CEO interview: Digi-Key builds for the future

December 12, 2017 // By Peter Clarke
CEO interview: Digi-Key builds for the future
Broad-line distributor Digi-Key (Thief River Falls, Minnesota) is on the rise. Digi-Key had global sales of $1.84 billion in 2016 and in preparation for a busier future it is quadrupling the size of its distribution facilities in Thief River Falls, Minnesota.

So eeNews Europe asked Digi-Key's chief operating officer Dave Doherty (shown above left) and vice chairman Mark Larson (shown above right) to explain how the company is differentiating itself from other broad-line distribution companies and why it is significant for Europe.

Its 2016 sales put Digi-Key a long way behind market-leading distributors Avnet at $25.17 billion and Arrow Electronics at $23.8 billion, but it still puts Digi-Key somewhere around 6th to 8th in the world ranking of distributors, depending on whose list you look at. Back in 2012 DigiKey was ranked 9th, according to EDN.

Larson, who ran the company for many years, before handing over the reins to Doherty in 2015, said the aim is to be able to serve prototype- through to production-quantities of components faster than the competition. Out of about four million product lines in total, Digi-Key has 1.4 million products in stock and ready for shipment. "That's twice as much product as anyone else, on two-day delivery – consistently," Larson said.

The key to doing that, is Digi-Key's long-held philosophy of focusing on a single distribution warehouse at its Minnesota headquarters. Other distributors have regional warehousing and that complicates the supply chain within those companies, Larson and Doherty claim.

Digi-Key's distribution model is aimed more towards fast turn delivery and support on prototyping for low to mid-volume applications, which nonetheless span application sectors from computing and telecommunications through medical, industrial and automotive. Digi-Key has built its business around fast delivery of parts and centralized multi-lingual support of customers available 24 hours a day and 7 days a week. "It also help us meet minimum order quantities. Aggregating demand can be used to hold MOQs for more customers," said Larson.

Doherty stresses that Digi-Key does well when the customer's design engineering team work well and efficiently get their own product to market and into volume. Doherty also emphasizes the culture in place at Digi-Key. "In Minnesota we are a big employer but we are still a relatively small company and yet we can compete on the world stage. We retain staff and they are supportive of customers; it's in the culture."

Digi-Key gross sales by product type. Source: Digi-Key

A positive culture is easier to foster when a company is growing profitably. And Digi-Key is growing in the global semiconductor market. As a private company it doesn't discuss its profitability in any depth but it does reveal some sales details. In 2016 semiconductor components were 47.7 percent of Digi-Key revenue. Passive components were next most significant at 23.8 percent; electromechanical components amounted to 14.8 percent; and connectors and cabling were 13.7 percent. The global growth in 2017 is expected to be 25 percent taking Digi-Key annual sales up to about $2.3 billion.

Next: IoT suits Digi-Key

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