Now in its 25th year of business, America II has expanded globally and has consistently ranked as one of the top distributors in its market. It hasn’t always been easy – independent (or non- authorized) distributors have faced an uphill battle in establishing themselves as trustworthy sources of supply. America II’s President Brian Ellison spoke with Electronics Purchasing Strategies about how America II has faced criticism from segments of the industry and has addressed concerns regarding quality, counterfeit components and customer service. (See:America II: Evolving the ‘Blended’ Distribution Model.)
In the second part of our Q&A, Ellison describes how the company manages spot-market customer demands with long-term scheduled orders.
EPS: Can you give us an idea of the types of customers you serve? Is it largely spot market?
Ellison: It depends on the market. If supply is handy and lead-times are short, 80 percent is scheduled business. We are heading into the third or fourth year of adequate supply and demand, and inventories are down within the OEM and EMS segment. I know OCMs don’t have stock, and the franchised distributors are turning as fast as they can. The slightest hiccup in demand will be a factor -- if fab utilization starts to rise and nobody stocks up [there could be more shortage]. We are starting to see leadtimes push up; but it’s nothing crazy.
The main thing [for our customers] is cost reduction right out of the gate. The authorized channel operates off of ship-and-debit, but when we buy product we own it so we have the flexibility to sell it [at different price levels]—that is one of the key factors. But usually out of the gate our customers have a shortage or a hard-to-find part and then they like our pricing and convert that into long-term business.
In terms of excess inventory, there is still plenty out there and that leads a lot of customers to us. That’s also a sustainable business. As the market has been challenging we don't see as much competition [for excess] as we did four years ago—but we have 300 consignment partners and that includes manufacturers and the like. We don’t buy product from them but we do market it for them – that’s an increasing trend -- and it goes back to why they would do business with us.
EPS: In serving a wide range of customers (spot market plus scheduled orders) managing inventory must be challenging. Can you share some of the ways America II keeps on top of inventory management?
Ellison: We have 500 people and we are hiring a bunch of people – I think it’s approaching 600 people -- we have global purchasing department; we have product management teams; we have excess inventory teams that approach 40 people each –that is a specific value asset to the customer. We also operate on a ‘buy it we own it’ principle versus ship from stock and debit.
At current market value our inventory is around a billion dollars and we carry 165,000 unique part numbers.
EPS: Are you seeing any trends among your customers that seem different than in past years? (Inventory, price, order patterns, issues with globalization?)
Ellison: We are seeing some reshoring. The guys that spent time in China -- some are testing Vietnam and India -- once some infrastructure [is built.] From what I understand, though, we are seeing more of that coming back to Latin America. The ‘made in America’ movement is strong. In the last month we have been visiting customers and talking to vendors and because the pressure of the ‘made in America’ stamp on it there is a pullback [from Asia] to some degree, which is good for the customer. In particular, we’re talking about customers without the financial wherewithal to compete by manufacturing locally; they have the option of Latin America and Mexico.
From an EMS standpoint the purchasing [jobs] have left but as some jobs are coming back to Mexico we are investing heavily in Mexico in Latin America. We are serving the U.S.-based automotive guys and some of the internationals such as Samsung television. Small EMS [companies] are being supported by local distributors.
EPS: What haven’t we covered in this discussion you’d like us to know about?
Ellison: Our expansion. From the North American standpoint we are increasing our salesforce by 40 percent this year and part of it has to do with the mid-tier [manufacturing] segment in North America. There is a huge customer base to support and they seem to be thinking in that area they are a perfect fit for our model. We need to get ahead of that, and in Latin America we have hired a group there -- we hired a director and doubled our inside and outside salesforce for Latin America. We also have some Mexico-specific manufacturer agreements driven by types of customers in the Mexican market.
We are moving our U.K. office because we are looking to increase our salesforce by 30 percent, and that that is good thing – the EU market has been struggling the past two years – and we made a major investment in Asia. We are expanding into India; and as Thailand and Taiwan grow we are adding resources there for supply chain [services].
EPS: Do you provide the same range of value-added services as authorized distributors?
Yes. We provide a litany of services and we have seen more design engineers. Our salesforce has 10 years’ experience in the industry as distributors or manufacturers reps and they are familiar with design engineering is high. We also have component engineers on staff.
Why customers ultimately do business with us comes down to supply chain programs. We are getting in to scheduled business and we bid on annual AVL contracts, we have bonded inventory, we are EDI capable and have supplier managed inventory programs. We have people and inventory on site and something unique to America II is the master distributor role. Customers trust our processes and ask us ‘why aren’t you testing this particular part?’ We can tell them we trust the vendor. Sometimes they ask us to take a part to look at it and push through inspection. There are cases where our customers will buy a product and ask us to test it for them.
How we manage all of these things -- we have made some major investments in technology. We have a proprietary system specific to distribution and inventory management and purchasing teams all over the world proactively buying. In order to do that you need to be on a single platform globally and we have made a major investment in that arena.