Electronic Component Bargain Hunters Beware

It seems like the biggest buzzword over the past two years has been inflation, and electronic components are not immune. Although we're currently in a state of inventory surplus among most distributors and semiconductor manufacturers, that is sure to change going into the future. High prices and significant inventory create plenty of impetus to go bargain hunting. If your goal is price reduction, where can you start to shop around? 

Search engines offer you two benefits if you are hunting for bargains on components: 

• You can see everyone's inventory and pricing information
• You can see many resellers and overseas distributors

This might all sound great to the savvy supply chain manager, but pay attention to these potential risks when sourcing outside the authorized distributor ecosystem.

What's a Few Pennies Anyways?

Most individual electronic parts are not terribly expensive, especially when you look at the common semiconductors, chip package passives, and many of the simplest integrated circuits. Some of the main value-creating components in your BOM will tend to have higher costs as they might have more specialized functionality. But most items in your BOM are common passives and semiconductors, and their costs per part tend to be low. 

If you're out hunting for bargains, you're essentially looking to save fractions of a dollar per component. This might not sound like a huge amount of money, and if you're only building a small number of prototypes, cost savings may be negligible. When those savings are aggregated over a large BOM and/or large production orders, the savings quickly become significant. 

Take a look at the search results below to see the dispersion in component prices for a single part. These results are typical of what you would see of the more popular parts on the market.

You'll notice the authorized distributors keep a pretty close range across their prices. The overseas brokers and resellers, however, don't have the same relation among their pricing.

So is there any risk in using these sources for parts? As it turns out, there is plenty of risk. We've all heard of counterfeiting, and that practice is still alive and well. Although counterfeiting is probably the best-known risk, there are additional risks to be had from using non-authorized sources. Aside form the counterfeiting issue, you might find:

• Parts could be recycled from old builds
• Shipping dates could be unpredictable or unreliable
• Shipping costs could wipe out your part cost savings
• Packages could get held up in customs
• There could be no customer support if an order is wrong
• A reseller might bait and switch with a higher MOQ and price
• Parts could arrive at a facility late, which pushes back schedules

Sometimes, if you see a deal that looks too good to be true, then that just might be the case. This is why it might be better to play it safe and stick with savings from authorized distributors only. 

Some of the points above can be mildly irritating, but they don't derail your product. Some of the points listed above are major problems that impact your company's competitiveness. Can you really risk these problems for a few pennies worth of savings per part? This is part of the risk versus reward calculus when sourcing parts.

Are You Actually Getting Positive ROI?

Looking for alternative sources takes time, and time is money. Poking around the internet for alternative sources of parts also takes a lot of patience. Supply chain managers and purchasers spend a lot of time doing this anyways; it's part of their job description. Most engineers I know don't have patience for this, they want something that helps them streamline their component shopping, and they are usually too busy building stuff anyways. 

So before you start looking for bargains that will yield a few cents per part on resistors and capacitors, do some back of the envelope math first. Take a look at the potential savings per part aggregated across your expected production run. If a small amount of savings per part equates to a significant fraction of your salary, then it's worth looking for a better deal. The same applies to Alternative part numbers; if you already have a list of alternates then you'll cut down the time requirement and get greater ROI for your efforts. 

The next time you need to look for some cost savings on electronic parts, head over to Octopart and use the advanced search and filtration features to create your component orders. You will also find suggested alternates on Octopart’s component pages and up-to-date distributor pricing data, parts inventory, and parts specifications.

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