Called a catalog distributor in the good old days, Digi-Key Corp. continues to make its mark in electronic component distribution and to evolve with the market.
Just a year ago, the distributor announced the retirement of its long-time president and chief operating officer Mark Larson. Dave Doherty, the company's executive vice president of operations, stepped in to take the helm. Larson retains a board-level role as vice chairman and advises the company.
We recently sat down for a chat with Doherty to get his thoughts on what direction he plans to take Digi-Key, as well as how the electronics distribution business and industry are evolving.
EBN: Talk a little about your plans and hopes for Digi-key. What do you see as Digi-Key's key differentiators, market position, etc.? What new directions are planned?
Doherty: I'm hoping that this transition of leadership will feel relatively seamless to outside community. Digi-Key is a company founded by an engineer when technology was transitioning from tubes. Mark [Larson] came into place and has provided visionary leadership for almost four decades. I come from engineering roots, as an EE that was customer of Digi-Key. I started to see the value proposition of efficient way to communicate and reach customers. I watched Mark from afar as a customer then as a supplier then as a competitor and came to marvel at the company and it's leader. Eight years ago, I moved to a place inside the company and tried to understand it. Change is inevitable but what is critical to us is staying true to our core value; providing engineers with products they need.
The transition going well as well as can be expected when you are replacing a legend who has been in the role 39 years. Mark is still accessible and a big part of our company as a mentor and to offer council. Kudos to him for putting together a strong team before he left.
We got aggressive in 2012 and doubled our SKU count. I still believe the basic tenants of selection and availably will continue to drive success. What engineers want is consistent: 24/7 Web site availability for the products they need. Procurement customers look a little more purely at what the company needs to be successful. They want electronic data interchange (EDI), manufacturing resource planning (MRP) sharing, portal access, and more.
Customers, especially in the U.S. and Europe, with so much volume move offshore. These people are looking for places to let innovation flourish, and get product out there quickly. They don't have the luxury of visibility and they build to order. In this world, our model is becoming even more accepted. Customers don't have back end visibility and rely on us to have inventory when I need it.
EBN: Can you speak a little about how business-to-consumer (B2C) commerce is impacting customer expectations?
Doherty: B2B e-commerce is definitely staring to feel more B2C. Now, in our personal time, we have Amazon, Netflix, and others. We expect certain functional utility, like the ability to bounce back and forth to a shopping cart, delay purchase and the rest. That function utility that customers want as a consumer is bleeding over to business customers. On the web you are dealing with single entity on the other side of connection—and they expect a certain experience. We have a defined path to purchase in our e-commerce site. We've identified the traditional ease of use and make sure it is incorporated n to our site as well.
My guess is that we are on an evolutionary path that still has a lot of legs to it. Data scientists are continuing to make sites that evolve with consumer learning. There will be another huge wave to leverage technology, including sensors, wearables, and IoT, to self power some of these capabilities and lower the bar on innovation.
EBN: How is Digi-key working with customers to enable the supply chain?
Doherty: The supply chain is critical and has many challenges that go hand in hand with it. Many companies doing business around the world but that doesn't' make them global. We have overcome the challenges with model of inventory shipping out of one location. We work with with FedEx and UPS to break through delays that slow us down from getting product to customers as quickly as possible. We process an order in about an hour but till have to clear customs.
I see more and more companies being smart enough to collaborate, knowing that they can't do it all in house. There has been an explosion of quick turn manufacturing houses. We are the collaborative partner that has inventory. I see it as many points on a circle; people have a concept and are turning to those who can enable them to get it done. We used to think mostly about Tier One contract manufactures, but now they are trying to offer services that looks smaller. The number of smaller contract manufacturers going for the incubator market is astounding. There's a huge hot bed of innovation for ideas and concepts. Nine out of ten won't make it but one or two will. No one has perfected the recipe about how to hit a design home run, s they need partners to at least give it a shot. That's our sweet spot.
EBN: Are there trends that you are seeing emerging for 2016?
Doherty: From a macro perspective, nobody is forecasting a very robust year. Lead times continue to be low. Inventory is getting burned down through distribution and customers. We are seeing some outcomes in terms of spot shortages. That causes an emotional event and customers are trying to build inventory in the pipe—so we are in trough that will lead to a small boom. More and more engineers are designing in modules over board level products to get to market even faster.
EBN: Are there new directions that Digi-Key is pursuing?
Doherty: We took this time of change as a chance for reflection. We want to evolve faster. If someone hasn't been on the web site in a month, they should come by. We are constantly tweaking it. We are constantly asking customers what they want more access to. We are decreasing our time to market, and at any given time we are in the middle of a couple of dozen experiments around providing more functionality and efficiency.