As layoffs swept through most of the electronics industry last year, Digi-Key Corp. didn't give in.
The catalog distributor instead took a hard look at what it needed to do and came up with a plan to improve logistics, shorten lead times, and reduce costs.
"One thing we did while business was slow was concentrate on the entire supply chain, beginning with how we do business with suppliers, which is where it starts," said Steve Tsukichi, vice president of marketing at Digi-Key. "We're looking at ways to streamline and automate the supply chain from the supplier to the OEM by increasing procurement efficiency."
Like Digi-Key, several U.S. catalog distributors, including Allied, Mouser, and Newark, spent much of last year figuring out what changes they would need to make to their business models. By forging closer ties with parent companies and building up their IT systems, U.S. catalog distributors are hoping to improve top- and bottom-line growth, expand services, and extend their global reach.
To cut costs, Mouser Electronics Inc., Mansfield, Texas, recently consolidated warehousing and internal systems and operations under one 170,000-sq.-ft. roof and added a new mainframe and 30 e-business servers. Mouser has also started working closer with its parent company, TTI Inc., Fort Worth, Texas.
"We'll continue to establish cross-functional teams that build on the synergies between TTI and Mouser by leveraging each other's strengths," said Glenn Smith, president of Mouser. "We have the ability to do a very good job of getting products in small quantities into the hands of engineers and at the same time offer suppliers more of an integrated solution, whereas TTI specializes in volume purchase orders."
Mouser is also scheduled to launch a Web site later this quarter with real-time order status and tracking capabilities. The site will feature project management tools for engineers and bill-of-material management tools for procurement specialists.
Tighter collaboration with its parent company, Premiere Farnell plc, is also key for Newark Electronics, Chicago. By implementing customer relations management software from Siebel Systems Inc., Newark can tie into the ERP system of MCM, a sister catalog distributor in the United States, also owned by London-based Premiere Farnell. Premiere is implementing an identical plan with distribution subsidiaries in the United Kingdom. By the end of 2002, all five global Premiere Farnell distribution subsidiaries will be linked on a common platform that will give each access to improved logistics capabilities and a central product database.
In addition, Newark consolidated warehouses and developed a management system for its distribution center in Gaffney, N.C., according to president Michael Ruprich. "All this will contribute to an increase in customer service and enable us to expand globally," he said.
Allied Electronics Inc.'s parent company, Electrocomponents plc, is also implementing an ERP system that will eventually tie together all 26 of its global operating companies.
"Allied is making investments in a global networking system, but it will take us another two to three years to have everything in place," said Robert Pfleg, president of Allied, Fort Worth. "Today we have visibility into inventory housed with our sister companies and they can see ours, but total functionality is still being put in place."
Eye on Asia, Europe
As competitors work to strengthen relationships with sister companies, Digi-Key is looking to establish stronger ties with its suppliers in Asia and Europe. By shipping products directly from its Thief River Falls, Minn., warehouse, the company hopes to improve logistics and shorten lead times for more than a dozen of its top 25 overseas suppliers, Tsukichi said.
For Digi-Key, that would mean lower costs since shipments would bypass suppliers' consolidation centers.
"Asian and European companies often use these warehouses to package and ship product to the U.S. market," Tsukichi said. "Consolidating orders keeps shipping costs in line, but eliminating this process could cut weeks from delivery schedules."
Digi-Key also plans to penetrate accounts in Asia and Europe by first launching Internet sites specific to Japan and England, with a long-term goal to open distribution and sales facilities in each region as it gains market acceptance.
"We see Japan as being a more developed economy than China," Tsukichi said. "The goal is to take our service-oriented business model that has been successful in the U.S. and export it into various countries, making changes based on customs and cultures."
Expanding globally requires regional logistics capabilities to address international customs' issues, something distributors can't efficiently handle from the United States, Mouser's Smith said.
"Roughly 90% of our business comes from North America, but we sell to customers all over the world," Smith said. "Beyond that, we don't have a timetable to extend our infrastructure, but it's something we're looking at very carefully for the future. You must be in the country to grow the business and make an impact."
That's an all too familiar sentiment for Newark, which earlier this year closely examined its operations in Mexico. The company began serving OEMs and EMS providers in Mexico from El Paso, Texas, late last year and worked feverishly to develop logistics capabilities to move product from the maquiladoras into the country's interior within three working days.
That sufficed for the short term. For the long haul, the company determined that it needed a distribution center in Mexico. Newark plans to open a facility by June that will stock 5,000 of Newark's fastest-moving parts.
To augment the launch, the company rolled out a region-specific Web site in January, and this month will introduce a Spanish and English printed catalog with prices based on the Mexican market.
"Newark's business in Mexico is less than 5%, but it's the fourth-largest electronics market in the world," Ruprich said. "We'd like to see that reach 10% of our overall volume in the next three to four years."