America II Electronics Inc. will this year mark its 27th anniversary in the same quiet way it has celebrated previous milestones. Behind the scene, though, the mid-tier electronics components distributor is making giant stride in a strategic transformation that has positioned it as a major beneficiary of the market’s decades-long consolidation.
Once one of a slew of medium-size distributors in the Western hemisphere, America II is today one of the few survivors in that segment. The company has done better than merely survive, however. It has grown consistently over the years and now has a presence in all the global markets, with facilities in North America, Europe, China, Japan and Singapore.
Not satisfied with the company’s leading position in the independent distributor space, founder/CEO Michael Galinski and president Brian Ellison have in recent years embarked upon the most aggressive and dramatic corporate transformation in America II’s history. That strategic upward shift for sales growth and deeper market representation would require America II to operate more or less like its much bigger rivals in the distribution business by expanding franchise supplier activities and offering extended supply chain management support.
In January, America II fired another volley in a long-running battle to emphatically signal to the industry that it is pushing ahead with the franchise-oriented growth plan. The company signed on 9 new franchise lines, raising the number of suppliers it has recently added to its roster above 50. The new additions include suppliers of “capacitors, resistors, sensors and power management ICs”, the company said in a statement.
“The growth in our franchise lines correlated to rapid growth in our overall business. As we made strategic investments in technology and infrastructure throughout the US and Latin America, we also focused heavily on our supply chain,” said Ellison in the statement. “We closed the year on a positive note and rode a wave of strong momentum into 2016. We’re now pleased to announce nine additional franchise lines that allow us to further expand into the Internet of Things (IoT), consumer electronics, industrial, automotive, medical and sustainable energy markets.”
America II is signing up more component suppliers as part of a broader strategic plan. The company’s sales have been rising and founder Galinski believes it needs to move on to the next level of its evolution. This is a natural direction for the company, Galinski said, during a meeting at America II’s St. Petersburg, Fl., office. The company expects to outline further details of this plan and disclose additional franchise agreements later this year.
In the meantime, America II has been upgrading back-end functions to support its franchise component suppliers. These support services are typically more extensive than the offerings an independent distributor would traditionally provide. These offerings include design engineering services, supply chain solutions, inventory management and other cost-saving programs.
“We’re committed to helping our customers innovate and elevate their designs with high-quality, cost-effective, manufacturer-direct solutions,” Ellison said. “So, we will continue adding the very best lines based on our customers’ needs.”
America II is well positioned to make this transition because of its long history in the industry. Founded in 1989, it focused initially on direct services and support to small and medium OEMs and contract manufacturers, quickly expanding in North America before setting up its first international office in the United Kingdom in 1994.
In order to support the growing customer base, America II has incrementally added storage facilities near its office in Florida and has increased this as its inventory stock jumped above $1 billion. Recent facility expansion activities have pushed total storage capacity to nearly 500,000 sq. ft., raising available component stock above 4 billion items.
Even while operating solely as an independent distributor, America II focused on assuring the safety of its supply chain. It has an advanced components testing facility at the Florida facility and in recent years added technical expertise to assure suppliers and customers of its commitment to providing effective and problem-free inventory and supply chain solutions.
“Our commitment to the highest quality solutions is 100 percent and more,” said Chad Spikes, director of quality at America II, while showing the facility’s quality control and testing room to a reporter recently. “We’ve added the latest equipment for counterfeit detection. It’s expensive but that’s what you must do to maintain the highest quality levels.”
One of America II’s greatest strengths is its workforce, consisting of many employees who have been with the company for more than two decades. Just inside the company’s Florida facility America II is a hallway with the names of long-serving employees stamped on the floor in a fashion similar to the Hollywood Walk of Fame in Los Angeles.
The America II Walk of Fame has filled up so rapidly that the company has had to expand the original location into a different direction within the office, according to Rick Kauchak, vice president of sales, and a 20-year plus veteran of the company.
Aside from the commitment of the leadership to ensuring the growth of the enterprise, America II has also benefitted from a different industry development. The company survived the large-scale, decade-long winnowing of the components distribution market in North America and Europe, emerging stronger from the waves of mergers and acquisitions that swept many small and medium competitors into the arms of the industry’s two biggest players, Arrow Electronics Inc. and Avnet Inc.
Founder and CEO Galinski admitted there were moments when America II itself was considered an acquisition target but that the company resolutely chose to remain independent because of his believe in its value proposition, which “comes down to our quality, inventory and people.”
As the industry consolidation wrapped up in North America and largely in Europe over the last years and as more of the traditional industry functions transitioned online, companies like America II saw a widening of the opportunity to serve small and medium-size OEMs and EMS providers not just in their traditional home markets but globally.
It’s an opportunity America II plans to expand upon, according to Ellison, the president. And, if this requires operating more and more like a franchise distributor, then that’s what the company will do, added Galinski. “It’s all about the customer,” he said. “You have to respond to your customers’ needs. It’s really that simple.”