Catalog Distributors


Catalog distributors at a glance NA sales


% growth rate from


Company Digi-Key


Newark element14 Allied Electronics Mouser Electronics Source: ESNA


($millions)


1,029.00 594.9 400.0 336.0


previous year 47.5%


20.7% 30.7% 47.4%


"When you service the design engineer and small production


employees 2,411


1,345 752 739


and inventory levels," saidWenger. "As a high-service distributor it's important that we have inventory on the shelf for our customers. Inventory was at an all time low so we had tomake buys to ensure that we had inventory available for our customers," he added.


"Dramatic growth poses serious challenges to your business


particularly for amodel like ours that provides high service to our customers," agreed ScottMcLendon, vice president of product management andmarketing, Allied Electronics, Ft.Worth, Tex. "You see lead times stretching out fromin stock to four weeks then to allocation and you have to be able to work the supply chain in an effectivemanner to continue the high levels of service."


It also impacts a distributor financially. "It puts a premiumon


working capital because as you grow, especially in a business like ours, we're committed to inventory, and inventory went up dramatically in 2010," addedMcLendon.


Even though catalog distributors have very robustmaterials


management systems in place that automaticallymonitor and adjust for changes in demand and lead times, several distributors had to intervenemanually last year to handle the dramatic increase in demand and long lead-time parts.


"Although our systems were taking the appropriatemeasures to


adjust to the increased demand we also had somemanual intervention tomake sure we were accelerating it. The way you programyour ERP could take awhile to react," saidMcLendon.


Digi-Key also had tomake somemanual adjustments,which


resulted in the distributor adding inventory over and abovewhat the predictivemodel recommended. "Our ordering is based on forecasted sales and forecasts by their nature rely on taking a look at historical usage. This is a very good and analytical approach to purchasing as long as the growth iswithin +/-15 percent," said Larson.


"When you go into a year like 2010 where growth is so fast, that


type of forecasting and predictive buyingmodel can't react quickly enough to the upturn, and as a consequence, we had tomake some decisions andmanually override our programmatic buying model," said Larson.


Larson says the additional investment in inventory paid off. The


company grew its North American sales by nearly 48 percent, and global sales by 64 percent last year.


For buyers, the good news is thatmanufacturing production


capacity is catching up with demand. "It's encouraging to hear wheremanufacturers are in terms of catching up, but the events in Japan did not help," said Hess.


Mouser's assetmanagement teamhas been closely watching


component lead times, and is in contact withmanufacturers to determine what the distributor can do to ensure that it has inventory at the levels needed to service its customers.


Lead times are always a challenge, said Hess. "It's our responsibility to have product on the shelf."


42 | June 2011 # of NA


buyer it's very important to have inventory on the shelf at the levels that they need it," said Hess. "Fromday one of the earthquake, we've had a teamdedicated to ensuring that we get the product we need on the shelf. If we need to pull in product earlier or increase the order, we've done that," he added.


If themanufacturer is unable to provide thematerials needed,


Mouser will try to work with the supplier to find a solution. "Themost important thing for us is to keep the breadth of


inventory on the shelf because if you go online to buy something it needs to be in stock and ready to ship that same day. That is the same for customers who call our sales branches throughout the world. So we focus on inventory," said Hess.


New challenges in 2011


More new product introductions (NPIs) are expected in 2011 than last year, whichmeans distributors will face a bigger challenge in terms of keeping up with the new product launches, a core service that they provide to their suppliers.


Distributors will need to ensure that they get product introduced


as fast as the suppliers launch their new lines, which includes having the rich content to back up the launch along with stock so designers and purchasers can buy the new parts immediately.


Newproduct introductions are something that catalog distributors


have done a very good job of, saidMcLendon. "Suppliers rely on us to help get that product designed in," he added.


A big issue atMouser is getting all the information about the


new products posted at its website. "A lot of our growth comes fromintroducing new products," said Hess.


"We havemore than 1,000 product knowledge center pages,


which aremicrosites focused on a particular technology or a specific product," said Hess. "These pages provide engineers and buyers with everything they want to know about that product - features, benefits, applications, links to technical docs, links to applications notes - so we can educate the engineers or the buyers about the products online at their own speed."


Every newproduct that is launched has amicrosite created for it as


a quick learning page, andwithin that page designers and purchasers are able to buy itwith one click, added Hess. "The important thing is whateverwe are promotingwe need to have stock."


Catalog distributors are garnering a greater portion of their sales


through their websites. Digi-Key has been consistently growing its sales via theWeb over the past several years, deriving 76 percent of its sales fromthe web in 2010 up from71 percent in 2009.


The distributor recently announced that it has dropped all print


versions of its product catalog,marking amajormilestone in the catalog distributor's transition into a totally integrated Internet- based distributor. Integrating all product and support information online puts engineers and procurement professionals in control as they solve tough product development challenges, said Digi-Key.


Allied Electronics followedwith 40 percent of its total sales from


theWeb, up from30 percent in 2009.Mouser Electronics derived 39 percent of its sales fromonline buying, the same as 2009.


Newark also grew its online sales, reaching nearly 35 percent,


up from24 percent in 2009. The percentage provided in the Top 50 distributors report (May 2011 issue) did not include eProcurement sales.


www.electronics-sourcing.com


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