5 Quick Questions: Pushing The Distribution Envelope
Thief River Falls, MN-based Digi-Key Corporation is a global distributor of electronic components, with over $1.5 billion in annual sales. This market leader continues to push the envelope in terms of how they approach order fulfillment, expansion and reaching out to new customers. We recently sat down Mark Larson, the company’s president, to get his thoughts on globalization, inventory management and steps that established distributors can take in helping to set themselves apart from the crowd.
Q: How has Digi-Key adjusted with the times in order to match the needs of both new and current customers?
A: Digi-Key is unique in that we have transformed our business from a traditional electronic components catalog distributor into a unique hybrid distribution model. We have leveraged our roots in the engineering community, and expanded geographically to serve global customers in roles that include engineering, prototyping, design and purchasing.
Digi-Key’s business evolved as a natural progression of these relationships. As customers move from design to production, they now know that we have what they need, when they need it. Our ability to adapt is integral to the model. We lead with on-demand resources, self-service, and rapid fulfillment of the latest and greatest, with significant investments in web-based product data and application notes. Product Training Modules (on-demand video presentations on products and technologies) and other on-line tools and multimedia resources provide additional support.
We also offer significant differentiation in terms of breadth and depth of product that can literally be shipped the same day they are ordered. Our web-based BOM tool helps provide visibility on the broad range of products we stock, so if production quantities change, we typically have the ability to accommodate the purchaser.
Q: What do you see as the most significant supply chain challenge currently facing distributors?
A: Global distribution is an interesting challenge for distributors. Dealing with quality and compliance regulations is a process and an area that is continually changing.
Q: What is the Prototype-to-Production model and how does it work?
A: Being able to go to a one-stop, single source and quickly locate and order small quantities for one or several hundred components helps save time and preserve the integrity of the product engineering process. As Digi-Key has evolved, our customers started turning to us for support of larger and larger volumes of components to support their production.
The move into an increased focus on production-type orders was a natural progression of the demand we saw from our customers. So we coined the phrase Prototype to Production to emphasize Digi-Key’s ability to provide support throughout product development. Our strength lies in our ability to provide the products and resources needed to support this entire process.
Q: What supplier trends are you seeing?
A: We currently have 650 supplier partners and serve as an authorized distributor for each. All product we sell is purchased by Digi-Key directly from the manufacturer. We do not source on the open market and expose our customers to the potential of counterfeit product, which is a significant and growing concern on the supplier side.
There are always new technologies, innovations, and emerging growth areas, and our goal is to offer the newest product as quickly as it is available from the manufacturer. We are seeing growing interest in M2M, wireless, lighting, development board environments and memory products.
Q: Are you entering new markets — new customer segments and/or geographic target areas?
A: Yes. We anticipate continued growth in the production side of our business as more suppliers turn to us for supply chain services and larger volume ordering. In North America, this will account for well over fifty percent of our business by the end of 2014.
In 2013, we have added several local resources to support growth opportunities in the EMEA region. In addition to adding sales directors across Europe, we recently opened an office in Munich that houses 18 sales and support professionals with industry experience. Our expanded team will focus on supporting anticipated production business growth as we continue to expand our customer base. In addition, we will be focusing on expanding our presence into the China market.