Overseas suppliers, gray markets, and the age-old question: do you want it cheap or fast?

The gray market refers to the trade of genuine parts that, while legal, may not be authorized by the manufacturer. While these parts are often sourced from legitimate manufacturers, they bypass official distribution networks, resulting in lower prices.

Advantages

• Cost: Prices can be as much as 70% below manufacturer wholesale rates.
• Rare or discontinued parts: These channels can provide access to parts that are otherwise difficult to source.

Risks

• Availability: Gray markets often have large surpluses of a particular item in one month and then may not offer that item at all for the next several months. Having a secondary supplier is crucial when utilizing gray markets. For this same reason, it’s important to price gray market items carefully. If you lower your sell price dramatically due to low sourcing cost, customers may be displeased if you have to reverse that decision a month later due to gray market availability concerns.
• Lead Time: Gray markets often have extended lead times, even in comparison to other overseas options. This can significantly impact service levels and safety stock requirements. 
• Quality Issues: There is a risk of receiving parts that do not meet quality standards, as gray market suppliers may not adhere to strict quality control measures. Be willing to pay a premium to buy from sources that come from authorized vendors. 
• Lack of Certification: Parts purchased through gray market channels often do not come with warranties or the same certifications as they do when purchased directly from the manufacturer. Remaining shelf life, when applicable, may be shorter. Worst case, the parts you buy on the gray market may not even be legal to sell in your local market.
• Relationship Risk: If manufacturers and key approved suppliers find out about your utilization of gray markets, they may view it unfavorably, which could impact your future relationship with them.