The Power Triangle in Electronic Component Specifying and Purchasing
I recently had the opportunity to interview Mark Larson, the vice chairman of electronic component distributor Digi-Key Electronics. The company was founded in 1972, and Larson joined only four years later to what is now one of the largest such companies not only in North America but the world. He led the company as president for an astounding 39 years, just recently stepping down in July.
In the four decades during which Larson ran Digi-Key, there was considerable change -- in the electronics being sold, in whom the products were sold to, and in the supply chains the products traveled through. The other thing that has changed is the way Digi-Key interacts with different points of contact at each customer. Although it has always aimed its marketing efforts at design engineers -- and continues to do so -- it has had to adapt to the growing role of centralized procurement in managing purchases.
Since the interactions between engineering and procurement have not always been naturally easy, the insertion of a third party into the electronic component purchasing process has brought some benefits. When looked at from an outsider’s point of view, the two teams may have more in common than they realize.
The good news, according to Larson, is that the primary "wants" of engineering and procurement are not all that different. “One thing that has been interesting to see is that if you look at industry surveys on the needs of the design engineer -- what they highly value in a distributor -- they say they want to access the broadest range of products, they want parts in stock for immediate delivery, [and] they want consistent on-time delivery,” Larson said. “Those essential needs of the design engineer, they closely parallel the needs of the purchaser once that design goes into production.”
On the other hand, as long as engineering and procurement both continue to exist, there will be differences in perspective in component and vendor selection, such as cost versus performance. From my perspective as a procurement professional, there is an important caveat for all companies trying to bridge a divide between their engineering and procurement teams: it creates an opportunity for suppliers to increase their influence and leverage.
As Larson explained of Digi-Key, “If those two sides [engineering and procurement] aren’t blended in-house, we can be the facilitator to see that each side operates in a fluid and efficient manner.”
In other words, information about specifications, performance requirements, and demand volume can pass from engineering through Digi-Key and on to procurement (or vice versa). This way, Digi-Key serves as a key facilitator in the decision-making process. There is not necessarily anything wrong with this, and Digi-Key has, according to Larson, built a competitive advantage out of being able to foster and maintain such close working relationships with their customers, in part through its parts catalog and application experience.