Supplier of Last Resort Specializes in Finding What Others Can’t
Integrated Circuit Solutions Inc. is the last place most manufacturers ever want to call, but that doesn’t exactly hurt company president Joe Stafford’s feelings,or his bottom line.
The Aliso Viejo operation is a supplier of last resort, ferreting out hard-to-find parts for electronics and computer makers when supplies are low enough to bring production lines to a standstill. The more acute the shortage, the more likely manufacturers will come to Stafford in desperation, willing to pay a premium for his company’s search-and-rescue efforts.
They’re calling a lot these days. With a capacity crunch hitting most segments of the computer and electronics industry, his company expects to bring in $70 million this year, compared with $17 million last year. He’s hoping for even faster growth in coming months, with plans to get venture capital and hire more than 120 people over the next year or so.
“We could be ruthless,” he says, smiling. He’s quick, though, to add that the tactic wouldn’t be a wise long-term strategy.
Maintaining friendly relationships will be crucial as the company embarks on its newest push, an electronic commerce operation called eBom designed to make it easier for companies to find emergency components. The name eBom stands for electronic bill-of-materials, a twist on a common phrase referring to lists of components or supplies.
Customers who use IC Solutions now have to do it the old-fashioned way, making orders and negotiating prices over the phone or at best by e-mail. The new system will create a Web-based marketplace that displays the going rate for components and takes orders online.
Stafford hopes to secure $40 million to $60 million in the next six months to launch the service and expand his operation. Several competitors have received outside funding in recent years, adding urgency to Stafford’s plans.
Santa Clara rival Advanced MP Technology allows customers to search inventory and request a quote, and Peabody, Mass.-based Necx.com hosts an online exchange for electronics and computer components that promises to connect buyer and seller directly.
Stafford hopes that combining the convenience of the Web and IC Solution’s old-fashioned shoe leather will make for an irresistible mix.
The 3-year-old company, Stafford says, stemmed from his frustration while at Viking Components Inc. when he had to deal with emergency suppliers.
“A day didn’t go by when we weren’t disappointed,” he recalls.
Betting that other manufacturers had similar horror stories, Stafford teamed up with an old friend, Greg “Rocco” Smith in 1997 to scrape up $200,000 from family and friends and create IC Solutions.
So far, the company has been profitable every year, a position both men credit to customer service. Smith, who got his nickname from frequent bruises he gets from his activity as a wrestling coach, often travels the world personally to find components for customers.
“In fact, I’m going down to Reynosa, Mexico, right now,” he said, cutting short a recent interview.
Ironically, customers include some of the biggest names in the industry,even manufacturers such as Compaq Computer Corp., Dell Computer Corp., Cisco Systems Inc. and Sony Corp. find themselves in a bind every now and then,and dozens of smaller contract manufactures.
Viking was an early customer, but IC Solutions has largely stayed out of the memory market because of its volatility. But that’s not all he’s gotten out of the relationship,IC Solutions’ headquarters used to be one of Viking’s office facilities.
By default, most calls coming into IC Solutions are about a near-crisis situation, making the job one of the most stressful in the computer industry.
When supplies aren’t so tight, the company makes money by purchasing excess inventory from manufacturers at a discount and selling them to other companies. IC Solutions also offers engineering services and so-called “end-of-life” inventory management, finding buyers for outdated products.
Though the company faces competition from a bevy of similar-size companies providing what many see as a non-glamorous task of moving around commodities, Stafford says he’s more concerned about heavy hitters such as Avnet Inc. and Arrow Electronics Inc. Because IC Solutions usually makes money when the usual distributor falls through, its business depends on the shortcomings of others,something over which IC Solutions has little control.
But unlike most distributors, Stafford argues, his company represents the components buyers, not the sellers. He says this puts his company in a better relationship with its customers.
“Their customer is the supplier,” he says. “My customer is the customer.” n
