Jed Pecchioli explains why America II is targeting Tier 2 and 3 companies.

3 min read

Set up in 1989, America II has established itself as an increasingly important player in the electronic components supply chain, working with a growing number of manufacturers, OEMs and EMS companies around the world.

Headquartered in St Petersburg, Florida, the company continues to evolve and is now focusing on looking to service the needs of companies operating in the industry's middle tiers.

"The neglected middle," according to Jed Pecchioli, president of the company's APAC and EMEA operations. "Having spent the last few years in the Far East refocusing our business and developing our presence among Tier 2 and 3 companies there, I'm looking to do the same in Europe."

Our customers operate in practically every market segment and now we are seeing the beginnings of a massive boom in the development of Internet of Things (IoT) devices."

America II has been busy adding manufacturers, components and technologies to its line card and is expanding rapidly into new European markets, ranging from Poland and the Czech Republic in the East to France and Italy in the West.

"Our business in the Czech Republic has exploded and in France we have been gaining real traction. Many component manufacturers feel that they are not being serviced by larger distributors and are not getting the attention they need. We're benefiting from that and intend to grow as fast as we can. To be honest, future growth will be determined only by how fast we can recruit the right people."

The available market in Europe is huge, he suggests.

"You have to work hard to educate and understand your customer's needs, but customers in Europe are no different to those in Asia or globally for that matter. They all want quality; they want assurance of supply; the chance of cost savings; and to know how you intend to bring them and their end customers greater value."

According to Pecchioli a large number of Tier 2 and 3 companies are looking beyond the traditional 'entirely franchise' or 'entirely independent' distribution models.

"We need to offer a more 'intelligent' supply chain," he contends, "one that understands the needs of customers over time. One thing that tends to differentiate America II is the fact that we hold stock."

And rather a lot of it; the company holds around 4billion components at its St Petersburg distribution centre.

"For larger distributors, inventory is seen as a liability; for me, it is an asset. America II operates a 'load and chase' distribution model, so while we may buy in stock for a particular customer, that stock will open up opportunities with other customers."

America II, which has spent the last 18 months building its franchise lines, will have more than 70 lines in total by the end of the year. It currently derives around 10% of its revenue from franchise lines, but expects that to grow to 30% over the next five years.

The development of these lines is seen as helping the company to maintain its strong growth, up 17% alone in 2014.

Adding new lines, however, is just part of the company's plans to grow sales. It has invested heavily in new warehouse capabilities, invested in new sales teams and expanded the services it provides, ranging from IC programming to a test laboratory to handle failure analysis.

"One area of particular interest to us is the growing market for the 'Internet of Things'," Pecchioli explains.

"Whoever's figures you believe (IDC has predicted that the IoT market could be worth $4.6trillion by 2018, growing at an annual rate of 19%), we are on the verge of an enormous boom in IoT devices," Pecchioli believes.

"This market has attracted the attention of a growing number of middle tier companies and we intend to service their needs."

According to Pecchioli, these companies will be looking for a high mix/low volume supplier in what can be a very complex supply chain.

"Franchise distributors tend to favour larger customers looking for higher volume, higher margin supplies. They are not keen to hold stock."

Many companies in the IoT space also tend to rely on older components, especially if they are more cost effective.

"Franchise distributors aren't positioned to supply out of production parts, while 'independent' distributors are always able to guarantee volumes or supply," he notes.

According to Pecchioli, many OEMs and ODMs operating in this particular market are forced to use a combination of franchise and independents in order to get the balance of services they need.

"This approach can be both time consuming and expensive," he suggests.

"Because of the way in which we have positioned ourselves, we are able to supply a wide range of reliable, high volume, guaranteed franchise lines, as well as boutique and heritage lines. However, these businesses are also going to value some wider 'open market' capabilities and value-add services, such as inventory management where that is appropriate.

"There is a 'third way,' Pecchioli concludes, "and we want to help those businesses in the second and third tiers to get a slice of the IoT action."