Ron McConnachie, chief operating officer of Rapid Electronics, talks to Electronics Weekly about inventory replenishment in the supply chain, the most active end markets in the UK, the future of the UK manufacturing community, and the biggest challenge of 2010.
1. Have you seen evidence of increasing demand rather than inventory replenishment in the supply chain?
While Rapid Electronics have experienced reasonable growth against last year we are still some way off saying with confidence that we have recovered to pre-2008 levels. Neither is there any consistency across the product base. This is probably explained by the changes in the competitive market brought about by the recession where the supply chain is competing in new dimensions, thus distorting any clear trends at a micro economic level.
As an end distributor most of our customers are manufacturers who buy to order. We have experienced growth in five consecutive months which would indicate an increase in demand, although this is not the case across our entire customer base.
2. Which are the most active end markets in the UK at present?
Rapid’s customer base has traditionally been very diverse and this continues to be the case, from OEMs to SMEs across every industry sector and the hobbyist market. Optoelectronics has been the major growth area, and this is reflected in the strength and range of our LED sales, but passives, ICs, soldering and test equipment are performing well too.
3. Has the last 18 months changed the way you run the business or your approach to market in anyway?
Our approach to the market has not changed. Our core belief is to provide exceptional service and value for money. We have however become much more customer focused so we can better understand their needs. Rather than market “perceived” value adds, promises or discount schemes, we focus on good old fashioned customer service and value.
When we entered the recession working capital was managed very tightly. Stock shortages and allocation are now prominent across the supply chain with some very long lead times so we are focussing on communicating with our customers. This strategy seems to be paying off, as our customers are constantly asking us to cover more of their product requirements, which we gladly do.
4. What is the biggest challenge of 2010?
Forecasting to hold the right levels of stock versus cash. The supply chain needs to collaborate and spread risk but that is a difficult proposition to realise.
5. Are you concerned about the future of the UK manufacturing community?
Mass manufacturing exited well before the recession. Without doubt we need to keep a close eye on how things evolve but Rapid has built its business model on serving a highly fragmented domestic market.
Most of the larger manufacturers have already taken steps to look for cheaper production and they need to follow the money. But these are still early days and the total costs of offshore manufacturing are yet to be fully measured. I believe lessons will be learned and businesses will be encouraged to look at how they can compete by improving production efficiency at home. This could bring new opportunities as UK manufacturing learns to adjust and drive innovation, improving the UK’s competitive position in total delivered cost.
See also: Q5 - Interviews with electronics industry leaders
Read all the Electronics Weekly Q5 interviews. From ARM's chairman, Sir Robin Saxby, to touchscreen technology firm Zytronic's MD, Mark Cambridge, the business leaders share their particular insights on the UK electronics industry.