An online marketplace for high-tech electronics will launch tomorrow with a strategy to filter out counterfeit parts and offer anonymous, secure transactions to buyers and sellers in the secondary market.
Verical, a start-up backed by venture capital firm Valhalla, qualifies the sellers in its network and audits the inventory in its Web-based catalog, assigning a rating to each part based on its chain of custody, or pedigree. This enables sellers to turn their excess inventories into cash, and buyers to know just what they’re getting, co-founder John Brown, vice president of marketing & strategy, told Managing Automation in a recent interview.
The online marketplace can help manufacturers deal with ever-changing forecasts and resulting parts shortages, Chris Cookson, vice president of supply chain and operations at the company, told MA in an interview. The primary supplier channel may not be able to react quickly enough, especially as the market starts to recover from the downturn. Generally, “about 40% of purchasing’s time is spent scouring 1% of parts,” he said. “We provide a safe source of parts, available on demand, and we execute transactions quickly through our automated system.”
The catalog is built on a so-called rich Internet application, Brown said. A buyer can find out “in a few seconds” what parts are available, along with date codes, lot codes, prices, and features. Verical can automatically upload data from Excel spreadsheets to the online catalog, company executives said.
Brown and co-founder Josef Ruef, CEO, came up with the idea for Verical in response to the threat to the supply chain by counterfeit parts that, more and more, were passing visual inspections and even initial testing.
“The secondary market is being exploited by fraudsters and profiteers,” Ruef said in a statement.
The founders reasoned that using chain of custody information and “allowing only first owners to sell would block out an entry point for counterfeiters and would give buyers confidence,” Brown said. “This is an extension of the primary market.”
Of the $600 billion annual market for electronic components, the time-critical segment is roughly $22 billion, of which about $12 billion is serviced by unauthorized distributors and 13% of which is counterfeit, according to Verical’s statement, citing figures from electronics industry trade association IPC.
Under Verical’s rating system, a product with four stars comes directly from or is traceable to the component manufacturer. A three-star rating indicates that a component comes directly from or is traceable to an authorized distributor. Two stars mean that the seller is a member of the Verical community and has a purchase order listing an authorized distributor or the original manufacturer. A product with one star comes from an OEM or electronics manufacturing service (EMS) member of the community.
Verical takes a commission on all sales. The company processes orders and passes them through to the sellers. Components are delivered by Verical’s third-party logistics partners to preserve both buyers’ and sellers’ anonymity.