Component alternatives exist, but is anybody supplying them? Better yet, does anyone know about them?

When many distributors reach an agreement to be a franchise distributor of a name brand product line, the company agrees not to carry off-brands or competing brands in many cases. But if design engineers are given some flexibility, they could make significant cost-saving decisions by integrating generic or house brand components — especially in non-mission critical areas.

“As we sit around and look at an economy that’s in the toilet, we think that design engineers at this point really have more onus on them to design component cost into their final design," says Greg Harris, vice president of sales and marketing of Jameco Electronics, an electronic component distribution company that has been in business for 35 years. “Every piece of the design will drive up the price. The higher the price in a down economy, the tougher it is to sell. The more cost margin — if you can do cost reduction by redesigning and replacing expensive brand name components with less well known brands, you can save a lot of money.”

Saving money, in part, is about the quantity a design engineer purchases from the supplier, the commitments he/she makes as well as the deals that can be negotiated. 

“You don’t read about the opportunity to save money by buying off-brand, house brand or lesser known brand names,” says Harris. “You don’t hear about taking advantage of inventory.”       

When the stock market crashed, companies across the world stepped on the brakes and did serious inventory dumping, according to Harris. Companies wanted to clean their balance sheets and pull back on expenses — most overreacted, because they were (or thought they were) responding too late.

“We started buying when people were trying to dump inventory,” says Harris. “In many cases you’re buying for pennies on the dollar and in many cases we’ll buy the entire inventory, much of which isn’t useful, just to get our hands on a few part numbers that are a part of the lot.”

Jameco’s approach is simple: The company will sell you the name brand stuff, but they also sell off-brand, house brand or lesser known brand names and surplus inventory to reduce the customer’s cost.

Reign Costs In

If a design engineer finds a way to take 30 cents out of a design, he/she will be recognized and rewarded in this day in age.

In many cases of new component development, the plan is to obsolete a current product and replace it with the new design, according to Harris. There is a plan that is designed to ramp down current sales while ramping up the new product, but this transition requires that the product keeps selling according to plan.

“I think a lot of companies all of a sudden realized that they were supposed to be running out of inventory, and they weren’t running out of inventory,” says Harris. “In order to introduce their new product and stay current, they had to get rid of that inventory. We saw a lot of fire sales and balance sheet adjustment. There is a theory that says, ‘If you’re going to take a hit, take a big hit; take it once and get it over with."

Trust Factor

“Many design engineers would never buy surplus inventory,” says Harris. “They worry. Is that new? Yes. Is it fresh? Yes, generally. Is it the latest and greatest? No, but it’s available for a fraction of the price.”

The importance lies in offering an eclectic selection of products — there are product categories where the brand is just not relevant. Mission critical components, such as an Intel processor, is an area less-dictated by cost control. Less important components, such as power supplies, cabling, wiring, solder and others create an opportunity for large savings — away from mission critical components.

Harris also stresses the importance for a design engineer to trust the supplier. “You want to buy from a quality supplier,” he says. “You want to make sure that you understand who manufactured the house or lesser-known brand. You want to make sure that there are appropriate return policies, warranties and guarantees in order to take some of the risk out.”