner?

• Is there a way to plan ahead for shortage situations?

If you prefer podcasts to white papers, then listen to our informative conversation with industry expert Scot Hennessey, Converge Director of Sales for the Americas, as he offers insight on “What You Need to Know About a Shortage Market.”

Supply chain disruptions in the electronic components industry may be a reality, but that doesn’t mean they have to derail your business. Partnering with a trusted independent distributor can give your company a significant edge when it comes to procuring shortage parts and protecting your supply chain from unwelcome interruptions.

Seeing Is Believing in the Electronic Components Industry

At Converge, we like to say that seeing is believing in the electronic components industry. For more than 30 years, we have been among the leaders in quality assurance processes for independent distributors – starting with our original 76-point inspection. With each passing year, we further enhance our inspection and testing capabilities to continue to protect the supply chain from substandard components.

One of the many things that sets Converge apart is that we welcome customers who want to see our quality assurance processes in action. For customers who haven’t had the chance to visit, we have produced a short video that takes you inside one of our inspection facilities to highlight our in-depth quality inspection process. We hope you will take a few minutes to see what makes Converge such a reliable distribution resource:

When it comes to electronic components, it is imperative to verify your supplier’s inspection process and capabilities. Converge carefully screens all of its suppliers, and we urge our customers to do the same. It is the only way to guarantee the quality and peace of mind that your customers deserve.

What to Do When Parts Go End-of-Life

Every electronic product and component has a finite life cycle. In a world of rapidly changing technology, companies need to react quickly in order to stay competitive in the marketplace. For example, when a component manufacturer introduces a new chip to the market, it already has engineers working on the next generation of that technology. Once the manufacturer has perfected the new and improved technology, customers are alerted that the old chip will be going end-of-life (EOL). Typically, customers using the old chip to manufacture their products will then have a short window to decide what to do next.

When a needed component goes EOL, manufacturers using that part have a few options:

• They can switch to other previously qualified alternatives from their Approved Vendor List options.


• They can “spec” in the next generation of the chip from the manufacturer. This would require engineering support and likely carry significant financial costs and time-to-market considerations.


• Based on the product life cycle, they can estimate how many of the EOL parts will be required to continue manufacturing and servicing the product through a specified period of time. They can then order that quantity from the chip manufacturer as a last-time buy. This option places a large economic burden on the buyer, who must pay all the material costs up front and take possession of the product, which requires ongoing logistic and storage expense.


• They can come to an independent distributor, like Converge, for market intelligence. Converge has a team of expert commodity managers who can give companies visibility into the liquidity of a particular part in the independent market. What manufacturers really want to know is: “Do we need to make this last-time buy right now? Can we lessen our financial burden of carrying costs long term? Will this part be readily available in two years if we need more?” These are questions that independent distributors can help companies answer – at no cost and no obligation.

The next time your company is faced with an EOL situation, why not put an independent distributor’s market intelligence to work for you? You might be surprised to find that you and your EOL parts can be happily reunited in the “afterlife” in the independent market.

Three Ways to Recover Value from Surplus Inventory III

Part Three of Series: Demand Opportunity

Converge offers three valuable ways for manufacturers to recover value from surplus inventory. In this blog series, we have already learned about the outright buy and consignment options. Now we will take a closer look at the third option, which is taking advantage of our leverage program, also known as “demand” opportunity.

The demand opportunity option is very similar to consignment in that the seller receives the full benefits and expertise of Converge’s market intelligence, operational expertise, and extensive global network. In both arrangements, your company sends its surplus list to Converge and then we work to match the inventory to the demand that exists throughout our network. However, unlike the consignment program, Converge does not take physical possession of the inventory being sold. The products stay with their owners until Converge finds a potential buyer for them. If proposed terms and conditions of a sale are accepted, the products must come to Converge to undergo quality inspections before sales are finalized and the items are shipped to the buyers. All financial reconciliation and reporting are managed by Converge.

The demand opportunity is ideal for a company that has not previously worked with Converge. Perhaps you would like to evaluate our capabilities and performance on a smaller scale before you consider consignment? We completely understand, which is why we offer this program. Quite frequently, companies who start down this road will switch to the full consignment program as time goes by.

However, there are a few drawbacks to the demand opportunity option that companies should be aware of. Since Converge does not actually have the inventory in our possession, we rely on the accurate descriptions that the sellers provide. Products received by Converge must be in the exact condition expected; otherwise, the status of a pending sale could be compromised. The seller may also be required to provide additional company resources to facilitate the flow of information and approvals during the negotiation phase.

In addition, valuable time (and potentially, money) can be lost in a leveraged transaction, because it takes longer for the product to get from the seller to the buyer. The consignment program does not face these challenges, since Converge has the chance to inspect, sanitize, and prepare inventory for shipping before it is ever remarketed. When consignment products are sold, they can be shipped out the same day, which maximizes value for the seller.

There is no one “best” option for recovering value from surplus inventory. The one you should choose depends on your company’s specific situation. The important thing to remember is that there likely IS value in your surplus parts, even if you can’t use them. So before you scrap your surplus, give Converge a call. We will help you find a solution to recover the most value in the right amount of time.

If you missed Part One: The Outright Buy or Part Two: Consignment of this series, you can read them now.

Three Ways to Recover Value from Surplus Inventory II

Part Two of Series: Consignment

In our last post, we discussed the benefits of using an outright buy option to recover value from your surplus inventory. Now let’s take a look at the consignment option. To simplify, we will start with a comparison.

In the last decade, consignment shops have become a popular way for families to resell expensive and unused child-rearing gear that they no longer need. The family leaves the unneeded items in the consignment shop. If the store is able to sell the items, the family receives a percentage of the sale. Buyers are delighted to find valuable items for less than retail cost, and the family is pleased to recover value from the unneeded items with almost no effort.

Consignment of surplus electronic components works very much the same way. If you find yourself with surplus inventory, but you don’t think that you can maximize its value through an outright sale, you can consign the products to Converge. We receive, reconcile, inspect, and stage the products, while your company retains ownership, complete visibility, and control of each line item – down to the resale price if you choose. Then our commodity experts put their market intelligence to work for you, scanning the globe for buyers who may need the parts you have in surplus. When we find a buyer, we take care of the details. Then your company gets the majority of the proceeds, which enables you to recover a significant amount of value from items that otherwise may have been scrapped.

The consignment option is very similar to Converge’s third option for recovering value from surplus: taking advantage of our leverage program, also known as “demand” opportunity. What is the major difference between the two, and which option would work best for your company? We hope to answer those questions in Part Three of this Series: Consignment. 

If you missed Part One: The Outright Buy you can read it now.

Three Ways to Recover Value from Surplus Inventory I

Part One of Series: The Outright Buy

Every OEM and contract manufacturer has been down the same road at least once: you order the parts needed to build a specific product and then the plan unexpectedly goes off track. The forecasts change, the customer cancels, newer technology is introduced…whatever the reason, you are suddenly left with surplus inventory that you can no longer utilize. Now it becomes a liability on your books. The challenge is, what is the best way to handle the situation?

You can try to return surplus inventory to the manufacturer or franchise distributor, and you will likely end up paying a restocking fee if you are able to return it at all. If that doesn’t work, you can check to see if the materials can be used by another internal project. If those two options don’t pan out, some companies will resign themselves to taking a loss on the inventory and go into scrap mode.

OR…you could partner with an independent distributor like Converge to consider other possibilities. Converge offers three different ways for companies to recover value from surplus inventory: outright buy, consignment, and our leverage model, also known as “demand” opportunity. In this blog series, we will explain and differentiate these options, starting with the outright buy.

In an outright buy, a manufacturer sends Converge its surplus inventory list. Converge’s commodity managers review the list, determine what the products are worth on the current market, and then may make an offer to buy the inventory outright. This is the perfect option for a company that wants to unload the surplus immediately. Keep in mind that if you are an OEM that owns surplus sitting in a contract manufacturer’s warehouse, you are probably paying storage costs for that inventory.

In addition, there is the potential for depreciating technology due to price erosion and product freshness factors. So the longer the inventory sits, the more money you stand to lose. With the outright buy option, Converge takes the inventory out of your hands and off your books, and you are free to focus on other matters.

One drawback of the outright buy is that your product mix may be moderately liquid, which could negatively affect your buyout amount. If your independent distribution partner is unsure about the return on investment due to market conditions, product condition, date code, or other risk factors, the buyout offer will be lower than if the risk were being shared by both parties. If this is the case, risk-sharing options such as consignment or demand opportunity might be a better choice for recovering value from your surplus. We will explore the topics of consignment in part two and demand opportunity in part three of this series.