In the last half century, the electronics distribution landscape and business model has evolved greatly. Master Electronics has managed, through a variety of strategies to maintain and improve its business position through it all.
Fifty years ago, Ike Nizam founded Master Electronics in a cramped 750-square foot apartment in Santa Monica. Now, with 300 employees and 12 locations worldwide, the organization is headquartered a few blocks down the road and has its organization spread across 750,000-square feet of office and warehouse space.
In the decades since its start, the company has made some major shifts, such as moving from being a small regional player to a global distributor. In 2007, the company bought All American Semiconductor to expand its product scope. In 2014, Electro Sonic further expanded the company’s holdings. Once focused solely on relays, the company now carries relays, connectors, power supplies, fans, switches, circuit protection devices, passive components, fuses, filters and more.
Other things, like the company’s focus on flexibility and breadth and depth of product, have remained the same. Today, Master Electronics stocks over 350,000 unique part numbers available for immediate shipment, with over three million additional part numbers available for sale. The Nizam family remains at the helm, and the company continues to operate on the same core values: we care; we are dedicated and loyal; we are entrepreneurial; and we embrace visionary thinking.
EBN sat down with Jamil Nizam, president at Master to talk electronics distribution and staying relevant in a changing market.
EBN: Your company has managed to stay relevant to small and mid-sized customers for over five decades. What would you say is the cornerstone of your strategy? And what are the newest ways that your customers want to work with you?
Nizam: In terms of how we’ve managed to stay relevant, we are very focused on our customers and suppliers. We go to great lengths to provide best in class service and understand what problems they are having and how we can make a positive impact on their business. One of the ways we do that is having an entrepreneurial spirit. We are open minded and take a long-term view of things. We are the last distributor of any scale that really has this entrepreneurial spirit.
I couldn’t mention core strengths without mentioning availability and breadth and depth of our inventory. Our stated goals is to have more parts in stock for our customers than any of competition and to have it available whenb customer needs it. The last part is people. We want to hire people that are a cultural fit and make Master a fine place a work and provide tools to make our people successful in their efforts to be more efficient and take cost out of the process. It would also be about linking and sharing information with our partners. Also, we focus on having a lot of tools that semi automate the decision-making process. We think we’ve been at the forefront of this. We’ve been able to take out a lot of cost.
Our core customers are small to medium sized OEMs that buy from us on a regular basis. We have taken the approach that we should be able to communicate and engage with the customer in their preferred method. That includes phone calls, emails, chats, field sales people, full blown web engagement, and customer portal. It includes communicating via EDI and API. We want to be able to communicate in the way the customer wants.
Recently, we’ve allowed customers to chat with us via mobile device. We’re soon going to launch a feature where sales people can connect with sales people via digital chat. Also seeing more customers wanting us to feed information into their services proactively.
EBN: Consolidation in electronics distribution landscape has continued as the norm. Tell us a little about the how acquisition has furthered your company’s strategy?
Nizam: We’ve been very active in acquisitions. We’ve done 15 acquisitions in the past 30 years. The consolidation we saw in the past in the marketplace was scary. We saw the predominantly active component distributors getting into interconnects, passives and electromechanical components. In addition, they were leveraging their relationships with tier one accounts. Back in the 1990s and maybe early 2000, we were struggling to compete at tier one OEMs. We saw the resale margins go down dramatically. It really forced us to reinvent ourselves.
We had a renewed focus on small to medium sized OEMs and focus on breadth depth and availability of inventory. Although consolidation was very scary, it forced us to focus on what we could do better than the larger distributors and, in the end, made us a better company. It’s a discussion we have constantly: Can we do this better than the large global distributor. We broke it down into line card expansion, geographic expansion, and getting access to employees and customers.
We created a playbook for acquisitions. Looking back, based on a year after the acquisition, we would choose the same path in 14 out of 15 cases. The fifteenth one was the smallest acquisition we did. One of the cornerstones of our playbook was to look for a company with some reasonably strong business and culture that we could bring resources to and improve
EBN: What are the biggest changes you’ve seen in the electronics distribution landscape in terms of the role of the distributor?
Nizam: As far as changes go, we’ve started to talk about changes that will happen internally to our industry, potentially external changes and also technological changes. If I broke those down, the internal changes are really about the model: the cost to do business, the cost to have resources; and the margin. We expect some changes to happen in those areas.
Externally, our industry really hasn’t been disrupted by external companies yet. I do expect to see some significant changes in the short term. I am talking about a company that is not in electronic components distribution today that will bring something new. There’s tremendous upside and downside to that type of change. Companies in our space today are going to be driven by external forces and technology. I think the secret to staying relevant is being entrepreneurial. We are creative and open minded, not afraid to evolve and try new things.
Going forward, we have to have a winning strategy for ecommerce and digital. Without that a company can’t be relevant. I am really excited about the next one to three years. We used to talk about e-commerce. Then a few years ago we said is this really about e-commerce and digital. We believe that there are no right or wrong answers. We have lively discussions about things, and we are trying a lot of things also. We have to play our playbook creativly, doing things other people cannot do.
EBN: What key investments have you made in your business and how are you reaping the rewards of those investments?
Nizam: I think top on the list is we’ve had a lot of energy behind investing in our people. As we’ve continued to grow, we’ve had to create, hire or develop leaders and managers and that was a big impact for us and it was something we had to work on. I’m really happy with where we are today.
Our founder started the company in 1967, and still brings a wealth of experience. We’ve got me as president. I came into the industry in 1984, started in the warehouse and have done virtually every job there is to do in distribution. Then we’ve got, at least family wise, the next generation, 30 year olds. They also started in entry level positions.
On our leadership team, we’ve been very open to hiring both boomers or millennials. As a percentage, we have more millennial leaders and managers than anyone else in our industry. We also encourage our people to keep learning. I had a blind spot about that three or four years ago. I realized that we weren’t getting exposed to enough trends and technology. Since then, we’ve gone out of our way to get out of our comfort zone and get exposed to new thoughts and new trends. This is something we can win at, embrace these ideas and move faster than our competition.
We’ve had to continue to invest in inventory. That’s one of the keys to our business. We’ve had to continue to invest in technology. Part of that is dollar investment but the other part is to invest in other things and see how they perform
EBN: What emerging technologies or customer segments have had the most impact on your business?
Nizam: We see one tactical item, that lead times pushing out a little bit, and being a bit unpredictable. The e-commerce and digital changes that we think are really upon our industry are also taking a good chunk of our energy. As the industry is going to get really proactive about it, we have to play to play to win.
EBN: What other industry trends are you watching today, particularly as they relate to customers and the supply chain?
Nizam: We are watching lead time very closely. I just think there’s been a big push the last number of years for companies to get efficient, and we’ve got very complicated supply chains. If there’s a little uptick in business, which we’ve seen in the last nine months, it causes some issues. In the past year, we’ve seen less inventory in the channel and we’ve done the opposite. We’ve been investing heavily because we saw the channel reducing its inventory.
Risk is an interesting topic as well. I would take the position that any prudent business leader should be thinking about all kinds of risks as part of their job. There’s risk associated political happenings, natural disaster, M&A, lead times, credit, and technology. We have this discussion all the time ad leadership level.
EBN: What do you have planned for Master Electronics future?
Nizam: We want to stay focused on our winning strategy. This is a strategy that we can do better than anybody else. We absolutely want to lead the way in e-commerce and digital. We are very focused on helping and being a partner that helps our suppliers solve problems and reduce expenses. We want to continue to invest in our Master culture and people with the goal of being successful and having a great time.