It’s been 45 years since TTI Inc. opened its headquarters and first distribution center in Fort Worth, Texas. Now a global IP&E specialty distributor, TTI is undergoing its most extensive facilities expansion ever.
TTI has grown significantly in the past 45 years; is now part of the Berkshire Hathaway company; and during a lackluster market most of its competitors aren’t expanding but TTI’s executive team believes the timing is perfect. Most of all, said TTI President, Global Sales and Marketing Mike Morton, TTI’s customers require more customization than ever before. “I’d say less than 15 percent of our shipments are ‘pick, pack and ship’” he said. “The rest require some degree of value-added or customization, whether it’s a simple bar code or something more complex.”
The complexity of customer requirements will only increase, added TTI Senior Vice President Global Business Operations, Don Akery. “It used to be customers were OK with placing an order in Texas and picking it up in Texas. Now, we plan transportation requirements for and with our customers: some are global; some import and export; and some ask us the best way to move things around the world.” The demand for the latter has escalated the most. “Now customers want inventory closer to the point of consumption and in Mexico they want it even more so in order to more tightly manage their supply chain,” Akery said. By the end of 2017, TTI will have eight proximity warehouses in Mexico.
Customers want the best of both worlds from their distributors: not only a local feel and presence but global capabilities and clout. They also want their deliveries coordinated with production, or ASAP. For the channel, that sometimes means making tough decisions. “We don’t want to talk the customer out of doing anything,” said Akery, “but we also have to ask ourselves ‘can we afford to do what they require?’” Global distributors have increasingly been providing online and self-service options for customers as a way to reduce costs but maintain a high level of services. Some have even disengaged with unprofitable customers or lines of business.
TTI began its globalization in 1990 in Munich. The company’s model for expansion has largely been to duplicate its business from the ground up – or greenfield—in new locations. TTI’s acquisitions, which have included Mouser Electronics and Sager Electronics, have been strategic. “Certainly over our lifetime we have made about 15 acquisitions, but none of these have been to achieve geographical expansion,” said Morton. “We have always opened a TTI facility. We have made some acquisitions in both the EU and Asia, but they have been to obtain a product line, expand our product portfolio, access talent or to focus on a specialty such as power, with Sager.” Greenfielding has a number of benefits: new facilities are immediately on a common operating system; there is less of a company-culture learning curve; line card conflicts are rare and the new sales region can immediately leverage TTI’s global infrastructure.
TTI selected Munich as its EU service facility hub which will expand to 365,000 square feet by 2017. Although Germany is not the lowest cost region in the EU it is TTI’s biggest electronics market, said Akery. It is also geographically central for EU logistics purposes. “You can move products from other parts of the world pretty easily through Germany,” Akery added, “and it’s well set up to serve North Africa and Eastern Europe.”
TTI entered Asia in 2000, and has three distribution centers: Hong Kong, Shanghai and Singapore. The distributor’s overall footprint in Asia has expanded to 217,000 square feet. It’s difficult to support Asia centrally, said Akery. Hong Kong supports parts of mainland China and outlying regions; Singapore supports other areas in Southeast Asia; and Shanghai is a beneficial trade zone servicing mainland China. “We didn’t look at Asia as a single geography,” Morton said. “We looked at it as three distinct markets and what we are doing there is an offshoot of proximity locations and to support some specific customers.”
But globalization isn’t the main driver behind TTI’s historic facilities expansion. “The fact is, with the mix of customers between global, local and regional, a significant portion of our business wants us to look like and behave like a local distributor,” said Akery. This is particularly true in Asia. “There is still a significant amount of business in Asia conducted locally so we have to look and behave like—and provide the same products and services—as local distributors. It may sound fluffy, but there are a lot of benefits to being local, such as rapid delivery, and we have to make sure we maintain a balance between having a local presence and benefiting from the economics of a global infrastructure.”
“When we talk about Europe and Asia,” Morton added, “while we categorize them as regions there are many unique differences and requirements country by country. Again, this requires a high level of value-added: they may want shipments to be received the same day every week; unique invoicing; specific country requirements; and in addition to customer requirements each country is unique. What that means to us is we have to offer customized services but also be global in scope. We have to provide consistent products and services, but act as if we were a local distributor.”