Choppy market conditions set to continue for UK distributors

"The past twelve months can best be described as patchy," suggests Adam Fletcher, chairman of the Electronic Components Supply Network, "and the UK is not immune to current weaknesses in the Euro area and to instability in global markets. Despite these headwinds, we are seeing significant variations in the performance of distributors." Fletcher highlights the success of local or specialist distributors focused on vertical markets, many of whom have experienced a significant increase in design activity. L2Tek, a specialist distributor of electronics components and technology for communications and imaging markets, has seen demand for its high speed interface products surge as the market moves towards quicker and more reliable data transmission. "Increasing data rates are required by customers seeking ultra high definition television (4K) transport solutions, with broadcasters now needing to move UHDT video along at 12Gbyte/s rather than 3Gbyte/s. There has also been increasing interest in embedded modules to deliver greater connectivity for cloud based and M2M solutions," explains Tim McBride, director at L2Tek. "We work closely with our customers and suppliers to provide expert and cost effective technical support, enabling rapid product development – something that broadline distributors struggle to provide," he adds. David Zelkha, managing director at Luso Electronics, agrees. "Rather than select traditional broadline distributors to buy components, local manufacturers serving niche markets are increasingly choosing smaller distributors to do business with. We can deliver a range of value-added services that can closely integrate into its operations, while offering easier inventory management and procurement." Despite tough market conditions, independent components distributor Anglia Components is outperforming the market, according to managing director, Steve Rawlins. "Innovation and our strategy of maintaining comparatively high levels of stock is central to our relationships with our customers, and allows us to remain master of our own destiny, even in unfavourable market conditions," he suggests. "As a privately owned business we're driven by our customers rather than shareholders. We have the flexibility to buy off the back of market conditions and maintain our stock levels even in periods of comparatively low demand. Our stock is held in the UK allowing us to continue to support customers promptly when they see demand in their businesses." According to Rawlins, "With demand weak there are high levels of inventory in the supply chain. I think the current choppy market conditions will continue into the first half of 2015 and it is a brave man who calls the market for the second half of next year, though it is likely that we will see weak growth for 2015 as a whole." According to Rawlins the same market conditions can be seen in many of its customers' end markets and they are finding it difficult to forecast their own long term demand. "Smart customers are aware of the fact that there is overcapacity in the market. They know that the supply chain has inventory available on relatively short lead-times and are buying to short windows and shopping around to help compensate for their own lack of forward visibility," he explains. That trend is placing an increased transactional burden on distributors who have to take on a disproportionate amount of risk when it comes to managing inventory and there are growing calls for a more balanced and transparent relationship between suppliers, distributors and end customers.