Verical Communications

Bulk Search Tool Matches Open Orders with Available Supply for Multiple Shortages

• DemandMatch™ automates workflow to shrink sourcing time from hours or days  to minutes
• Online catalog eliminates the spreadsheets, phone calls and web searches used by buyers spending 40 percent of their time sourcing 1 percent of their parts purchases
• Industry-first sourcing feature only available on Verical

SAN FRANCISCO — February 3, 2010 — Verical, Inc., the online outlet for electronic components, today announced DemandMatch™, the industry’s only bulk search tool that matches open requirements with available supply automatically. With DemandMatch, open requirements generated by planning systems are matched with available supply at www.verical.com, segmented, and returned via email to the buyers responsible for purchasing the components. Available now, DemandMatch dramatically reduces the time it takes buyers to procure parts “on demand,” slashing sourcing time from hours or days to minutes.

“Parts shortages are weekly, hair-on-fire problems for EMS companies,” said Chris Cookson, vice president of operations for Verical. “When a production line goes down, it can cost hundreds of thousands of dollars per day in lost revenue and market share. Worse still, if orders are perishable then each lost sale impacts the bottom line at the gross margin level. EMS companies spend anywhere from one to ten percent of their total material spend filling shortages by sourcing from the secondary market. Buyers typically spend over 40 percent of their time sourcing the 1 percent of the parts they purchase to cover shortages. DemandMatch puts out the fire, saving companies time and money while keeping production lines up and running.”

DemandMatch automates the workflow for sourcing time-critical components that can’t be obtained through the primary channel. On a weekly basis, buyers armed with spreadsheets and telephones spend countless hours calling distributors and brokers, hunting down parts needed to fill gaps between planned and actual parts requirements. Despite the huge outlay of time, these “on demand” requirements make up only one to two percent of the total parts purchased. DemandMatch compresses sourcing time to zero by processing open requirements sent automatically from buyers’ enterprise planning systems and notifying buyers of matches via email within minutes.

DemandMatch in Detail

DemandMatch delivers in-stock supply information to buyers with extremely short deadlines, allowing them to fill their time-critical needs for production shortages, new product introduction builds, and repair orders. Groups of factories can be served simultaneously. DemandMatch emails buyers only when exact matches or drop-in replacement upgrades are available for immediate purchase and delivery. Buyers need only click on hyperlinks embedded in the email to view matches.

The DemandMatch process begins when Verical receives an electronic requirements report from the planning systems of participating OEM and EMS companies. These lists may be submitted in any electronic format, including industry-standard protocols such as RosettaNet, web services, XML, cXML, xCBL or EDI.  Alternatively, buyers may upload lists directly to the Verical website by registering and then clicking on the “Buyer’s Workbench” tab.

After the requirements list is submitted to Verical, DemandMatch automatically generates match lists and segments them by buyer. The individualized match lists are subsequently emailed to each buyer. Each email includes hyperlinks that navigate users to matches in the Verical outlet. There, buyers review the matches against their open requirements, select the parts they wish to buy and check out.

Cookson, who held the position of VP, supply chain solutions at Solectron prior to joining Verical, said, “DemandMatch delivers component solutions to buyers in advance of the Monday morning shortage meeting, provided that their planning systems are calibrated to send information to Verical after running over the weekend. If our automated tool can enable buyers to get parts in the air two days earlier than through a manual sourcing process, we’ve reduced their risk considerably. Their lines stay up, penalties are avoided, and they can deliver their finished products on time.”

For more information on Verical, Inc., please visit https://www.verical.com. For additional perspectives, visit and subscribe to the Verical blog at http://www.verical.com/comm/category/blog, and follow Verical on Twitter at @Verical.

Additional Resources

Verical Website: https://www.verical.com

Company Overview: https://www.verical.com/about/

Newsroom: http://www.verical.com/comm/category/news

Blog: “The Electronic Components Source” http://www.verical.com/comm/category/blog

Verical on Twitter: http://www.twitter.com/Verical

Verical on Facebook: http://www.facebook.com/Verical

Industry Insights: presentations, articles, websites; https://www.verical.com/about/resources/industry.html

Counterfeit White Paper: “The Real Solution to Fake Parts: Securing Supply Chains through Data Transparency and Better Market Design”; http://bit.ly/counterfeitwhitepaper

About Verical

Verical is the creator of the Verical marketplace, an online outlet for electronic components that provides buyers traceable, branded goods at discount prices. Top manufacturers and franchised distributors publish slow-moving inventory to Verical to optimize prices and yields anonymously. Founded in 2007, Verical is a San Francisco-based start-up backed by Valhalla Partners. The company is experiencing rapid growth with over 27,000 parts available today in the Verical outlet at www.verical.com.

###

DemandMatch is a registered trademark of Verical. All other brand names and product names are trademarks or registered trademarks of their respective companies.

Tags: electronic components, distribution, electronic component catalog, electronic components outlet, excess inventory, online catalog, shortage purchasing, shortages, supply chain integrity, supply chain security, DemandMatch

Media Contact:

Susan D’Elia, media relations for Verical

TECHMarket Communications

650.344.1260

Susan@TECHMarket.com

By Josef Ruef

It turns out that purchasing agents and other corporate buyers are no more forgiving than their consumer-oriented counterparts when it comes to slow, bulky ecommerce sites. And that frustration is playing a large role in the trend to make the online shopping experience faster, more efficient, and more convenient for B2B buyers.

In the electronic components market, major players are revamping their B2B sites with B2C perspectives. Avnet has gone public with its adoption of best practices from consumer sites like Amazon.com. In doing so, company officials admitted that on its previous ecommerce site, “many of our customers had to either be really patient or simply stubborn to make a successful purchase.”

Avnet’s investments in website upgrades have favorably influenced its bottom line. Since refreshing its B2B site, Avnet has seen a 75 percent annual increase in ecommerce revenue and a 50 percent annual increase in site visitors. Similarly, distributors like Premier Farnell, TTI, RS, and Digi-Key have seen their web sales soar. In fact, Digi-Key reports that 66 percent of its sales were received over the web.

Companies that lead the advances in online commerce do so by optimizing their websites to serve a specific buying audience. In electronic components, that audience is the array of buyers with time-critical requirements that use the web heavily to make purchases. For example, production buyers turn to the web when demand rises in the short term and exceeds planned supply. When this happens, volume buyers immediately become shortage buyers with time critical needs.

Historically, manufacturers and distributors have focused their efforts on forecasted distribution which has meant they have not advanced their online capabilities to optimally meet the demands of buyers with time critical requirements. But that’s starting to change. With the increased emphasis on lean manufacturing and persistent volatility in demand, buyers are facing an ever greater need for “on demand” access to supply.

Now more than ever, buyers want their online shopping experiences at work to be like the B2C experiences they have after hours, at sites like Amazon.com, Priceline.com, and the like. They expect it, and companies like Verical are working to bridge the gap between the online shopping experiences in B2B and B2C ecommerce.

For instance, Verical’s recently-announced Bid Button gives shoppers a way to save extra money by submitting fixed bids on clearance items at prices lower than those published on Verical’s catalog listings. The one-click icon automates price negotiations between buyers and sellers, providing fast, hassle-free negotiations and immediate, definitive results. Buyers get instant confirmation of a bid’s acceptance or rejection.

As end-user demand continues to grow, companies will continue refining their B2B sites to reduce the number of screens, screen refreshes, and steps needed to complete a transaction. By making their sites flatter and faster, these companies reduce abandonment and increase conversion rates. Going forward, buyers can expect more B2C-influenced features like the Bid Button and a better overall B2B online shopping experience.

Verical Debuts One-click Buying Capability for Electronic Components Outlet

Buyers, Sellers Gain Fast, Hassle-Free Price Negotiations and Immediate, Definitive Results

• One-click icon automates price negotiations between buyers and sellers
• Bid Button eliminates protracted haggling by phone or email, letting buyers know in seconds whether their bids are accepted or rejected
• Industry-first feature only available on Verical

SAN FRANCISCO — January 20, 2010 — Verical, Inc., the online outlet for electronic components, today announced the Bid Button, a one-click icon found on listings of clearance inventory at www.verical.com available from top manufacturers and franchised distributors of electronic components. Clicking the Bid Button (available on selected listings only) enables bargain shoppers to get great deals when bids exceed specially discounted and unpublished reserve prices set by suppliers. Winning bids are accepted instantaneously. Available now, the Bid Button automates price negotiations between buyers and sellers, providing fast, hassle-free negotiations and immediate, definitive results.

A first for the electronics industry, the Bid Button streamlines the typically drawn out, inefficient process of haggling. The Bid Button lets buyers submit bids on select components at below-published prices — and get immediate confirmation of a bid’s acceptance or rejection — as part of the Verical checkout process. Meanwhile, sellers can set both published prices and secret reserve prices at the time they list their components, enabling automated negotiations with bargain-hunting buyers.

“The Bid Button lets buyers and sellers quickly and easily negotiate component prices without haggling,” said co-founder Josef Ruef, president and CEO at Verical. “Nobody wants to spend hours watching bids on auction sites or haggling over the phone or by email. Buyers don’t want to deal with aggressive salespeople. And sellers want an easy-to-use mechanism that optimizes yields on slow-moving inventory assets, without adding new layers of cost or complexity to their operations. With the Bid Button, buyers offer prices they are willing to pay, and sellers set secret prices they are willing to accept that are lower than published prices on the listing. We’ve managed to conveniently generate the best prices for buyers and sellers alike.”

Bid Button in Action

A Bid Button icon appears next to any component that a seller is willing to sell at a below-list price. To date, approximately five percent of components in the Verical outlet have Bid Buttons appearing next to them. That percentage will increase over time. Clicking the Bid Button initiates the following bidding process:

• The buyer fills out shipping and billing information, which is submitted along with the below-list bid, e.g., an $0.80 bid for a component listed at $1.00.
• If the seller accepts the bid, the buyer is immediately notified with a message confirming both acceptance and order information.
• If the seller rejects the bid, the buyer is immediately notified with a message confirming rejection and inviting a second, higher bid.

Ruef added, “A buyer might balk at paying a dollar for a component, but be perfectly willing to spend ninety cents. Meanwhile, a seller might be willing to sell that component for eighty cents, but doesn’t want to publish that price publicly for fear of eroding prices in primary channels. The Bid Button gives both parties a quick and easy way to negotiate a transaction that isn’t advertised but makes them both happy.”

For more information on Verical, Inc., please visit https://www.verical.com. For additional perspectives, visit and subscribe to the Verical blog at http://blog.verical.com/ and follow Verical on Twitter at @Verical.

Additional Resources

Verical Website: https://www.verical.com

Company Overview: https://www.verical.com/about/

Newsroom: https://www.verical.com/about/resources/newsroom.html

Blog: “The Electronic Components Source” http://blog.verical.com/

Verical on Twitter: http://www.twitter.com/Verical

Verical on Facebook: http://www.facebook.com/Verical

Industry Insights: presentations, articles, websites; https://www.verical.com/about/resources/industry.html

Counterfeit White Paper: “The Real Solution to Fake Parts: Securing Supply Chains through Data Transparency and Better Market Design”; http://bit.ly/counterfeitwhitepaper

About Verical

Verical is the creator of the Verical marketplace, an online outlet for electronic components that provides buyers traceable, branded goods at discount prices. Verical’s suppliers are top manufacturers and franchised distributors who use Verical’s self-service marketing platform to optimize yields on slow-moving inventory. Founded in 2007, Verical is a San Francisco-based start up backed by Valhalla Partners. The company is experiencing rapid growth with over 27,000 parts available today in the Verical outlet at www.verical.com.

All brand names and product names are trademarks or registered trademarks of their respective companies.

Tags: electronic components, distribution, electronic component catalog, electronic components outlet, excess inventory, online catalog, shortage purchasing, shortages, supply chain integrity, supply chain security, Bid Button

Media Contact:
Susan D’Elia, media relations for Verical
TECHMarket Communications
650.344.1260
Susan@TECHMarket.com

So the results are in, but who are the “real” winners and losers? I propose we change the way we measure success. We need to look deeply across the end-to-end supply chain to determine which supply chain is the strongest performer, rather than look at single entities. Sure, the retailers’ results indicate who is performing best in that sector, but how are their respective supply chains performing to allow them to deliver those results?

Black Friday 2009 results ranged from disappointing to slightly higher than last year for traditional retailers, depending to whom you listen. In contrast, on-line sales soared on both Black Friday and Cyber Monday. Over the holiday, weekend consumers spent $5.2 billion on-line (Source: Retail Decisions), and there were a whopping 4.3 million shoppers per minute throughout the day in North America (Source: Akamai). Cyber Monday beat all forecasts with a 13.7 percent increase in total sales, and buyers bought 30 percent more items per transaction than in 2008 (Source: Coremetrics). On-line buyers also spent on average $50 more at $180 per transaction, compared to a decrease of $30 to $343 for retail store sales (Source: The National Retail Federation).

The perceived on-line winners were Amazon.com, Wal-Mart and Target. The Kindle e-reader was “the best selling item across all of Amazon.com’s product categories on Monday,” according to spokesman Craig Bermen. Consumer electronics were far and away the biggest winners across product categories; the most popular items being flat screen TVs, cameras and GPS navigation devices.

So who are the “real” winners and losers? Well, the bottom line is that we won’t really know until these companies report their earnings.

Despite the hype associated with the number of people lining up outside of Best Buy stores, weekend revenue estimates, website traffic and transactions, average order sizes, etc., we just are not seeing the whole picture. Now don’t get me wrong; all of the data we have at our fingertips is fantastic, but it doesn’t mean that much on its own. In fact, I’d propose that retail results, while being a terrific indicator of the economy, are far too narrow a segment to look at in determining success for the consumer electronics industry. To determine real success, we need to look right across the electronics supply chain — from the component manufacturers to the EMS companies, OEMS, distributors and retailers to determine how well each party worked together and, in total, how the end-to-end supply chain performed.

According to Goldman Sachs Analyst Adrianne Shapira, Wal-Mart’s average prices were 3.5 percent below Amazon.com, 4.2 percent below Target and even lower (in the double digits) compared to Kmart and Toys “R” Us. Could it be that the efficiencies that Wal-Mart and Amazon.com are able to generate through their purchasing leverage and supply chain are so significant that they can afford to discount prices so deeply? Or, are these deep discounts used to drive traffic, or is it a combination of both? Given the narrow margins retailers operate, these price differentials are pretty significant and warrant a closer look.

I would argue though that the winners and losers in the consumer electronics industry will be defined by how efficiently they operate their supply chains. A key component is how accurately they are able to predict demand.

Forecasting demand in consumer electronics is notoriously difficult to do. The consequences of poor forecasting are serious. Forecast too much and end up with too much product, and suffer write-downs and price-erosion. Forecast too little and run the risk of lost sales!

The Risk of Underestimating Demand

The implications of getting demand wrong on the downside is significant, as any lost sale is perishable, and the opportunity cost is felt at the gross margin level and right at the bottom line. For retailers, lost sales go to the competition and have a big impact. Best Buy, for example, has a profit margin of 1.97 percent and a gross margin of 23 percent (Source: Yahoo Finance). So, for every $100 product sold, they make $1.97, but for every one lost to a competitor, they miss out on an opportunity to make $23. It doesn’t cost Best Buy any more to sell one more product than its Cost of Goods Sold for that particular product. It doesn’t require more stores, marketing or staff. For the manufacturers of the product (the OEM), the impact of a lost sale is significant as their gross margins are higher, so by default, any lost sale has a bigger opportunity cost to the OEM, such as Apple at 36 percent (Source Yahoo Finance).

What I’ve seen so far, despite a better-than-forecasted Cyber Monday, is that there haven’t been too many high profile examples of lost sales. Amazon.com’s deal of the day on Cyber Monday did sell out (8GB iPod Touch for $158), which like many other heavily promoted items over the holiday weekend is undoubtedly a loss-leader to get customers into the real or virtual store. Kaufman Bros. issued a new advisory on Monday that reported low inventory and out-of-stock Macs at many resellers. Neither of these specifically means Apple or their resellers have lost sales, but risk increases if out-of-stock conditions continue.

The Risk of Overestimating Demand

When demand is forecast incorrectly on the upside, the resulting slow-moving and excess inventory gets stuck in the supply chain. For some retailers, having slow-moving inventory will create price erosion. In some cases, the retailer is protected by the manufacturer through returns and price protection programs. In all cases, the remaining supply chain partners are left sharing the price erosion and write-downs in some form depending on contractual agreements.

Manufacturing companies typically write down 0.5 to 1.5 percent of their product revenue, predominantly due to demand and supply imbalances. For retailers, it’s harder to determine the amount of waste associated with price erosion; however, there’s no reason to assume it’s any different.

So what should we do? Rather than looking at individual performers, let’s take a look at end-to-end supply chains for different product categories and identify the best overall performers in each sector: manufacturing, retail, etc. Once we’ve identified the best overall performers we can begin to dig into what it is that makes them special. What are they doing differently? How do the parts work together, up and down the supply chain? What are the best practices, and what can we learn from them? In particular, how can we optimize supply and demand? What mechanisms exist to enable us to smooth out the inevitable imbalances that will remain? We can take this knowledge and apply it to supply chains in other categories and industries.

So who are the “real” winners and losers? Let’s wait to see and look beyond the retailers at how the product manufacturers and their supply chain partners fare as part of the overall ecosystem. After all, it is the best supply chain that wins!

Tip 5: Seek out transparent catalog pricing

One of the most frustrating parts about shortage buying is that the more urgently the part is needed, the higher the price goes! After all the effort to locate the part they need, buyers have to haggle their way through the price negotiation. They may not have many options so a bad deal is better than no deal, but the core of the problem is the total misalignment of incentives between buyer and seller in today’s secondary market. For both short- and long-term benefits, buyers should seek out transparent catalog pricing.

This is a problem that affects buyers at manufacturers and independent distributors alike. When they first have a shortage or requirement, buyers will reach out to several brokers or independent distributors to seek their help in finding the part. Most will respond with claims that they have the part in-stock or available from another supplier; so, with great effort and time, the buyer has to filter out the less convincing claims until only one or two credible options remain. Under significant time pressure, they have to make a decision with imperfect information, so buyers must take the best price they can get. Therein lies the rub — after all the time and effort to identify credible options, shortage buyers have sacrificed any negotiating leverage because they are simply out of time.

The secondary market makes its money by exploiting information asymmetry. Like any good trader, a broker or independent will soak up as much information as possible before revealing any to their counterparties. For independents, brokers and buyers alike, every detail given to a secondary market supplier is a loss of negotiating leverage. The more specific the need, the less leverage one has. The most variable detail, the one that affects price the most in a shortage buy, is time. A buyer with an assembly line about to go down or a requirement that is about to expire is totally vulnerable to price gouging.

Because the financial incentives of a transactional relationship are zero-sum, the buyer and seller are locked into an adversarial relationship. The basic misalignment of interests prevents companies from developing genuine partnerships and, at the end of the day, everyone loses.

The breakdown is a major driver behind the rise of online part catalogs. Beyond faster connections and great comfort when purchasing via the web, online part sales are booming because transparency gives buyers better information faster. The level of transparency demanded by selling parts through a catalog shows a level of respect for the buyer, because the seller forfeits the short term opportunity to exploit the buyer’s desperation for the longer term benefit of a relationship.

Some firms will publish catalogs with obviously inflated prices only to drop prices substantially when the buyer calls to haggle. While this is an improvement over the information void that is the secondary market, it still puts a burden on the buyer. Real transparency provides buyers with everything they need to know about a part: its history, the real pricing, date code, actual quantity available, etc.

Many catalog distributors do not have the parts needed in a shortage, but buyers are demanding that the shortage market be as transparent as the franchised market. A distributor who is genuinely interested in partnering with a buyer will be as transparent as possible, and that means catalog pricing.

With the holiday buying season fast approaching, rumors are already circulating, and ads are being leaked about upcoming Black Friday and Cyber Monday. What impacts are these likely to have on demand? Who knows?

Last year, Black Friday was dominated on-line by electronics products, with nine out of the top ten most popular products (Source: PriceGrabber.com). Cameras and game consoles lead the way (the Ugg Australia “classic short” boot was #2). Cyber Monday online sales increased 15 percent last year with record visitors to eBay, Amazon, Wal-Mart and Target. (Source: comScore) According to PMA Magazine, about 40 percent of digital camera units are sold in November and December, so the concentrated periods of demand make or break it for some product sales for the year.

How could it possibly be easy to forecast the combination of on-line and traditional retail sales accurately in advance? What is the impact of forecasting incorrectly? If we underestimate demand we get shortages and lost sales, and a huge opportunity cost arises. On the other hand, if we overestimate demand we get excess material and write-offs throughout the supply chain.

Consumer electronics is a category with dramatic levels of demand variation. One great example is mobile handsets. Demand can vary widely in a short amount of time—for example; the Palm Pre initially sold out and was in short supply with waiting lists when it was released in June. In just three months, there are reports of excess in some indirect channels.

For OEMs typically working off 30 to 60 percent gross margins, each lost sale evaporates into huge opportunity costs. As on-line sales become stronger and stronger, the portion of demand that is perishable is increasing. This applies more broadly beyond consumer electronics. For example, if Cisco loses a sale of a router to Tellabs or an IP phone to Avaya, the loss is felt immediately at the bottom line and by definition through to EPS. Risk management across the supply chain is a hot topic, and this may be the biggest risk of all.

While Cisco’s 2001 3rd quarter write down of over $2 billion is not by any means typical, OEMs do typically write down 0.5 to 1.5 percent of their revenue each year in excess and obsolete material. Apply that across the global high tech supply chain and you’re soon in the tens of billions of dollars written off annually.

Now that’s a waste.

So what can be done? Clearly OEMs need to put as much effort into forecasting demand as accurately as they can. However, all the forecasting in the world can’t eliminate the inevitable supply chain imbalances—excess on one hand, shortages and lost sales on the other. Where more energy needs to be applied is in the rapid response to both up and down demand signals as well as using more innovative ways to target both excess and shortage situations.

Let’s see what happens this holiday season.

The Rise of Counterfeiting

Three Certainties in Life: Death, Taxes, and the Forecast is Wrong!