Electronics Production | January 12, 2009

FusionTrade to expand European Operations in 2009

evertiq talked to Bill Masterson, General Manager and Paul Romano, COO of FusionTrade, about the company’s Anti-Counterfeit Program, as well as its European development. Expansion of their European operations is planned for 2009.

Can you tell me a little bit more about the Fusion difference?
Paul: Fusion is one of the largest, most innovative and efficient independent distributors of electronic parts and components in the world. Our annual revenue exceeds $200 million (US$) and we have facilities around the globe. With more than 80 years of combined management experience, we’ve developed market proven systems and processes to address inherent inefficiencies in the global supply chain.

The Fusion difference is twofold; people and quality. It really starts with people, because we are in a service business. We hire the best people, train them and give them the tools to be successful so that they can support our customers to the utmost of their ability.

Quality is the top priority. We operate under the view that quality – here at Fusion – is not just a word, it’s not a department, but it is everyone’s job. It’s a thread that runs through every single thing we do. Quality is crucial – we have developed a unique set of quality systems, processes and programs. That goes from our entire inspection process, our inventory and our vendor rating system. These capabilities represent the Fusion difference.

That would also be the reason why you offer a $10 Million Errors & Omissions Insurance?
Bill: Absolutely. It is an industry leading, risk avoidance policy. In summary, our customers are protected for up to $10 million in damages. This could be recall costs or cost to rework products. This policy covers these types of liabilities which is a great comfort to our customers because they are very concerned with any sub-standard part getting into their inventory.

How about counterfeit parts and components? How do you prevent counterfeits from getting out to your customers?
Paul: Counterfeits are a major problem. You really have to define and evolve your processes. You have to take a wide approach and employ a number of different methods to prevent counterfeits. It really starts with knowing the vendors that you are buying product from. Fusion applies a 5-Step Vendor Qualification process. It is a very stringent verification process to ensure that we know who we are buying from.

Additionally, we inspect everything, regardless from where it is sourced. It goes through the same level of inspection and we strive for 100% traceability. One of the things that sets us apart is Fusion’s quality database. It’s a home grown data base with 8 years of information stored and accessible in a second. So we can quickly make verifications on parts. If necessary, we perform further analysis such as X-rays or decapsulation so that we can come away with 100% knowledge that they are authentic parts.

What happens when you do find a counterfeit component?
Paul: We immediately segregate these parts and report them to the industry associations – for example, ERAI and IDEA. Fusion broadcasts the information to our customers in a market intelligence publication that comes out every 2 weeks – called the GreenSheet. Generally, when one part is counterfeited, we want everybody knowing that the potential is out there, that if they use this part it may be counterfeit.

Do you connect and report the vendor too? What happens to the vendor in your database?
Paul: We certainly connect it to the vendor, because if they let the counterfeit part through, then there is a problem with their process. If they do it once they are liable to do it again, unless they make a change. So Fusion contacts the vendor, insists on a corrective action and we restrict them in our purchasing system.

Now that the parts have gone through the verification processes, what happens next?
Paul: Once everything is approved and has been authenticated, we will ship it to our end customer. Through the authentication, receiving and shipping process, we record a lot of information. We record everything we see – and we do the same thing when we ship the products out. So we have a complete history and everything is double checked.

Did you find a counterfeit part since you use this specific process?
Bill: The process and system have worked very well. We have a 24-step-inspection-process and double check everything along the way, so that no counterfeit part will ever be shipped. It is a big investment for Fusion and obviously takes a lot of people and equipment. We do business with the largest EMS and OEM companies and will do whatever it takes to protect these relationships. We really have to take the time and make the investment to make sure that we never ship a sub-standard part.

How many employees do you have in the quality department?
Paul: We invest in people, but also in machinery and equipment. We have 22 – 25 certified employees. We invest a great deal in the infrastructure; for example the database software was built in-house. Our software development engineers are continually making enhancements to our systems. Customers that have visited and audited Fusion recognize this system as a key differentiator in the marketplace.

In what way differs the perception of the system around the globe?
Bill: One of the ways to clear up perceptions is to work closely with our customers. As discussed, we have Quality Managers from our customers come in and audit our facilities. We walk them through the Fusion inspection process. Those people are experts in what they do and have a common objective; to try to detect counterfeit products and parts. They learn from Fusion and we learn from them.

Where is your quality hub located?
Paul: We have two principal quality hubs. We have a quality hub in Wilmington, Massachusetts and one in Hong Kong. We operate these hubs exactly the same. We run the same processes, systems and procedures. That way, we can ensure the same level of quality and consistency. We have plans in 2009 to open a third quality hub in Europe – most likely in Amsterdam.

Do you have offices in just these two locations?
Paul: We have our headquarters in Andover (USA), an office in Singapore and another office in Amsterdam. These are additional to our quality hubs that we mentioned earlier. The office in Amsterdam is just over a year old. We’ve made great progress in Europe which now rivals Asia as our fastest growing market. It is essential that we can transfer products locally through that geography, so we have scheduled a European quality hub for the end of 2009. We are currently investigating the export / import law, taxes, property laws, etc.

Will the quality hub service the whole of Europe or just the European Union?
Bill: The office in Amsterdam covers all of Europe and EMEA. Europe is a key geography for Fusion given the presence of the world’s largest telecommunications and other technology companies. It is very important that we have a strong presence here to support our customers. Our biggest challenge is finding the right people to represent Fusion in the European marketplace.

How much does the economic crisis affect your day-to-day business?
Paul: It affects us in a number of ways. What tends to happen is that distributors may take risks with parts that they would not normally take. We have to be extra vigilant in our purchase of products. Companies will do most anything to keep their costs as low as possible, so you have to be very careful. On a positive note, we are seeing an increase in the availability of excess inventory which offers tremendous cost savings opportunities for our customers.

How did 2008 go for FusionTrade?
Bill: We ended our fiscal year 2008 up over 30% with revenue over $US200 million. In just 7 short years Fusion has grown to the fifth largest independent distributor of electronic components in the world. This is due to the depth in experience of our team and validates that Fusion’s formula of people, process and culture is working. The budget for 2009 calls for similar growth and we are off to a great start. There is business out there, people are still purchasing electronics. As long as this industry keeps re-inventing itself and forecasting remains an inexact science, there will always be the need for independent distributors of electronic components like Fusion.

We would like to thank you for the interview.
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