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Keeping up with technology trends and investing in the future

02 February 2018

Digi-Key is one of the fastest growing distributors of electronic components in the world. More than 1 million products are in stock and ready to be shipped from its headquarters in Thief River Falls, Minnesota, USA. Last year, the company was on course for a turnover of £1.6bn and saw Europe as a key market, with a 36 percent growth in UK sales.

DPA & Connectivity Editor, Paige West, spoke to President/COO of Digi-Key, Dave Doherty and Vice Chairman, Mark Larson about how they are driving this growth and the company’s future investment plans that will more than double distribution capacity.

The evolving customer 

Since its founding in 1972, Digi-Key has been able to offer a broad selection of in-stock electronic components that help engineers through the entire design process from prototyping to production. With over 1 million parts in stock, related content on all products needs to be successfully exchanged with the customer in a method that best suits them. For an engineer looking to purchase a product, having access to everything online is quickly becoming the preferred option. No longer do they wish to speak to a human operator, instead relying more on simple communication methods. This means Digi-Key’s IT requirements are now huge and as its digital infrastructure continues to grow, the way the company interacts with customers has evolved. 

“It’s still all about knowing your customer’s needs. People have less time to form personal relationships so you have to think of other ways to interact, but not feel invasive,” Dave Doherty, President/COO of Digi-Key.

Data has now become an integral part of the process, not just collecting it but analysing it. Over the course of a year, Digi-Key will process over 20 million purchasing transactions and by mining data from these transactions, the company can start to tailor customer experience down to an individual level. 

With this change comes the requirement for new skills; it’s a different type of individual that needs to be recruited to interpret the large volumes of data accumulated by these big manufacturers and distributors. You’re looking for themes and trends all the time, and how best to service that. With that in mind, Digi-Key is now actively recruiting data analysts to meet the above needs. 

Keeping up with big technology mega-trends 

Customers are using products and capabilities more broadly than they ever have in the past. Emerging trends like IoT, 5G and autonomous cars have seen growth in sensors, relays, connectivity etc. and Digi-Key is constantly looking at adding new lines to keep pace with this. 2017 saw the addition of approximately 100 new suppliers and in totality, with the other additional 600 suppliers it already had, the company added 145,000 new parts that weren’t on offer previously. 

Rendering of Digi-Key's new building in Thief River
Rendering of Digi-Key's new building in Thief River

Automation products has become an even greater part of Digi-Key’s offering; around 20 new lines dedicated to automation were added in 2017. Additional automation products from suppliers such as TE Connectivity, Molex, Omron and Panasonic were included and the Digi-Key website now has an entire section dedicated to this area. This opens up a whole new set of customers and allows them to meet their engineering needs even more. Digi-Key’s prominence in this area has driven sales not just in the UK but worldwide. 

But how does the company decide which lines are the most relevant to the engineering community and which ones will be in demand? It comes back to mining that data; what do people type in the search bar? Which suppliers are they looking for? How popular is a certain product? Using this information, Digi-Key can reach out to potential suppliers with real data and predict which products are going to be popular. Dave Doherty notes that predictions become easier with longer data sets over a sustained period of time, rather than in the short term. A certain level of automation is used to monitor and set trends and decide appropriate stocks levels but the company also has a dedicated team that look closer at historical transactions, analyse the data and make appropriate decisions. 

The future of Digi-Key

Digi-Key’s service and support systems have been specifically designed to respond to the needs of customers. It’s one of the few distributors who don’t have multiple warehouses across the globe, meaning its main distribution centre in Thief River Falls, Minnesota, USA doesn’t have to compromise on the breadth of product. Having so many products in stock in its expandable distribution space of more than 700,000 square feet (65,032 square meters) allows Digi-Key to ship 99 percent of all orders the same day they are placed. 

Now, Digi-Key wants to double its capacity within the next 10 years and to do this, it’s expanding its presence in Thief River. Over the next few years, a new building will be constructed to accommodate an even wider product portfolio and provide more space for the growing data analysis and marketing teams. Digi-Key is investing millions in this new building, which will have approximately 3½ x the footprint of the current one. 

A connecting bridge between buildings will be incorporated, featuring not just as a walkway but a conveyor. Advanced automation technology will play a huge part in keeping Digi-Key ahead of the game and particularly in removing the non-value added tasks, like walk times for the workers, and replace them with goods-to-person and shuttle systems. The company is looking to use its own engineers, who were originally brought in to service customer needs, to help make the new manufacturing lines more efficient. How can Digi-Key generate its own automation that is unique and home-grown? An important question that the company has spent years researching and planning. 

This investment will not only expand the company but the surrounding community of Thief River. Every year Digi-key is attracting more people to the area and Dave Doherty states he has a strong commitment to creating 1,000 new jobs over the next ten years.

“Thief River is the heartbeat of Digi-Key. Digi-Key is connected to the community just as much as the community is connected to Digi-Key,” Dave Doherty, President/COO of Digi-Key.

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