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Digi-Key goes beyond catalogue distribution

Posted: 07 Jan 2013  Print Version  Bookmark and Share

Keywords:electronics distribution business  field applications engineers 

EBN Community Editor Barbara Jorgensen analyses how Digi-Key started out as a catalogue distributor to having its own production business.

Listening to the customer doesn't just mean responding to a complaint or following up a sale with a confirmation email. In some cases, it means restructuring or adding to an established business model.

The long-time catalogue distributor Digi-Key Corp. faced such a challenge about 10 years ago, when some customers wanted it to manage their production business.

"We discovered there was a gap between the traditional fulfilment business model and catalogue distribution," Chris Beeson, Digi-Key's vice president of global sales and business development, told EBN. "After receiving immediate fulfilment and delivery during the design phase, our customers suddenly had to deal with a different distributor, 14-week lead times, and hard-to-find products. They wanted to stick with us through production. So we looked at the production business and found, if we were going to play in this space, we would have to alter our business model," Beeson added.

Catalogue distributors operate under a very specific business model. They fulfil low-volume, high-mix engineering orders immediately from in-house stock. Their component prices are fixed, and shipments go directly to the end user or designer. Production orders are different. They rely on forecasts and factor in inventory that hasn't been built yet. They are subject to volume price negotiations, and they may be shipped to locations all over the world. Catalogue and production models rarely exist profitably under the same roof.

Digi-Key, a $1.5 billion global distributor that had published a paper catalogue for 40 years, wanted to provide production support without diluting the catalogue model. "Because we understand engineers' needs, we believed we could scale our core business attributes-wide product selection, stable pricing, and fast delivery-to support production," Beeson said.

One of the first things Digi-Key looked at was technical and sales support; it carries more than 2 million products from 650 suppliers. In volume distribution, this usually means outside salespeople, salaried field applications engineers who visit customer sites, and complex logistics services. It made centralized FAEs available 24/7 over the phone or through live chat to supplement online component specs and other information-rich content.

Digi-Key now sees itself as a hybrid "prototype-to-production" distributor. "We've also found that, if you can provide the customer with what they want, you don't have to put a label on your business model," Beeson said.

- Barbara Jorgensen
  EBN





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