Distribution


Dynamic distribution in the electronic components industry


Dave Doherty is the president of Digi-Key Electronics, a global electronic components distributor. Under Dave’s leadership, Digi-Key has expanded its global presence and exceeded the $3 billion mark in annual sales. Dave is a long-time veteran of Digi-Key and previously served as the vice president of global supplier and product operations. Here he shares his views on the future of the industry


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’d say we’re at a dynamic time in our industry, but I’m an optimistic guy and will always see the glass as half full. As a company, we’re definitely at an exciting point – the building for our new 2.2 million square foot expansion is about 95 per cent complete, and advanced automation systems will be installed and configured over the next nine months. A complete testing of the system will commence by the end of 2020, ahead of our planned June 2021 completion date. Aside from the construction, we’ve added more than 200 suppliers and over 300,000 new products over the last two years. We introduced our customers to our industry leading DK IoT Studio tool and continue to make website experience enhancements so that all of our customers have the information they need as quickly as possible.


Industry cycles But it hasn’t been all sunshine for the industry. Our industry went through one of its greatest expansions and contractions over the last 24 months. Digi-Key remained remarkably consistent in its expansion of new customer growth and line items shipped. We did experience major revenue expansion in 2018 and some minor pullback in 2019 due to product lead-time expansion and contraction.


The period of 2017 – 2019 was as volatile as any three-year period since I joined this industry 35 years ago. The below lead time graph provided by the Electronic Components Industry Association (ECIA) for passive products is an indication of the volatility that has been experienced in one product area that


inventory they carry, placing even more burden on purchasing professionals. A positive consequence of Digi-Key’s


Rendering of Digi-Key’s new Product Distribution Center (PDC) to open in June 2021 www.cieonline.co.uk


core model has helped address this predicament. Digi-Key’s roots continue to be in offering the broadest selection of product to support engineering prototyping and NPI requirements. Because of increasing supplier minimum order requirements and our conservative philosophy that places high value on holding inventory for immediate shipment, Digi-Key’s growth has accelerated with customer segments characterized by a “low to mid volume/high mix” model with very high service level requirements. We


depicts the disruption that occurred in 2017 and 2018 with a much steeper correction slope in 2019. This was a bit of a perfect storm, in particular with MLCC capacitors where the price point had been driven down over the years to the point that suppliers were pulling out of that segment. This combined with increased usage in areas such as automotive caused a disruption to the demand/supply balance.


Evolving the industry


Our industry is characterised by newly developing markets – e.g. industrial automation, transportation, medical, and more that are engaged in innovative product introductions that make it difficult to predict customer acceptance and thus, actual demand. This reality will continue to make it challenging for suppliers to accurately


Digi-Key’s sustainability efforts include using environmentally-friendly perforated fill material as a replacement for plastic packing peanuts and bubble wrap


predict and plan capacity requirements. Additionally, suppliers and traditional distributors are once again being pushed to reduce the amount of


see this segment as the fastest growing portion of the domestic electronics market, where our customers are rewarded for speed and service. Additionally, we see a growing trend with customers seeking M2M (machine to machine) connectivity to automate repetitive functions like order placement, stock check, quoting, etc. We believe Digi- Key has the most robust, real-time, Application Programming Interface (API) solutions in the industry, saving customers both time and money.


Sustainability factors


Digi-Key has been on a continued path to move towards environmentally friendly paper-based packaging. Some challenges remain with ESD sensitivity products and the requirements placed on them. Below is an image of the perforated paper and notice that we use for fill material, having replaced peanuts completely and bubble wrap in most applications.


In closing Digi-Key offers more than 10 million products globally, with more than 2.2 million in stock and available for immediate shipment, from over 800 quality name- brand manufacturers. Our customer- centered business philosophy continues to drive our rapid growth. We have a great group of people dedicated to providing the best possible service to our customers, and tools designed specifically to support electronics purchasing professionals. Now that’s something to get excited about!


digikey.co.uk Components in Electronics March 2020 25


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