Brian McNally, president, Arrow EMEA talks to Electronics Weekly in the latest in a series of exclusive interviews where executives give their impressions of the last 12 months and point to the challenges and opportunities which lie ahead for the industry.
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In my 25 years in this business, I have never seen the supply chain reduce inventory and capacity so quickly and efficiently as it has in the last 12 months. The harsh reality of the global economic downturn has forced organisations to manage inventory and capacity more carefully than ever before.
Companies in all sectors have shed less strategic parts of their business and the channel, suppliers and customers have all focused on closely managing their balance sheets. This has resulted in a relatively efficient downsizing of the supply chain, but presents some interesting opportunities and challenges for the future.
At the design level, the economic challenges have led to an increased focus on core engineering competencies. This trend, which we were observing before the downturn, has gathered momentum as ODMs and OEMs look to drive down costs and maximise profits by extracting the maximum return on investment from increasingly limited engineering resources.
From the channel perspective, an increased customer focus on core competencies represents a significant opportunity for the future. Successful distributors will be those that partner with customers and help them bring innovative products to market as quickly and as cost-effectively as possible.
To achieve this, distributors must look to provide complete solutions that encompass product, design-in support, engineering capabilities and easy access to key development tools.
This solution approach will lead to an increased need for collaboration across the supply chain. It is important now that the channel, component suppliers and third-party solution providers increase the level of collaboration to best serve customers. While it is not clear, it would seem that after the year of downturn there are some signs of improvement and the possibility of a slow and steady recovery.
There remains a general lack of visibility from customers, and there are some sectors that have coped better than others and that are likely to present good opportunities as we move forward.
Legislation and concerns for the environment, for example, are driving the growth in segments such as efficient LED lighting and renewable energy, while the medical and transportation sectors show signs of longer term potential.
A continued conversion of mechanical designs to electronic and electrical solutions also provides ongoing opportunities for electronics ODMs and OEMs.
For the distribution channel there will also be the opportunity to grow business by satisfying the needs of certain vertical markets such as lighting, medical, aerospace/defence and automotive. At the same time, the channel must be able to address the international demands of customers who take an increasingly global view.
This provides opportunities for those distributors that can combine consistency of products, services and support locally while collaborating with remote geographies.
As the economy continues to recover, there will be transition opportunities for the channel. In this ‘credit squeezed’ market the channel has an absolutely vital role to play in providing customers with solutions and support that will minimize the capital required to fuel the upturn.
Unique inventory and accounts receivable solutions will accelerate the growth of our customers. By utilising improved forecast tools and analytics, we can help to ensure that the investment in inventory is prudent and aligned to future needs.
This downturn has resulted in the largest loss of DTAM in EMEA in the past two decades. While the decline is very challenging for OEM, CEM, supplier and channel companies to manage, the transition back to growth will represent significant opportunities for those who collaborate to best meet their customers’ needs.
Author is Brian McNally, president of Arrow EMEA