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Perspectives

Distributors and the Internet of Things: Impact and Applications (Part 3)

2015-12-01


High-tech distributors can realize significant operational improvements and increase profitability by putting the IoT to good business use. Here are some ways organizations can take advantage of the IoT’s possibilities.

High-tech distributors can realize significant operational improvements and increase profitability by putting the IoT to good business use. Here are some ways organizations can take advantage of the IoT’s possibilities.


High-tech companies are both producers and consumers of IoT products and services. The IoT represents an opportunity to reshape competition within high-tech and expand industry boundaries. It can shift the base of competition from discrete products to highly-customized product systems containing closely related products, to software-enabled services based on machine-to-machine (M2M) communications (Figure 1).

Figure 1

Here’s how the IoT introduces opportunities for distributors in two core areas: increasing sales and improving operations.

An Evolving Value Chain for Increased Sales

The IoT can help electronic component distributors reinvent their existing business models and break through into adjacent markets. Customers of these companies are seeking guidance in areas such as connectivity, cloud operations and new business models. Often, this can translate into service and consulting opportunities for traditional hardware distributors. 

Counterfeit Detection for Process Improvements

Counterfeit components are a major headache for electronic component manufacturers, distributors, OEMs and consumers. Such components, when sold as genuine products, can cause product performance issues and raise warranty costs. In some cases, such as medical and automotive applications, they can pose a very real threat to the health and safety of the user. 

Efforts to eliminate counterfeits have met with only limited success, as the globalized supply chain of high-tech companies provides ample avenues for injecting fake components in the distribution chain. One anti-counterfeiting approach for the pharmaceuticals industry, offered by a group of RFID experts, suggests using IoT technology in the electronic components supply chain (as illustrated in Figure 2).

Figure 2

A component manufacturer can insert sensors in individual parts/packages at the manufacturing site. These products are then shipped, through multiple points, to an electronic manufacturing services (EMS), original design manufacturer (ODM) or original equipment manufacturer (OEM) facility and are authenticated at every step. An alert is triggered to the component manufacturer/distributor whenever a counterfeit product is detected. 

Thus, by linking physical products with digital identities through IoT sensors, component distributors can prevent counterfeit products from entering the distribution channel. In the long term, the awareness of counterfeits and the knowledge about items’ most recent locations can be used to effectively deter counterfeiting.

Looking Ahead

At every stage of the manufacturing value chain, the IoT can bring greater capability to monitor, intervene and even reasonably predict the journey of every physical component. For distributors, this introduces an immense opportunity to not only detect fake products and protect quality, but also evolve the value chain to positively impact profitability.

This is part three of a four-part series on the impact of IoT in the high-tech industry. Read more about the impact and applications of IoT in the semiconductor, contract manufacturing and OEM space in the other installments of this series. For more about the role of IoT in the high-tech industry, please read our whitepaper The Internet of Things: Impact and Applications in the High-Tech Industry. Visit Cognizant Digital Works and the IoT section of our website for more.

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Distributors and the Internet of Things: Impact and Applications (Part 3)