Valuing excess inventories treatment business, Chitron displayed “services” in IIC.
Independent distributors outstood themselves in IIC 2007. On their show stands, there weren’t showy schemes, but various services designed for customers attracted some professional purchasers. Chitron is one of the independent distributors who implement service innovation. To obtain sustainable business increase, Chitron, since last year, has engaged in the excess inventories treatment business, aiming to realize the objective of such business taking up 25% of Chitron’s turnover.
Searching for rare components and excess inventories treatment are the two contributions to independent distributors. However, independent distributors have never been successful in fully operating the overstock business in China market. Dai Jie, Manager of Logistics Department of Chitron Electronics, claimed that the operation failure lies in two aspects: Firstly, in China market, OEM and EMS haven’t formed a set of system and process on overstock treatment, “From the perspective of finance, manufacturers are in a state of loss while conducting overstock treatment which seems to bring no benefits to enterprise. And this makes enterprises, especially state-owned enterprises, prefer to keep these inventories as fixed assets instead of disposing of them.” Secondly, there lacks mutual confidence between manufacturers and independent distributors, manufacturers refuse to take out the surplus inventories for independent distributors to dispose.
Why Chitron, a company engaging in independent distribution industry for years, chooses to enter into the field full of challenges? Dai Jie said the reason lies in our appreciation of the opportunity of developing this business. “This is a large market, Chinese manufacturers keep lots of remained materials. With our help, they can obtain maximum value of the surplus inventories and decrease their losses to the minimum.” He thought that the current scale of Chitron enables it to enter into the industry with the support of its capital strength.
Dai Jie said, the characteristics of excess inventories treatment are high profits, but slow cash turnover, big risks, considering too many factors in the specific operation process, including types and quality of components, logistics, goods check and adaptive expectations etc.. For this business, we must ensure that we don’t suffer losses after purchasing them, and we should pursue a higher stock turnover while pursuing the maximum profit of each device, and this is a difficult struggle process.” he emphasized.
Dai Jie claimed that presently Chitron, based on “Chinese feature”of this business, mainly adopts the buy-out method instead of adopting the consignment mode popular in European and American markets from the very start. “With the improvement of customers’ awareness to actively treat the surplus inventories, we will gradually transform into such internationally popular operation modes as the consignment mode.” he claimed. Some leading enterprises in the same industry, such as Taiwan-funded enterprises and private enterprises, have adopted a whole set of standard process to treat the surplus inventories, which provides a pretty good chance for Chitron who is familiar with current market situations. He estimated that there will be much bigger growth room in this business this year.
ESM China reported: Valuing overstock treatment business, Chitron displayed “services” in IIC.