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    Global Component Industry: The Deadly Pandemic, Shortage of Semiconductors, and Challenges Ahead

    This is the most apt time to talk about the global component distribution keeping in mind the present semiconductor crisis. While the market has turned everything to stand back on its legs, the global general electronic components market is expected to grow from $337.12 billion in 2020 to $378.68 billion in 2021 at a compound annual growth rate of 12.3%. The general electronic components market is expected to reach $509.06 billion in 2025 at a CAGR of 8% but at the same time how can we forget the acute shortage of chips in history?

    Semiconductor being the major industry for electronics, our ELE Times Sub Editor & correspondent  Sheeba Chauhan took this opportunity to interact with the industry’s major players. It is our pleasure that we got an opportunity to interact with David Stein, vice president of global supplier management for Digi-Key Electronics.

    Excerpt:

    ELE Times: How leading global electronics distributors are weathering the evolving marketplace to survive and thrive.

    David Stein, vice president of global supplier management for Digi-Key Electronics: The past year has taught us that the market has the potential to be more unpredictable than anyone thought. Digi-Key has weathered the unpredictable market conditions by continuing to invest in strategic initiatives to expand warehouse capacity, localize the customer experience both digitally and from a support standpoint, scale our website and web services and expand into new markets, in order to continue serving customers around the globe with the widest product offering and best possible purchasing experience.

    Digi-Key’s inventory model is more important than ever for the engineering community to be aware of the stock we have available. Today, Digi-Key offers 12.6 million parts from 2,000 suppliers, and since January 2021, we have added 500 new suppliers and 1.1 million parts. In addition to our core stock, we also offer 1.1 million parts from more than 850 suppliers through the Digi-Key Marketplace, augmenting the types of products that we don’t currently offer in our existing core business model.

    ELE Times: Almost two years of pandemic and now a shortage of semiconductors, how challenging has been maintaining the supply chain agility and maneuverability for you.

    David Stein, vice president of global supplier management for Digi-Key Electronics: 2020 and 2021 have brought nearly every possible type of challenge to the electronic components industry: decreased production due to the COVID-19 pandemic extended shipping times due to delays at ports and container shortages, natural disasters, difficulty accessing raw resources and everything in between – all throughout a period of time where customer demand for parts has never been higher.

    The good news is that some distributors, like Digi-Key, were able to forecast this shortage well in advance. We keep a close eye on global design activities in the engineering community, and made note of an uptick in activities throughout the second half of 2019. This, in addition to the high volume of new product introduction and design starts Digi-Key was supporting, triggered our team to ramp up purchasing inventory starting during the second half of 2019 and in early 2020, scheduling orders through the end of 2021, to give suppliers as much visibility as possible into future needs.

    Suppliers in every niche of the market deserve a round of applause for their performance over the past year. In 2021, suppliers have gone above and beyond, identifying new, innovative ways to increase their supply and provide customers with the parts they need.

    Distributors are proud to work with suppliers who truly understand the importance of their products to the engineers and makers around the world who are creating innovative projects every day. With that in mind, it’s highly likely that there will be an uptick in supply as a result, sooner than expected.

    Digi-Key experienced significant global growth of greater than 60% in 2021, and its growth in India is more than 80%. Digi-Key works closely with its trusted suppliers around the world to ensure the availability of inventory throughout this high level of demand, even when it has been a challenge for traditional distributors to keep up with their inventory pipelines.

    Digi-Key’s continuous investment in bringing in new suppliers and increasing product SKUs has prepared us better for the high customer demand globally. Our earlier actions to increase inventory levels have also helped us catch this wave that started during the third quarter of 2020.

    ELE Times: How OEMs are leveraging the influx of big data and the Internet of Things (IoT) to design and build wearable technologies that improve human health.

    David Stein, vice president of global supplier management for Digi-Key Electronics: Wearables, in combination with big data, have the potential to profoundly improve human health.  Wearables are evolving from simple convenience devices that track basic health vitals to reliable medical diagnosis products.  Wearable sensors are able to gather health data about an individual’s habits, diet, exercise levels, heart rate, and several other parameters.  This data is, by and large, collected passively with little deliberate action on the part of the individual.  All this data provide for opportunities in tailored medication and personalized treatments.  Furthermore, with sufficient collection time, the data can be used for preventive medicine that can detect diseases earlier.  Analyzing the vast amount of data generated by wearables will require sophisticated AI tools that are currently controlled by a few companies.  The types of partnerships OEMs form with big data companies will be a determinant of success.  OEMs will also need to upgrade their workforce skill sets to be more software and data science-focused.  Privacy and data security will continue to play a large role and these responsibilities cannot be outsourced.

    ELE Times: General electronic components are the devices that work within an electronic system to have an effect on their associated fields like automotive, aerospace, communication, and many related industries. How do you relate to the above statement?

    David Stein, vice president of global supplier management for Digi-Key Electronics: Over the past year, there has been a surge in new product introductions in every industry from automotive to medical, industrial automation to consumer devices and everything in between. IoT and related solutions are in particularly high demand and have been a significant driver of Digi-Key’s business in recent years, which is likely to continue into 2022. Digi-Key will continue to provide all the components and services necessary to fuel innovation across the entire ecosystem.

    ELE Times: How are you evolving to meet the changing demands of the industry?

    David Stein, vice president of global supplier management for Digi-Key Electronics: The biggest capital investment Digi-Key has made in recent years is in warehouse infrastructure. Our new Product Distribution Center Expansion (PDCe) is close to quadrupling the footprint of what we currently have in Thief River Falls, Minnesota. It’ll give us 204,000 square meters and allow us to serve close to three times the number of packages that we support today, out of a single site location. It will be the largest facility in the world committed to shipping custom, fragmented manufacturer pack quantities to meet our customers’ exact requirements. This investment is the result of Digi-Key’s commitment to continuously exploring new ways of reducing the delivery cycle time to its customers around the world, including India.

    This will continue to be our model, as it’s the best way to provide our customers with the broadest supply of inventory by aggregating global demand under one roof. We also continue to receive feedback from customers that they’d like to receive the majority of their build material from one place, all at the same time, and shipped to them wherever they are around the globe. Even as customers’ supply chains shift, we can quickly ship to different manufacturing locations as they convert from an NPI line to a production line, or even shift countries for their own strategic reasons, for example.

    Although I don’t have a crystal ball that can predict the future, I think that the impact that these last couple of years have had on Digi-Key, and the industry as a whole, have increased the amount of confidence and trust we have gained in each other and our ability to meet a crisis head-on — ultimately benefitting customers and the global engineering community.

    ELE Times: How do you maneuver during the changing face of distribution?

    David Stein, vice president of global supplier management for Digi-Key Electronics: Our customers have high expectations in both service and quality. Our new warehousing capabilities will offer more product traceability and accuracy of cut tape products. Digi-Key has also invested in numerous behind-the-scenes technology enhancements for our customers including improved search experience, customized search, personalized content, and visual product search. Digi-Key also offers the widest selection of component- and automation-level products to select from, including an enhanced Bill of Materials (BOM) Manager, quoting, and API tools.

    ELE Times: The distribution business has evolved radically, with customers expecting support from first design through the end of life. How are you dealing with the technical support to your present services?

    David Stein, vice president of global supplier management for Digi-Key Electronics: At Digi-Key, we wholeheartedly believe in a digital-first approach, and that has served us well in 2021. We are constantly developing new ways to make it easier for our customers to engage digitally from anywhere around the globe, including localizing their experience in markets around the world with local language, currency and support hours, as well as fast shipping times and processes that expedite customs clearance, in order to remove barriers for global customers.

    For many companies, and particularly those based in the U.S., it’s tempting to conduct business in a single language, using a single currency. However, as the electronic components industry continues on its global trajectory, distributors must make stronger investments in supporting customers worldwide with a seamless experience. Today, Digi-Key supports 26 local currencies and does business in 21 local languages – something that will continue to grow along with the business.

    Content is king, and Digi-Key works closely with its supplier partners to ensure the right, most up-to-date content is available in their product centers on our website to help engineers with their product searches and find exactly what they’re looking for.

    Digi-Key has also developed a suite of digital solutions to help customers integrate technology and a digital strategy for faster communication and better use of data for planning and procurement. Digi-Key provides three robust digital solutions including API (Application Programming Interface), EDI (Electronic Data Interchange), and punchout, which all help customers to maximize efficiency and speed, and improve operations through automation. For more information, Digi-Key has published a free Demystifying Digital Transformation for Procurement eBook.

    ELE Times: Are there any specific markets or industries you see as ripe with opportunity right now? Are there any present specific challenges related to the industry?

    David Stein, vice president of global supplier management for Digi-Key Electronics: Over the past year, there has been a surge in new product introductions in every industry from automotive to medical, industrial automation to consumer devices and everything in between. IoT and related solutions are in particularly high demand and have been a significant driver of Digi-Key’s business in recent years, which is likely to continue into 2022. Digi-Key will continue to provide all the components and services necessary to fuel innovation across the entire ecosystem.

    We all know how difficult it has been this year for customers to get their hands on some of the high-demand parts they need, and in some cases that has led to increased order volume. Although there may still be challenges ahead of us, I believe orders will start to revert back to more realistic levels in 2022 as customers find more breathing room.

    We’re proud to work with suppliers who truly understand the importance of their products to engineers and makers around the world who are innovating. Suppliers are dedicated to finding new, creative ways to boost supply.

    Knowing that I’m hopeful that in 2022 we will see an uptick in supply as a result, and trust that our partners are doing everything in their power to ensure they can meet demand.

    ELE Times: Please tell us about the challenges you are facing to expand your brand due to the covid impact.

    David Stein, vice president of global supplier management for Digi-Key Electronics: The industry has taken many lessons from the last year, and it’s clear that the industry is cyclical. What we’ve experienced this year, we’ll to some degree experience again in the future, and hopefully, we’ll be better prepared with new building blocks we’ve put in place. Digi-Key is looking forward to the innovation that will come in 2022, and are excited to enable the world’s ideas.

    With the cancelation of trade shows, the industry has also had to find new ways to communicate and work more closely with both suppliers and customers, ensuring that their digital experience is seamless.

     Contributing Author:

    David Stein, vice president of global supplier management for Digi-Key Electronics

    Sheeba Chauhan| Sub Editor | ELE Times

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