Future Electronics Inc. plans to increase its investments in distribution support facilities and jack up hiring in Europe and Asia in 2015 as the company prepares to support rising “proliferation of electronics” in all areas of manufacturing, services and other segments of the global economy, according to company executives.
In 2015, Future expects to more than double the number of employees the company has in Germany, where it has one of its newest distribution warehouses, to serve the markets of Eastern and Western Europe, Middle East and Africa. Company executives said they are optimistic about the future of the electronics industry, which they expect would continue to grow in volume and total sales. Future itself, they said, will grow even faster than the entire market.
As a result, the company is reviewing its operational strategy for Asia and examining options for a new automated distribution warehouse to replace the existing one in Singapore, notes Lindsley Ruth, executive vice president at Future.
In an interview with Electronics Purchasing Strategies Ruth talked about the company’s services for its engineering and purchasing customers and why Future Electronics continues to pour millions into new investments to support OEMs and component suppliers even as some other distributors cut back on capital expenditure due to concerns about the market direction.
Future, Ruth said, is willing and able to invest in longer-term strategic programs because owner and founder Robert Miller believes in providing the company the infrastructure and support systems he expects the market would need five or more years into the future rather than focus primarily on short-term initiatives.
“The company reinvests its profits back into Future, and that’s been our strategy for many years. We don’t build distribution centers for where we are today, we build distribution centers for what we think the customer will need in future,” Ruth said. “When we build a new distribution center, we anticipate the business doubling or tripling, so we’ve got tons of capacity available for new lines, new products and for expanding the inventory and the parts we have on the shelf and for handling more customers and putting out more parts per day.”
In this first of a two-part report, we excerpt portions of the interview with Ruth. In the second and concluding report we will look at how Future Electronics deals with the issue of counterfeiting, a problem that continues to plague the electronics industry. The second report to be published mid-January 2015 will also feature Ruth’s comments about expectations for 2015 and the company’s preparations for natural disasters to ensure it can continue to serve the electronics supply chain.
In the first part of the interview published below, Ruth talked with EPS editor-in-chief Bolaji Ojo about the company’s expansion strategy and the various offerings for engineers and the purchasing/procurement community.
EPS: What’s the strategy behind the decision by Future Electronics to expand operations in Europe and Asia?
Ruth: Germany is a very important economy in the European marketplace and it is the largest market for electronic components on the continent so it has always been a bellwether for the electronics industry throughout Europe. That is why we will continue to invest in the country. The same applies to China, Japan and the entire Asia Pacific region. These are areas where we want to continue to invest as well. It’s important for us to have a strong presence in each market, not just for Future and our brand, but also for the suppliers we represent.
EPS: Does Future’s strategy vary from region to region?
Ruth: No. We go to market in the same way in every country around the world. We aim to provide the same level of excellence in the services offered in each region. In terms of distribution center capabilities, we are currently evaluating whether to put a distribution center in China. We’ve been exploring that option for a couple of years now and we plan to make a decision soon. However, in terms of the way we go to market, there are some slight differences based on geography.
We look at our offerings customer by customer. We look at what we can do for the customer and not what they can do for us. So, we examine what we can do of value to help a customer improve their cash-flow, profitability, revenue and service. We focus on these areas and if the customer is not interested in those things, then we say fine, we’re not interested in engaging with them. We apply the same metric in terms of our own profitability. We’re not a non-profit organization. If we can’t make a profit we’ll move on to another customer. We’re not in business to lose money but we look at how it can be a win-win for ourselves, the customer and the supplier.
EPS: How would you describe Future and its operating model?
Ruth: We’re really a risk management organization. There are two types of risks. From the buyer’s perspective there’s the risk of excess inventory, which involves getting stuck with inventory that they don’t need. There’s also the risk of shortages; not having parts when the production line needs them. So we want to make sure we get it just right, so that if the customers end up having excess parts, we can help them deal with that. Future helps to keep the suppliers’ inventory levels low and we help prevent them from having excess.
With our modern inventory management programs and on-time delivery you’ve seen first-hand that we can deliver products anywhere, promptly, from any of our distribution centers and at a high quality level. On-time delivery is not a concern and that’s a major differentiator for Future Electronics. These are the ways you reduce risk of inventory shortage or excess for the customers.
EPS: Future has in recent years built two new distribution centers in North America and Europe. What’s the strategy behind that?
Ruth: The company reinvests its profits back into Future, and that’s been our strategy for many years. We don’t build distribution centers for where we are today, we build distribution centers for what we think the customer will need in future. When we build a new distribution center, we anticipate the business doubling or tripling, so we’ve got tons of capacity available for new lines, new products, for expanding the inventory and the parts we have on the shelf and for handling more customers and putting out more parts per day. We’re running right now about half the capacity we have.
EPS: What are the various products Future offers the electronics procurement community?
Ruth: Time is number one. In procurement what we’re really providing with our value solutions for buyers is time. We free up their time; if they have enough products available they can go to bed at night and not have to worry about whether what they’ll need would be available. They can also focus on other things because we’re not going to be late with delivery, we’re not going to stick them with excess inventory and we’re going to optimize the management of the supply chain – more effectively and efficiently than they can on their own. This is because it’s our business, it’s our expertise and we’ve got, at any given month, tens and tens of thousands of customers that we’re shipping to 400,000 times a year. So, we’re really freeing up the buyers’ time so that they can focus on other initiatives and priorities.
EPS: How do you service engineers?
Ruth: With engineers we are generalists and also specialists for the design information they need. Design engineers liaise with our engineers like going to a doctor – a general practitioner. You can go with a broken arm, a broken foot, a sprained ankle, a headache, whatever, and you’re going to get some level of diagnostic support or some diagnosis and it might be a referral to a specialist, a surgeon, or someone else, but you’re going to be able to get general types of treatment or advice. Those are generalists, and that’s the first wave of engineers we have at Future Electronics. They have a tremendous amount of expertise in a couple of categories, but they also have broad knowledge and ability to help the customer, so that a customer or design engineer doesn’t have to call on 20 different engineers.
Now, if they need something that’s very specific then we can call the surgeon, if you will, or the specialist. We have a lot of those who focus on specific applications, for example, power management for analog or whatever the case might be. We’re a little bit different in that we’re focused on the technology when it comes to specialists as opposed to maybe by supplier, which is what some of our competitors do. We tell our suppliers that the best technology always wins out. We don’t provide favoritism for one supplier over another; we look at the technology and we design based on that technology.
EPS: What’s the investment strategy at Future?
Ruth: I believe we’ve overinvested for the business today but I think that’s a reflection of [our owner] Mr. Miller’s personality. In 46 years of doing business, he’s always wanted to provide the best service and be prepared for the future, hence the name Future electronics. So he’s been very, very focused on reinvesting and at times maybe we’ve invested too heavily in certain areas but that pays off long term because you can offer better services and better terms. We’re in a position where we can invest because we have zero debt.