Buoyed by favorable business conditions over the last year and a half, the top distributors are taking a hard look at trends such as globalization and customers’ growing demand for technical service and support to determine how they can best meet the needs of design engineers and purchasing professionals (see the table). For many, that means investing in new technologies and personnel while keeping closer tabs on the pulse of the industry around the world.
The distributors on this list are using a variety of strategies to reach these goals. Many continue to develop global versions of their Web sites where customers can access information in their local language and order products in their local currency. Digi-Key, number six on the list, is a prime example, with more than 80 country-specific or region-specific sites targeting electronic design engineers and purchasing professionals around the world.
Others are taking a different route and are developing regional pages within their Web sites as a way to customize their product and service offerings to customers in different regions. Avnet, number one on the list, has done this with the launch of its AvnetExpress Asia last June, www.avnetexpress.com/asia, and Avnet Express EMEA (Europe, Middle East and Africa), www.avnetexpress.eu, this January.
The top distributors are also combining new technologies and social media to get closer to customers. For example, Mouser, number 10 on the list, introduced its MouserMobile application earlier this year. MouserMobile is a mobile Web site available on any Web-enabled smartphone, operating in 16 languages and supporting 16 currencies. Mouser and others also use some of the major social media sites, such as Facebook and Twitter, to introduce new products and technologies to customers.
Perhaps the most pointed example of how technology is changing the electronics supply chain landscape is Premier Farnell/Newark’s element14 online community. The element14 Web site serves as a portal to products and industry information for the design engineering community around the world. The site includes an online store, design tools, industry news, videos, peer networking forums, an “ask the expert” feature, and more.
One of its most popular features is “The Ben Heck Show,” a biweekly online TV series featuring modding guru Benjamin J. Heckendorn, a.k.a. Ben Heck. Each episode features Ben creating a new project from start to finish.
Premier Farnell has rebranded all of its Asia-Pacific business as element14, combining the physical and online elements of its presence in the region into a single brand. Premier Farnell/Newark checks in at number five on the Top Distributors list.
Distributors will watch these and other issues carefully as they take advantage of what looks to be another solid year for the electronic components industry (see “ECIA: One Mission, One Voice” at www.electronicdesign.com).
Top Trends And Challenges
Interviews with a handful of our top distributors revealed some key industry challenges, of which three emerged as top-of-mind issues: globalization, the faster speed at which customers must get their products to market these days, and growing customer demand for engineering and technical support.
“I think the biggest \\[challenge\\] today is that people want to design globally and supply globally,” says Ed Smith, president of Avnet Electronics Marketing Americas (see “Avnet: Thinking Globally” at www.electronicdesign.com). Smith points to customers who may have a design location in Europe or America but build their products in Asia, for example. “We have to have the capability to design in multiple places… then supply it the way they want to be supplied in different locations around the world.”
On the face of it, that may seem like a simple task, but there’s more to it than meets the eye. For instance, pricing and lead times may vary from one region to another. Distributors must have systems in place to track and communicate the design elements, pricing issues, lead times, demand, and inventory availability for a particular project as it moves from one location to another, Smith says. Avnet and others have invested in these capabilities.
“If we design \\[something\\] in America, we can communicate that design, its pricing \\[and\\] what we’ve worked on to our counterparts in Asia,” he says. “We even have systems now that take \\[into account\\] customer demand in different locations. \\[We see\\] demand in three different regions, then we can move out that inventory globally.”
Michael Knight, vice president of corporate product management for TTI Inc., number seven on the list, agrees that the globalization of distributors’ customer and supplier base is helping to reshape the industry. The issue touches multiple aspects of the business—from sales to service to logistics.
“The ongoing march to globalization really is the birthplace of most of our challenges,” Knight explains. “At TTI, we’re spending more time than ever figuring that out.”
Knight points to the systems needed to track products throughout the global supply chain, the difficulty of measuring financial performance in different regions of the world, and the challenges involved in motivating salespeople in an inherently more complex sales process. Decision makers located in different time zones and speaking different languages is just the tip of the iceberg.
“\\[The whole process\\] becomes so much more dynamic. Customers will design in one area and build in four other areas, and based on what capacity is in area A, they may shift more to area B,” Knight says. “You’ve also got customers that are trying to lock up global supply agreements… It’s a much more complex sell today.”
Speed And Service Reign Supreme
Hand in hand with globalization is today’s faster-than-ever business pace. In particular, customers must get their products to market much faster than they have in the past, putting pressure on distributors to deliver more information, service, and support to aid in that process.
“\\[Customers\\] demand from us more supply chain tools \\[and\\] more supply chain information in real time,” says Avnet’s Smith. “\\[They\\] want to see things sooner and \\[they\\] want more of it … The speed of information is just incredible now.”
Smith points to embedded systems and technology as an extension of this trend. As a way to get their products to market faster, many customers are designing by system rather than by part—buying entire boards, controls, or systems and then differentiating with their software and firmware, for instance. Avnet capitalized on this trend with last year’s acquisition of Bell Micro, a value-added distributor of storage and computing technology.
All of this plays into the need for more service and support in general. Arrow Electronics, number two on the list, is paying close attention to the service and solution trend as well, says Peter Kong, president of Arrow Global Components (see “Arrow: Service Is The Answer” at www.electronicdesign.com).
“Today, customers are looking for more than parts from their distribution partners, but rather a complete offering that includes end-to-end product life cycle services and support that will help them to improve their cost and time to market,” says Kong.
“Arrow has expanded and greatly enhanced our value proposition in this area. We now provide full engineering and service solutions to support our customers operationally, as well as at the strategic level where we can improve the effectiveness in both time and cost to market,” Kong adds.
Lindsley Ruth, corporate vice president at Future Electronics, number three on our list, agrees, noting that the situation has been exacerbated by customers’ reduction in engineering staff. This means customers are looking to their supply base even more—for engineering support and a wider array of design tools, for instance. Future Electronics has responded by investing in this area, especially in engineering personnel (see “Future Electronics: Inventory, Expertise Make The Difference” at www.electronicdesign.com).
“Customers are looking for knowledgeable, well-trained engineers with the ability and the tools to design product in. So, every year we invest a little bit more,” explains Ruth. “We tend to look for engineers who have quite a bit of \\[design\\] experience. Maybe they worked at a customer \\[location\\] for 10 to 12 years. We want them to actually have design experience so they hit the ground running.”
Ruth says distributors must be better versed in customers’ technology than ever before, especially as the trend toward providing application-specific solutions grows.
The Next Great Technology
While navigating the waters of globalization, technology, and service requirements, distributors are also looking ahead to the next great product or service that will change the industry. For many, alternative energy and solid-state lighting are ones to watch.
As more and more consumers and businesses look to save energy costs and reduce their impact on the environment, the demand for energy-saving products and systems is growing. This already occurring trend will only grow as the cost of these products goes down, many industry watchers argue.
“Your dollar light bulb is being replaced today by a $40 solution, but that will continue to come down,” explains Ruth. “The technology is amazing. The ability to control the light and do so many different things is going to shape so many industries.”
Arrow’s Kong agrees. “Alternate energy continues to be a high-growth opportunity as there is great support from government around the world to save energy,” he says. “Our lighting business continues to expand and we have made a major commitment to this segment.”
Others argue that business process changes are the next great industry game-changer. The Internet’s increasing role in business is a prime example. TTI’s Knight points to the increasing speed with which customers need information and the use of the Internet to deliver it.
“Customers want faster, more real-time, on-demand type of interactions with their suppliers,” Knight says. “And distributors are in a unique position to be the portal \\[to this information\\] with the tools we can bring online.”
But Knight warns against the impersonal aspects of the Web and their potential effect on a business that, for many, has been built around developing personal relationships with customers.
“There’s still an awful lot to figure out,” he says of bringing business online. “The relationship aspect of our interaction with customers \\[is so important\\]. If that completely disappears, that’s a whole different world. How you sell in that world and how you influence in that world is very, very different.”
This is where social media may find its niche, as both a way to deliver information quickly and form communities of like-minded professionals. Avnet’s Smith says it may not be too much of a stretch to envision a Facebook, Twitter, or some similar emerging platform just for the engineering community.
2011: Another Good Year
Most electronic components distributors would agree that 2010 “was an absolutely fantastic year,” as Future Electronics’ Ruth describes it. 2011 looks promising as well.
“The market is going to be up five to seven percent globally, and we’ll be up a little bit more than that,” says Ruth. “In general, this should be a very good year.”
Knight agrees. “To be honest, everything looks like an opportunity to me these days,” he says. “We feel very, very good about electronics overall, electronic components in particular, and distribution as the place to go to get electronic components.”
Of course, the recent natural disasters and nuclear crisis in Japan have created some uncertainty in the electronics sector (see “Distributors Respond To The Earthquake In Japan” at www.electronicdesign.com). Most agree that this will remain a waiting game in the weeks and months ahead.
For now, distributors are keeping a handle on inventory levels and assuring customers they will have what they need when they need it. As the crisis was unfolding in late March and early April, distributors were keeping a watchful eye on the situation.
“In the end, it’s about the people for much of the time and we’ll worry about the business side later,” Smith said in late March, pointing to the need to provide humanitarian support to the people of Japan. He also said the situation may create an opportunity for distributors to help customers find different parts or solutions for design and production needs—if product shortages in Japan become a problem.
“Today, customers are looking for more than parts from their distribution partners, but rather a complete offering that includes end-to-end product life cycle services and support that will help them to improve their cost and time to market,” says Peter Kong, president of Arrow Global Components.
“The ongoing march to globalization really is the birthplace of most of our challenges,” explains Michael Knight, vice president of corporate product management for TTI Inc. “\\[The whole process\\] becomes so much more dynamic. Customers will design in one area and build in four other areas, and based on what capacity is in area A, they may shift more to area B.”
“If we design \\[something\\] in America, we can communicate that design, its pricing \\[and\\] what we’ve worked on to our counterparts in Asia,” says Ed Smith, president of Avnet Electronics Marketing Americas. “We even have systems now that take \\[into account\\] customer demand in different locations. \\[We see\\] demand in three different regions, then we can move out that inventory globally.”
“Customers are looking for knowledgeable, well-trained engineers with the ability and the tools to design product in. So, every year we invest a little bit more,” says Lindsley Ruth, corporate vice president at Future Electronics. “We tend to look for engineers who have quite a bit of \\[design\\] experience. Maybe they worked at a customer \\[location\\] for 10 to 12 years. We want them to actually have design experience so they hit the ground running.”