Germany’s Rutronik Expands its Presence in the Americas

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For decades, U.S.-based electronic component distributors’ global growth strategy was acquisition. Beginning with the EU, American distributors acquired foreign competitors to establish themselves in a geographic market. The same is true for Asia-Pacific, and acquisitions there will likely continue.

For foreign distributors entering the Americas the trend has been different. While there have been acquisitions—by Premier Farnell, VEBA and Electrocomponents--distributors such as WPG and more recently, Germany’s Rutronik Elektronische Bauelemente GmbH, established their Americas businesses from the ground up.

Within the past year, Rutronik Inc., which opened its first office in the U.S. in 2015, has relocated its corporate headquarters from Cleveland to Dallas; added 20 franchised lines; expanded its inside and outside salesforce; has hired regional field applications engineers, and added sales offices in strategic locations.

“Rutronik has never expanded through acquisition,” said Sean Sisson, Rutronik vice president, North America. The family-owned parent company is committed to investing in personnel, inventory and expansion in the Americas. “That investment will continue,” Sisson added. “We are well on our way toward critical mass.”

It is an opportunistic time to be a distributor in the U.S. The electronics industry is facing severe components shortages and allocation. Rutronik has invested in having inventory on-hand, and is actively seeking new customers.

When components are allocated, many suppliers and distributors will fulfill the needs of their established customers first. In some cases, new customers seeking allocated products are turned away. So far, Rutronik hasn’t faced that problem.

However, like many distributors, Rutronik has some policies in place for allocated products. “If you want inventory today, you take your inventory today,” Sisson said, and much of it is non-cancellable, non-returnable (NCNR). “We lived through this [return] problem with the tantalum allocation and when the music stopped, customers wanted to return a whole lot of product. Hopefully the industry learned from that shortage,” Sisson added.

Analysts and the industry have been watching component orders carefully for signs of inflated demand. During allocation periods, some customers will place the same order with two vendors to ensure they get components. This practice of double-ordering appears to be a problem worldwide.

“We are seeing a lot more of it in Asia,” Sisson said, “but not as much in the Americas.” Cancellations are another red flag that customers are ordering more components than they will consume. “There aren’t a lot of those and in many cases, I’ll take back the material because we know we will sell it,” Sisson said.

As a global business and a sizeable distributor in Europe, Rutronik GmbH has some clout with its suppliers. “Because we are number 3 in Europe, we are getting the lion’s share of allocated products,” Sisson said. “We’re receiving 60 to 70 percent of hard-to-get parts.”

Rutronik is stocking about $400 million worth of parts and has profiled its inventory toward the needs of the local market. “The decisions have been made intelligently,” said Sisson. “We are in a good position for allocated product in North America.”

The Americas market has historically been the biggest for electronics components; Asia-Pacific has since surpassed the U.S. Having a global presence is necessary to be competitive in the distribution market, Sisson said.

“Rutronik has grown from a one-man business into the third largest distributor in Europe and the tenth largest worldwide,” he said. With over 70 offices in three continents, the company has transformed since its founding in 1973 into a global player.

Rutronik also has a couple of unique assets it brings to the U.S. market. It has developed and controls its own data center, and has a legacy product redesign program to deal with end-of-life components. Over time, components used by OEMs are discontinued by suppliers. OEMs will either seek leftover inventory of these devices or contract a company to re-manufacture them. Rutronik takes a different approach: it redesigns the OEM board with the latest generation of components.

The distributor also offers Rutronik24, a modular online shop selling around one million parts across the full spectrum of electronic components.

“We are absolutely opening doors at new customers,” Sisson said. Moreover, he thinks the current demand trend will continue for some time. “I think the demand is real. Our world has changed faster than we have been able to change. The electronics content in automotive industry increased by a significant percent, and a cell phone two years ago had 4 or 5 MLCCs. Now they have 20 or 30.”

Rutronik specializes in the lighting, medical, renewable energy, industrial and home appliance markets. “In sensors,” Sisson added, “we are probably one of the leading sensor distributors in the world. Our offering is deep when it comes to sensors and we are doing pretty well in that market.”

Rutronik is building a new warehouse and headquarters site in Dallas, and it will continue to invest in personnel, facilities and inventory in the Americas. “We here to stay,” said Sisson, “and our business has grown organically month over month for the last two years. It’s all positive.”