As the New Product Introduction process starts, a confusing relationship starts to unravel between your company, your manufacturer and the maker of the parts you are attempting to buy. Somewhere in that mix, a distributor steps in to provide the needed parts to your manufacturer, sales representatives from all sorts of companies start calling on you, and your technical questions are redirected to mysterious FAEs.
But who are all these companies and how do they interrelate? And before you shrug it off and don’t think any of them matter to you (they’re ‘business people stuff’) I can tell you from experience that FAEs can be the difference between getting a part to work and hitting my head against a wall for weeks. And a good sales rep and distributor will not only help you find the right parts to meet your needs, they also drive pricing. Meaning they can bring your product from out of reach due to cost to exceeding margin expectations.
The Four Main players
When manufacturing a product, there are four main players that work together to make it successful.
- Your company
- Your manufacturer
- The part’s manufacturer
- Everyone in between
This array of ‘middle-men’ is who we are going to look at in this post. Diving into what each does (FAE, Sales Rep, and Distributor) and how they work together to help you bring your product to market.
Field Application Engineers (FAE)
Often the primary contract for engineering teams, the Field Application Engineer (FAE or Apps Engineer) is the technical arm of a company’s sales and marketing team.
While some FAEs may get a commission when your company buys parts, their primary function is to help you get their parts working successfully. This may include supplying you with example code or reference designs to kick start projects or board reviews to get products shipping.
FAEs work for either the part manufacturer themselves or are employees of distributors. Often both are involved at different levels due geographic location. If you happen to be in a tech-focused city, you might be lucky enough to get a few different FAEs to work with, but sometimes it will be a single individual supporting everyone in the state.
The Sales Representatives
This is where it becomes a more complex inter-relationship. The part manufacturer you are buying parts from has a sales team, the distributor (below) has a sales team, and sometimes a third company step in to sell the parts to you. While competition is a normal course of action, it may not be the case where these three groups of sales are competing.
We will go through each of the three below, but at a high level, the sales rep’s job is to have your company buy parts. This is usually good for you, as you are trying to buy parts, but it also comes with unsolicited sales calls, spur of the moment meetings with manufacturers, and other overhead of working with sales.
Part Manufacturer Sales Rep
Every part manufacturer will have a sales team whose primary purpose is to get customers to use their company’s parts rather than another. They represent their employer in all transactions and don’t really care which channel your company buys parts as long as it’s their parts in the end.
A larger part manufacturer may have sales reps for different lines and geography, so you may end up working with multiple sales reps from a manufacturer if you have multiple parts from them.
Distributor Sales Rep
As we will see below, Distributors are the channels through which the parts flow. So the primary goal of distributor’s sales reps is to have you buy parts (really any parts) through them. If you want a certain part, or they suggest a new part, the distributor sales rep will work with the manufacturer sales rep to get the part to you at the best cost everyone can agree on.
The other difference with the distributor sales rep is they manage accounts rather than product lines. So when working with a distributor you will work with a single sales rep that has been assigned to you, even through you buy from multiple manufacturers through them.
Local Sales Rep
The world is a huge place, and engineering companies are growing in nearly every pocket. This makes it hard for part manufacturers to be everywhere needed to sell their product. Distributors are an alternative, but as they often source thousands of lines, including competitors, they may not align with a manufacturer’s best interest.
Instead, they may bring in a small, local company that will represent their business to companies in a smaller geographic area. These companies often represent multiple companies (as shown by their ‘line card’) but they are non-competing companies.
If your company isn’t located near a manufacturer’s sales site, or perhaps just too small of an account for them to spend time on, they will refer you to the local sales rep company, which in turn will bring in a distributor to get the parts to you.
To get parts from the part manufacturer to your product manufacturer, distributor companies come into play. They buy parts directly from thousands of part manufacturers, ship, and store them around the world (concentrated near major manufacturing areas), and then sell the parts to your product manufacturer.
Below are the largest worldwide distributors as of 2013 (via Global Purchasing)
- Avnet, Inc. ($25.2 billion)
- Arrow Electronics, Inc. ($20.4 billion)
- Future Electronics ($7.4 billion)
- TTI, Inc. ($1.6 billion)
- Allied Electronics, Inc. ($1.5 billion)
When working with Contract Manufacturers or smaller manufacturing companies you will be able to drive which company provides the distribution service based on who is available locally to provide the most FAE and sales support to you.
Other times the manufacturer already has an established relationship with a distributor or even a local parts warehouse in their building managed by a distributor. This limits your options for distributor options.
Because the distributor is where all the money flows, this can become the most competitive group. Sales representatives from other distributors will solicit for your business and when not handled well, it can get ugly.
But it’s also the distributor channel that you can find the most savings for your project. If you carefully designed in alternative parts, the sales group at the distributor can work with the various part manufacturers (remember they distributor for thousands) to get you the best price. They add their service fee on to but you end up with a lower cost product.
Fitting them all together
Bringing it all back together again, some of the mystery and confusion around getting parts to your manufacturer, I hope, is cleared up. Your company wants to buy parts (either specific or whichever is cheapest), get them to your manufacturer, and build a product.
Distributors are the funnel from all the parts manufacturers, sales reps will get you pricing and fight for replacements, and FAEs will show you how to get the parts to work.
While the competition between each of the companies in each group can lead to better pricing and part availability, I have also found that building good relationships with companies that I trust has brought the best results. I have my favorite distributor and FAEs, and I have my favorite silicon vendors – not just because they get the best price, but because we have built a good relationship to help each other’s companies out.
So, while the multiple parties become confusing and inter-jumbled at times, my overall advice is this: be honest and as transparent as possible to each of the companies. If you choose a different part, give them the reasons and see if they can provide a good counter. If your manufacturer uses a different distributor, be honest with the distributor you’ve been working with.
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