Protecting Your Supply Chain
Eight things you should do when your PCB vendor has been acquired.
YOUR PRINTED CIRCUIT board supplier has been acquired. Will this acquisition benefit you as a board buyer? Or will it lead to higher prices and a reduced level of service?
The reality is that your relationship with the supplier and the level of service will likely change. Here are steps you can take to protect your PCB supply chain.
- Don’t wait to be visited by the new supplier team, especially if the acquired firm was a big part of your PCB spend. Request a meeting sooner rather than later. Pay attention to how receptive the new supplier is to the meeting and be ready to ask as many questions as you need to get the lay of the land.
- Ascertain where your orders stand with the larger entity. What often happens when a larger supplier swallows a smaller competitor that builds a similar product is that customers immediately become smaller fish in a bigger pond. What was 5% before may now be only 0.5%. Ask the new entity what percentage your sales represent for them. The larger the percentage of business you have with the acquired vendor, the better.
- Will you still be considered a target account for the larger vendor? Will the potential for superior PCB buying power of the larger entity offset your company’s (potentially) reduced significance? Be prepared that you will no longer have as much leverage on pricing and service. In fact, the newly enlarged supplier may even raise prices to politely shed customers no longer seen as desirable.
- Plan on personnel changes after a merger. Ask how the new vendor intends to ensure a smooth customer service transition. The support staff you’ve worked with for years may be laid off to avoid duplication of costly services. The supplier’s sales representatives may now operate under a different incentive structure that makes their relationship with you less important, or be let go because the acquiring company already has a sales force in place.
- Review any written agreements with the supplier and those with your customers. Do they contain a clause about changing possible subcontractors? Once a broker is acquired, the new company is likely to try to move your business to PCB manufacturing locations that support its business operations – not necessarily to those best for your orders. Because of your customers’ specific requirements, let the new vendor know which orders can’t be moved and get it in writing that they will comply.
- Update and review whether the new entity can maintain the nondisclosure, hold-harmless, and service-level agreements you require. Are payment terms the same? Delivery times? What about the RMA process? Does the new entity have a different warranty policy? Who oversees quality? And be sure to give the new supplier a copy of your most recent PCB fabrication spec. (If you don’t have a fab spec, make it a priority to create one.)
- Develop a Plan B, especially if both vendors involved in the acquisition had been supplying PCBs to your company. Instead of two companies competing for your orders, you now have only one vendor that may not be as motivated to remain price-sensitive.
- Reach out to alternative PCB vendors for quotes, as they may be eager to give you price breaks and offer you a higher level of service, regardless of your annual PCB buy. At the very least, having an alternate source for your PCBs gives you more leverage with your new, larger vendor.
If the acquisition experience is not a good one for your company, cut the supplier loose by slowly migrating business elsewhere. Seek out other manufacturers. If the supplier is a broker, you can bypass the middleman altogether and deal directly with offshore manufacturers. That is now easier than ever.
Greg Papandrew has more than 25 years’ experience selling PCBs directly for various fabricators and as founder of a leading distributor. He is cofounder of DirectPCB and can be reached at email@example.com.