During this spring’s Electronics Distribution Show (EDS) held in Las Vegas, EP&T magazine sat down with Digi-Key president Mark Larsen to discuss a number of topics as they relate to the electronic component distribution business and the EDS show itself.
Q: What is the importance of EDS for Digi-Key?
A: EDS is very important to Digi-Key as it is a chance to connect, not just with our suppliers, but typically with many of the top management representatives. If you were trying to duplicate this meeting experience outside of EDS, you would spend months travelling and the probability that you would get three or four of the top key management, that are the most relevant to our relationship, would be very unlikely.
The show also gives us the chance to meet with a lot of manufacturers’ reps, and that is important because they figure into the supply chain equation too. In a sense, as the product moves from the manufacturer to the distributor, the rep is going to be involved some of the time. The end-customer may be oblivious to what happens behind ‘the curtain’, but it is important that we are up on the latest products and the technology roadmap – to ensure that we are well connected at the top and all the way down. EDS is an enjoyable event – it is somewhat grueling, but well worth it.
Q: How was the past year for Digi-Key with respect to sales?
A: 2014 was a pretty good year for Digi-Key, as we saw worldwide sales increase in the range of 13%, representing over $200-million in sales. Our sales overall this past year (2014) were $1.76-Billion, representing a new record for Digi-Key, positioning the firm as the fourth largest distributor in North America and the seventh largest distributor for electronic components in the world. Sales in North America were also excellent, while both US and Canada came in with 9% increases, which we consider very robust considering the fact that its a more mature market, as opposed to Europe or Asia.
Q: What is the current outlook for 2015?
A: What we are seeing right now (so far in 2015) is that sales in the US are up 5%, while Canada is up 7%, so growth is very strong. We are seeing some headwinds in Europe, which are stronger than expected and the result of strong US dollar. We are seeing real good growth in Asia and acceptable growth in North America, although we do see some weakening appear in the first quarter of 2015. It is going to be interesting to see if we can hold the growth rates that we started with, but so far, so good.
Q: Any pleasant surprises thus far?
A: We have been building the infrastructure in China, including the addition of an office in Shanghai about a year ago. We are dealing in the local currency (renminbi) and we are starting to get some pretty encourage results. These are real inroads to the indigenous market where we had fairly decent sales in China starting out, but they were primarily with multi-national firms with bases in North America and operations in China. Now we are starting to deal with Chinese companies that would not typically buy from us – so, that is a bright side. While most distributors claim to be international, but managed regionally – for Digi-Key, it is all run like one. This works to our advantage, as we are able to aggregate worldwide usage of product and support a much broader portfolio than our competitors.
Q: Explain the importance of sponsoring engineering or design contests?
A: We are always trying to reach out and latch onto new customers – it’s a way of introducing them to Digi-key. If they (customer) can see that we are someone that makes sense to interface with they may continue engaging with us. At least we are introduced to that potential engineer or user of components. At the same time, it will create a tighter engagement with our current customer base. There is a constant search in the industry for new customers and in a way – it’s perceived that the younger the better, because we want to establish a relationship that could conceivably carry on throughout their career.
In addition to that, Digi-key has been very involved with the FIRST (For Inspiration and Recognition of Science and Technology) contest, which has a worldwide reach. In a way, this group does missionary work in the industry, giving kids of a much younger age exposure early on.
Q: How is Digi-key targeting emerging sectors such as IoT, wearables, robotics, etc?
A: Any new technology area of relative size, such as IoT, has excited and stimulated a group of people that might not have formally been engaged in electronics before. But, because they are of a creative nature, they see the potential applications and they get drawn into our world, creating a certain vitality within our industry. Ultimately, many of them will determine that Digi-Key is the logical source for IoT. And, a lot of wearable or RF applications are extremely creative are generating a lot of excitement in the industry.I really think if you take a look at independent industry research surveys on the engineering community, what you will see is that Digi-key is rated number one for breadth of product, as well as availability of product, and consistently number one for speed of shipment, and responsiveness to customer problems. These are the parameters of customer service that they can take for granted, but they are not necessarily everywhere. The one thing that is consistent with these annual surveys is that Digi-Key ranks two-and-a-half times higher in almost all parameters of service then its next closest competitor. To me that is very amazing, because customers can see the difference, perceive it, recognize it and hopefully reward it.
Q: What are some future objectives or directives for Digi-Key?
A: The Canadian market does a lot with us on the web and we, corporately, are doing a lot of things on the Internet right now. I think people who have been exposed to Digi-Key’s web presence in the past are going to be very enthusiastic about some the changes we are making. I think they are going to be very comfortable with these changes. We don’t want to be too traumatic with the changes, as you want to ease the users experience in a comfortable way – intuitively incorporating the advantages of the changes. Canada is always where we do our Beta testing. So right now we are in the middle of a pretty significant test on our web and what Canada is seeing in the test group, will probably be rolled out across North America, and then across the world.
We want to maintain our dominance in terms of product portfolio and it’s critical we maintain our service and quality levels. Customers may not always realize, but we maintain full stats on the product from the time it comes into Digi-Key, until the time it leaves our facility and to the time it arrives to the customer. The process is all bar-coded supervised picking. We measure our errors per million (of shipments). The customer should be confident that they would never have a problem, but if there should be a problem – we want to resolve it immediately.
Mark Larsen, president of Digi-Key Corp.