© General | April 03, 2012

Debate: 'Dodgy spot-suppliers hurt us all'

Niclas Larsson of Emporium Partners responds to an opinion piece by Olle Hultberg posted on Friday. He presents his thoughts on the market and the nature of spot suppliers' work.
(Note: This article has been translated from Swedish).

As a partner and Scandinavian sales manager in one of the leading so-called spot-suppliers, Emporium Partners, I feel compelled to answer the arguments Olle Hultberg wrote earlier on this page.

In a business environment where just-in-time deliveries, cash flow management and lean production are key words for most people in our industry, component allocations are more common and component manufacturers are living under the same guiding principles as part of a difficult market and ownership requirements. To then delete the word allocation, as Olle hopes, from the industry's vocabulary by focusing on the design is, I think, wishful thinking.

About the Author: Niclas Larsson is co-owner of Emporium Partners, which has 50 employees, 6 offices and 3 warehouses. He has a master's degree in Economics and has worked in global component distribution for over 10 years.
© Emporium Partners

Very few players keep a large number of products in stock, because of the factors mentioned above. Ideally you hold no stocks at all. The competition is too tough to play with expensive and restrictive safety margins. To then claim that that spot-suppliers are buying up components for purely speculative purposes is strange. That argument is an old myth and completely untrue.

Unfortunately there are people in this industry that believe this illusion and it gives independent distributors a bad reputation. As spot providers we live with tough competition and obviously can not tie up capital that way. It's an unsustainable business model.

That we blackmail through our sales is also a strange argument. We are a vital part of today's supply chain. The smaller the error margins market participants play with, the more important is our role as problem solvers.

Emporium Partners, like all other players in the industry, focuses on giving our customers added value that increases both our clients and our own profitability, while maintaining a positive cash flow. It's the same difficult balancing act that most companies struggle with. Our added value in this industry is mainly to move components from where they are to where they are needed, at the right time. Both in high times and recessions.
>>Dodgy spot-suppliers hurt us all but they did not create the problem<<

In some allocation situations, this becomes more important and demand rises, leading to higher prices. The price structure has very little, if anything, to do with speculation. We also help our clients avoid tying up capital in stock through our advanced logistics services - a type of service that has garnered much interest in the current situation.

Something I believe both I and Mr Hultberg agree on is that extreme short-sightedness is detrimental to quality and creates unhealthy behavior. The focus for most companies is on price and profitability. If the solution is cost effective, it is interesting. Quality is taken for granted, blindly, and is never negotiable. Although, the problem of fake components originated from this same phenomenon. Customers want more for less. Dodgy spot-suppliers hurt us all but they did not create the problem.

Focusing on value added is the solution that I always read and is what Olle also argues for in his focus on design and delivery precision. I hope it turns out well and we as a spot-supplier can continue to assist in this endeavor.

Niclas Larson at Emporium Partners
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