Top 50 Distributors Report Global sales shrink in 2012 (Total revenue for North American distributors, $billions)
was very stable and low lead times, so product availabilitywasn't an issue,whichmeans that customers could go JIT or a bitmore handto mouth than they had in the past," he added. "This creates a
"Inventory in the supply chain is very stable and very low
so any shock such as an unexpected recovery in demand or a natural catastrophewill immediately start pushing out lead times," saidMichael Knight, SVP,Americas, TTI.
Global sales for North Americanbased distributors fell four percent in 2012. Revenues declined from$63.1 billion in 2011 to $60.6 billion in 2012. Source: ESNA
exciting," said Ed Smith, president, Avnet ElectronicsMarketing Americas, Phoenix, Ariz. "If you look at reoccurring business, itwas flat." Avnet experienced a decline in the Americas due to the closure of its
commercial components business in Latin America,whichwas part of the BellMicro acquisition a fewyears ago. Smith said the business sold components at very lowmargins to resellers. "Itwas a business based in a lot of small countries," said Smith. "In
order to build an infrastructurewewould need tomeet all of the U.S. government compliance issues, and itwould have costmore thanwhat the businesswouldmake," he said. Instead, Avnet "retrenched" the business as a Brazilian distributor that offers valueadded services. Many distributors believe thatwhat happened in 2012 is directly
related to the supply demand situation in 2011. "What happened last year actually started in the back half of 2011," saidMichael Knight, senior vice president, Americas, TTI Inc., Ft.Worth, Texas. "The big changewas thatwe had a really strongmarket in 2010 going into 2011 so therewas a big runup. Lead timeswentway out and customers were accumulating inventory. Theywere doing a lot of hedge buying," he said.
Arrowexpandsmarket share (%of total Top 50 revenue)
hypercompetitive environment for distributionwhere the customers aremoreworried about price than they are about assured supply. So they put everything out for bid," said Knight. "Our quoting activity in 2012was an alltime record.We looked at a ton of business last year. That pricing pressure created one of the biggest challenges in 2012,which ismargins, and it's going to be the case in 2013 for both distributors and component manufacturers."
Adapting to slowgrowth "In North America,we had to adapt to growth thatwas slow," said Avnet's Smith. "In the pastwhenwe've seen growth, itwas either explosive growth or rapid declines. Seeing a period of slowgrowth,we had to change some of theways thatwe operate the business in terms of hiring, butwe didn't have to change our strategy," he said. Most distributors agreed. "We have been consistentwith our go to
marketmodel for some time now," said ScottMcLendon, president, Allied Electronics Inc., Ft.Worth, Tex. "Wewant to do business theway our customerswant to do business. If that'swith a dedicated sales resource, online, catalog or a combination,we are flexiblewith local resources deployed across 53 sales offices in North America." "Our strategy has been not to veer off course fromour core strategy,
and to continue investing to ensure that the customer has a good experience and the ability to find the product on the shelfwhen it’s needed," said Jimmy Seifert, senior vice president of Newark element14, Chicago, Ill. "What it didwas drive us to a different type of behavior," said
Seifert. The distributor began targeting verticalmarketswhere it found growth, such as factory automation, oil & gas industry, and some medical applications. "Balancing nongrowth sectors versus growth sectors became the
newway of doing things," said Seifert. "For example,we found a growth sector in design activity so our strategywas to profile our inventories to very high robust levels for evaluation boards, development boards and classic parts around highend semiconductor products to have available for design engineers to find quickly for their concept prototyping builds." Catalog or highservice distributors like Newark element14 and
Arrow expanded itsmarket share in North America (NA) by one percent in 2011, while Avnet lost one percent in NA share. Source: ESNA
"Then themarket stabilized, lead times started coming back down,
and therewas a lot of inventory beingworked off in the back half of 2011 going into 2012," said Knight. "We had a little bit of a spurt going into 2012, but the story in 2012
24 |May/June 2013
Mouser continued to see a lot of design activity throughout the year. "In our case, some of the engineering business continued to growand we hadmore orders than ever before. Butwe sawsmaller orders," said Glenn Smith, president & CEO,Mouser Electronics,Mansfield, Tex. Some of this growth could be attributed to their focus on new
product introductions. "We're still focused on introducing new products and I don't see any need for that to change," added Smith. "What really drives growth and supports our supplier partners is our fundamental core strategy of newproduct introductions on our
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