Component Dynamics is showing how independent distributors can guide their customers in tricky times.
It’s well-established that the Covid component crisis forced the electronics manufacturers to rethink how they managed their supply chains.
The lesser-told story, however, is how it also reoriented distributors, pushing them to reposition their linecards and services to adapt to the changing market.
Those lessons were not lost on Component Dynamics, an independent supplier focused on supplying high-quality electronic component solutions for obsolete and hard-to-find parts. But while the company might scour the globe on behalf of a customer in need of a handful of tantalum capacitors, it also provides valuable market intel, boosting those firms’ predictive capabilities.
Figure 1. (l-r) The Component Dynamics team includes US account manager Matt Whitaker (front, far left) and managing directors Marc Schwanbeck (front, second to right) and Torsten Schwanbeck (front, far right).
Component Dynamics’ customer base comes largely from industries that use legacy components, such as medical, military and aerospace, and telcos, which are constantly shifting yet have products that could last years or longer in the field. Still, as managing partner Marc Schwanbeck explains, customers come to Component Dynamics to meet a need.
“They’re looking for something that’s hard to find, or they’re having trouble with their normal channel; they’re looking for a little bit more service and support than they would otherwise get from the manufacturer or their traditional supply chain. Or they might be looking for market trend data.”
Adds managing partner Torsten Schwanbeck: “What they want to know from us is, is product out there? What is the price and will the quality we deliver meet their expectations? This is almost a given, but it is something that developed over the years that we can supply quality products they can rely on.”
“Customers often hedge their bets,” Marc says. “They’ll go with the supply-chain solution they have in place, but knowing how things can go, they’ll want to have a backup plan in place, which we’re happy to deliver when they’re ready to execute.”
To the latter point, Marc points to DDR4 memory, which, at the time of our visit, was undergoing supply volatility. When Component Dynamics saw announcements that DDR4 end-of-life notices were about to start, it leveraged its experience to develop strategies for its customers based on the particular ODM’s practices.
“It seems some people aren’t going to be receiving their deliveries. What do we do? We check in with our top customers. We ask how they’re doing with their supply on those products, and make sure that the data they’re getting from their normal supply chain is accurate. And then we provide a backup solution if something goes awry.”
Checks and Balances
Component Dynamics maintains an approved vendor list, which its software system strictly monitors. The list includes original component manufacturers, franchised distributors, and third parties, including factories willing to leverage their excess inventories. Purchases are made only from qualified vendors that have no history of quality issues and maintain on-time deliveries across multiple shipments with the company.
Figure 2. Quality control manager Emily Fabian runs the test lab.
Traceability, of course, is always a key, and an area of differentiation.
Explains Marc: “We search our network and quote our customers accordingly. If we maintain the known chain of custody back to the original manufacturer, we note that and pass it on to our customer at the time of quotation. If it’s one level removed, or from an independent distributor, we share full transparency with them at time of quotation. When we don’t maintain traceability, we’ll go the extra mile to make sure all components are of original quality. If we need to test – for automotive, aerospace, or medical end-applications, for instance – product will be inspected at an approved third-party laboratory in addition to our in-house inspection.
An Entrepreneurship 30 Years in the Making
Torsten Schwanbeck came to electronics distribution in a roundabout way. He had been working in a different capacity with a large medical OEM in Germany three decades ago. There, a boss pointed out how semiconductors were taking over consumer life.
“I came to the US, and the component side just opened up to me. There’s an industry that’s growing, that’s interesting, and I found my match. I was good about retaining information, part numbers, pricing and customer relationships that are built up with these companies.” (The medical company has been a customer ever since.)
His son Marc attended Bentley University in the Boston suburbs, graduating with a degree in economics and finance. A stint in a finance role at a Fortune 500 distributor taught him how a large wholesale electrical distributor works.
It set the foundation for what Component Dynamics is doing today, albeit on a much smaller level. “We’re serving a role the same way that any distributor would serve a customer. You’re looking for a way to solve their problems.”
Matt Whitaker, the US account manager, also went to school in Boston, majoring in economics and finance at Boston College, followed by an MBA from Boston University. After 13 years running the North American tax and oversight division for a major investment group, he had “aspirations that were more entrepreneurial.”
As Whitaker tells it, “Our paths crossed, and being involved with OEMs that have these cutting-edge products was more interesting to me than tax code.
Whitaker began in OEM sales, later expanding to relationship development and management. He also aids in expanding the company’s market opportunities.
“The [business] cycle is going to go up and down, [or] there’s going to be stability in the market, like there is now. So where can we add value? We look at other things, like excess inventory management cost savings. Can we find pricing that’s below your franchise distribution pricing? That’s been our focus in a non-shortage environment.”
While based in Portsmouth, NH, a seaport city about an hour north of Boston, Component Dynamics now maintains offices in Germany, China and Hong Kong. Having boots on the ground in key regions allows local staff to verify market intelligence and perform inspections.
When Component Dynamics started, there was no Covid. Once the pandemic occurred, however, the parts allocation environment helped spur the company’s ascent. In 10 years, the team feels it has gained a lifetime’s worth of supply-chain experience.
According to Marc, “You start to recognize when those situations occur, so you can let your customer know, ‘I see something coming.’ The purchaser might not have experience in a shortage situation, and you’re there to guide them and say, “Look at your annual demand. What does it look like if you can only get half of it? Does that stop your company in its tracks? Do you have a way to pivot? Do you want us to provide a backup plan?”
Onsite Test Labs
One advantage Component Dynamics has is onsite test labs. The AS9120B and ISO 9001-registered Portsmouth facility features, among others, a Glenbrook Technologies x-ray, Hitachi EA 1000 XRF, Leica DVM6 digital microscopes, and an AMAC vacuum packing machine. Traceability includes a full quality control report, including the moisture sensitivity level.
The 5,000 sq. ft. warehouse is climate-controlled and houses thousands of parts packaged on tape, trays and reels.
Germany and China also have warehouses and labs, albeit with slightly different equipment (Germany has a decapsulation machine, for instance), and follow the same inspection protocols.
Figure 3. The onsite warehouse helps Component Dynamics manage its customers’ excess material.
An internal quality management system follows an industry-standard sampling plan aimed at counterfeit avoidance.
Higher-lead count testing is performed offsite, and Component Dynamics has established longstanding relationships with outside test labs, which enables it to receive favorable pricing and turnaround times.
“We can do that globally; it doesn’t necessarily have to be in the United States,” says Marc Schwanbeck. “If product needs to be sent to Asia, they have facilities there, or vice versa; if something must be done in Europe, we can utilize the test lab there. And then we have our supply chain network adjust accordingly.”
Torsten adds, “The way some companies see an independent distributor is, ‘They come when there’s a problem and charge a lot of money for the product that I need.’ We want to be your partner and change this perception. This is very important to us. In times of shortages, we want to provide excellent service and product to the customer.
“But say you have overstock on product. Let me see where we can put this through our database. Do we have customers? We can take your product and offer it to one of our other customers. We see if there are any connection points. We remain active in the market in any market cycle as a full-service independent distributor for these OEMs, not doing only one thing.
“We want our customers to think of us as an extension of their internal procurement team.”
To that point, Marc ticks off several scenarios.
“In today's environment many of our clients are looking to move material out and free up shelf space and liquidity. They might move their excess material to our site, and have us market it under a formal inventory program We bring them opportunities when we match demand from other contract manufacturers and original equipment manufacturers to offer them the best recovery scenario versus pennies on the dollar.
“Or perhaps they have contracts with a distributor and want to cancel an order. The disty said, ‘No, it’s already here. You have to take the product.’ In these scenarios we say, ‘OK, you’ve got too much product. We can help you with that.’”
Regional Impact
One advantage of having facilities in three regions is the impact on local customers. Each entity is a standalone company, under common ownership, with the businesses in Germany and China operating under the name CCI Europe and CCI Asia, and Component Dynamics operating in the US.
While independent, they all utilize the same ERP system and have visibility into about 20 years’ worth of demand and market data. Access to that history is particularly useful when, as Torsten puts it, “it gets into the nitty-gritty of who’s using what part numbers, [and] who might we be able to call if we have a problem with a certain part or product category.”
Product is moved around the companies as it makes sense, to reduce the impact of tariffs, for instance.
While onboarding a recent new customer, for example, the needed stock was in the US, but for compliance reasons and ease of doing business, the customer wanted a German-speaking vendor in the same time zone. While the order originated from US offices, Component Dynamics assigned a staffer in Germany as the point of contact. “We try to make it easy for the customer to do business with us,” Marc says.
That collegial dynamic has been noted. As Whitaker says, “The exciting thing for me is being involved with this cutting-edge technology, and watching it grow and it’s a family business. I grew up in a family business, so it’s something I’m comfortable with and excited to be part of.”
Mike Buetow is president of PCEA (pcea.net); This email address is being protected from spambots. You need JavaScript enabled to view it..
