ESNA spoke with ReSolve, part of Arrow's newly launched reverse logistics group, which also includes Intechra, an IT asset disposition services company and Converge, an independent distributor, to discuss the importance of a reverse supply chain logistics program. 
The aftermath of Japan's earthquake last month has left the electronics supply chain struggling with production stoppages and shipment delays of electronic components and raw materials supply.
Because the DRAM market is highly volatile the current buyer's market could quickly swing into a seller's market during the second half of 2011. Buyers will need to keep an eye on several key issues.
Electronics distributors struggle in 2009
Due to an industry downturn marked by lower demand, falling prices and shrinking profit margins, the total North American revenue for the top 50 distributors fell by $4.4 billion or 16 percent to $22.8 billion in 2009, according to Electronics Advocate’s survey of the electronic components distribution industry.
The largest share of sales for the top distributors was derived from semiconductors at $7.7 billion, followed by computer products at $7.2 billion, passives/electromechanical devices at $3.1 billion and interconnects at $1.3 billion.
Computer specialists were hit hard, particularly Bell Micro Products, which generates all of its revenue from computer products. The distributor posted a revenue decline of 37.7 percent in 2009, after falling 23.5 percent in 2008. Bell Micro was acquired by Avnet in March this year for $594 million.
Sales of the top two distributors were also down in the double digits. Avnet’s sales dropped 11.1 percent, while Arrow’s decreased by 16.1 percent. Both Avnet and Arrow derive a significant portion of their businesses, 40 percent and 47 percent, respectively, from computer products. In 2008, Avnet’s sales dropped slightly at 1.1 percent and Arrow’s sales decreased 2.3 percent.
Overall, the North American distribution industry lost a lot of ground in 2009 due to an economic slowdown across most industry sectors. Only six of the top 50 distributors recorded sales gains in 2009. Forty-three distributors posted losses, and one recorded flat sales.
Sales of semiconductor specialists also were significantly impacted by lower demand and falling prices. Nu Horizons, who derives the majority of its sales from semiconductors, posted a 27.1 percent drop in sales. Smaller distributors with the bulk of their business from semiconductors also reported declines. USI Electronics posted a sales loss of 8.1 percent and Symmetry Electronics recorded a decline of 8.2 percent.
No one went unscathed this year. Even catalog distributors posted lower sales in 2009. Mouser Electronics posted a sales drop of 11.6 percent. Newark reported a sales decline of 8.2 percent. Allied Electronics recorded a sales decline of 11.8 percent, and Digi-Key posted a 10.6 percent loss.
Several distributors, including CCA, Dependable Component Supply, Edge Electronics, Peerless Electronics, and Powell Electronics, that were expected to make the Top 50 ranking did not respond to this year’s survey.
Distributors hit the hardest include PUI (rank 47), which posted lower sales of 41.7 percent, Richardson Electronics (rank 14), whose sales sank by 30.7 percent, and Nedco Electronics (rank 34) with decreased sales of 31.7 percent.
Although the majority of distributors cite a slowdown in the economy as one of their biggest challenges, a handful of distributors — Interstate Connecting Components, Waldom Electronics, Jameco Electronics, Sherburn Electronics, and Astrex — managed to grow their sales slightly in 2009.
Interstate Connecting Components (rank 30) led the pack with an 8.8 percent growth rate, followed by Waldom Electronics (rank 28) with a 5.0 percent growth rate. Jameco Electronics (rank 41) recorded a sales gain of 4.7 percent, Sherburn Electronics (rank 33) posted revenue growth of 4.2 percent and Astrex (rank 32) grew 1.6 percent.
Despite sales declines some distributors including Bisco announced N. American branch office expansions in 2009, while IBS reported global expansions in Hong Kong, China, the Philippines, Singapore and Malaysia. Mouser expanded in North and South America, Europe and Asia.
Similarly, TTI continued to expand in Eastern Europe and TTI Asia added sales offices in the Philippines, Beijing and Dongguan, China. PEI-Genesis opened new sales offices in Paris, France; Milan, Italy; Calgary, Canada, and in San Jose and Houston.
The top two distributors continued their acquisition strategies in 2009, though slightly scaled back. Arrow Electronics acquired A.E. Petsche. Avnet purchased Sunshine Joint Stock Co. (Vietnam), Abacus Group Plc and a controlling interest in Vanda Group (China).
Other acquisitions include Premier Farnell’s (parent company of Newark) purchase of a small distributor in Eastern Europe and CAD design software company CadSoft. Online Components purchased Evalkits.com.
Not one of the top ten distributors reported growth. Avnet took the top spot this year followed by Arrow Electronics, Future Electronics, Bell Microproducts, Digi-Key, TTI, Newark, DAC, Nu Horizons and Allied.
Despite a significant decline in revenues this year, the top ten distributors continue to control the largest share of the North American distribution industry with 91 percent, or $20.8 billion in revenue for 2009
In addition to economic conditions, distributors also noted several other factors that have impacted sales in 2009. These include managing long lead times, maintaining profit margins, and a lack of capital for expansion.
However, distributors are looking forward to three industries in particular to fuel growth in 2010. These include energy (23 respondents), medical (21 respondents), and aerospace/military (19 respondents). They are also placing bets that emerging sectors including energy-efficient lighting and solar energy will drive further growth this year.
Distributors expect growth from value-added offerings, new products
With nearly all of the top distributors offering some kind of value-added service, nearly half of survey respondents expect these services to help grow sales in 2009. However, more than half of the top 50 distributors expect that new products will fuel growth this year. Thirty-four distributors report that new products will be the biggest growth driver, while twenty-three distributors believe value-added services will drive sales.
A host of other factors also are expected to help distributors make some gains this year including expansion into new markets and product areas, strategic partnerships, increased global offices and acquisitions.
The survey shows that 9 distributors derive 50 percent or more of their sales from traditional value-added services such as cable and harness assemblies, switch assemblies, connector assemblies, IC programming, and kitting services. They also offer supply chain services such as materials planning, bonded inventory, in-plant stores, vendor management inventory, and global logistics programs. Some also offer custom battery pack design and testing and solar installation kits.
Eleven distributors say 20 percent to 49 percent of their sales are derived from value-added services. The remaining 18 distributors that responded to the survey question say value-added services account for 19 percent or less of their sales.
Design services are also a source of revenue. Twenty-six of the top 50 distributors say they provide design services, which are supported by one or more design engineers on staff.
Avnet is number one
Avnet took the top spot as the leading N. American distributor with sales of $7.5 billion, slightly ahead of Arrow, which posted sales of $7.0 billion. Avnet also posted global sales of $16.6 billion in 2009. Arrow recorded worldwide sales of $14.7 billion.
Both distributors also maintained their market share despite lower sales in 2009.
Online buying continues to grow
Sales transactions via the web are still a small portion of the distribution industry’s sales, generating between 1 percent to 40 percent of North American sales, according to Electronics Advocate’s survey. Of the Top 50, 40 distributors offer online buying. Fourteen of the top distributors reported double-digit sales via the Web.
Those that reported online buying in the double digits include All American, Components Distributors, Electronics Supply, Flame Enterprises, Gopher, Hammond, Kensington, Marsh, Nu Horizons, SMD, TTI and Waldom.
All American tops in productivity
All American can boast the lead in employee productivity with $5.9 million in sales per employee, followed by the Genie Group with $5.0 million in sales per employee. The survey also reveals that only three of the top ten distributors — Arrow, Avnet, and Nu Horizons — rank as leaders in productivity.
Other leaders include Flame Electronics, USI Electronics, Sherburn Electronics, Symmetry Electronics and A.E. Petsche.
Year after year quality continues to remain a top priority. Of the Top 50 distributors, 33 of them have received ISO certification. Of the remaining 17 distributors who are not certified, two said they are in process of registration and four distributors have no plans for certification. The remainder did not respond.
Global sales reach $42.1 billion
North American distributors posted global revenues of $42.1 billion. Not surprisingly, the top 50 distributors derive the majority of their sales from North America at 53 percent. About $10.4 billion or 26 percent of their sales were derived from EMEA (Europe, Middle East, and Africa), while nearly $8.0 billion came from Asia. About 1 percent of sales came from South America.
Top 10 independent distributors’ sales rise 6%
Despite a downturn over the past few years, independent distributors managed to grow their sales by 6 percent in 2009. Global sales for the top 10 independent distributors rose from $1.7 billion in 2008 to $1.8 billion.
Four of the top 10 independent distributors posted higher sales in 2009. Smith & Associates led the pack with a 41 percent increase in sales. World Micro Components followed with a 25 percent increase. Advanced MP posted a sales increase of 24 percent and Horizon Technology’s sales rose by 9 percent
See related Top 50 articles:
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ESCS – An Industry Advocate in the Fight to Combat Counterfeits
Electronic Supply Chain Solutions, Inc. is a leading advocate in the fight to combat counterfeits in the electronic component distribution industry.
ESCS has always been actively commited to quality and to working with government and industry leaders in the development of best practices for the electronic component supply chain.
Our commitment to our customers is that nothing leaves our dock without either a proper source pedigree or a professional 3rd party test report for authenticity and/or functionality.
ESCS’s credentials include:
AS9120 Certification
ESCS was among the first three companies in the U.S.A. to achieve Aerospace AS9120 certification. After five increasingly in-depth audits, the company achieved a 100% score in its 2008 full re-assessment audit.
The AS9120 standard flows down the requirements of your AS9100 manufacturer’s quality system, giving you the assurances you need that your requirements are being met with the highest quality operations, including special procedures for inventory control, split lot traceability and a stringent vendor management system.
You can easily view our AS9120 certification status and most recent audit results on the OASIS database at http://www.sae.org/OASIS.
CACP Founding Member
ESCS is a founding member of The U.S. Chamber of Commerce’s “Coalition Against Counterfeiting & Piracy” (CACP). The CACP coordinates high level inter-governmental and industry initiatives to protect all U.S. intellectual property rights.
Mr. Heaphy was an active participant in the CACP 2007 Summit in Washington, DC, representing the electronic component distribution industry.
Government & Industry Association Memberships
ESCS is a member of ERAI, Inc., an industry group promoting information sharing and high standards of business ethics among independent distributors of electronic components. ESCS is also a member of The Government and Industry Data Exchange Program (GIDEP).
Pioneer of Safe Source Seal Source Validation Program
ESCS’s President, Matthew Heaphy III, recognized the need for a validated means of providing sourcing declarations to aerospace and military manufacturing customers of independent electronic component distributors. As a result, the company developed the Safe Source Seal program, which was officially launched in November, 2008. Safe Source Seal has been well received by ESCS’s customers as well as industry leaders involved in developing standards for best practices to combat counterfeits. For further information, please visit http://www.safesourceseal.com.
Our Industry Research
With counterfeiting of electronic components rapidly escalating, there has been a lack of fact-based information available on how aerospace and military manufacturing companies have reacted to the problem. To address this information gap, ESCS staff conducted interviews with over 90 quality and procurement professionals across a range of companies, from leading prime contractors to smaller contract manufacturers. The resulting industry assessment was issued in October, 2008, “Awareness and Industry Efforts to Combat Counterfeits in Aerospace & Military Electronic Component Procurement”.
Speaking Engagements
As a recognized quality leader among independent distributors and an active advocate of best practices to combat counterfeits, Mr. Heaphy has spoken on the subject to various companies and industry groups including Honeywell, Lockheed Martin, NASA, and most recently as keynote speaker at the 2008 Future Aerospace Congress.
If you would like to inquire about a possible speaking engagement, please see our Contact Us page.
Free Consultative Services
Mr. Heaphy and the entire staff of Electronic Supply Chain Solutions, Inc., are pleased to assist companies wishing to develop specific risk mitigation strategies to combat counterfeits. ESCS can quickly take you through a “checklist” of risk factors, look at your companies strengths and potential weaknesses and recommend appropriate steps to help secure your supply chain, while maintaining maximum flexibility to meet your program objectives.
Please see our Contact Us page for information on how to reach us and begin the process.
ESCS Procurement Resources
Click-n-Go Launchpad
This is the starting point for sourcing of electronic components, saving you time and putting at your fingertips the information you need to make sound business decisions:
Shop by commodity type
Navigate to over 3,000 manufacturers
Drill down to 100′s of RoHS initiatives
Access key entry points to the DSCC site
Look up datasheets
…and much, much more. Over 60% of buyers who visit bookmark this valuable resource.
http://www.ICPHOTOSYNTH.com
Photographic Parts Database
ESCS innovates with another first in the electronic component supply chain. Navigate to a high magnification photo of the part you’re looking for in a “virtual 3-D image”, with multiple parts rotated to show all part markings, logos, etc.
ICPHOTOSYNTH also gives you a link with each part photo to the related datasheet. And for future reference, ESCS keeps a photo of every lot and date code we have ever shipped to you, just an email request away.
http://www.COTSS.com
Component Off The Shelf Services
ESCS innovates with another first in electronic component procurement. Now you can have all the services you need in a single request, so your products are delivered ready for the production floor. Keep your project on track and within budget. Let ESCS handle lead forming & tinning, tape & reeling, dry packing, even bar coding. Need testing or de-programming? ESCS’s COTTS can handle that for you, too. Learn more.
Online Request a Quote
Why not get started now sourcing your components through ESCS? We understand your needs and can help in developing strong, risk mitigation strategies. Use our easy, online form to request a quote.