No rapid turns as distributor looks to grow its UK business

4 mins read

Graham Pitcher finds out how the world's fourth largest distributor sees the difference between itself and it competitors

Although it's the fourth largest electronics distribution company in the world, with sales approaching $3.5billion, Future Electronics is, to some extent, one of the least well known. The reason, according to Chris McAneny, Future's director of strategic business development, EMEA, is simply because it's a private company. "It has kept itself to itself," he claimed. "The contrasts in the market are interesting," he continued. "There's the two As (Arrow and Avnet) globally, WPG in Asia, but not in Europe or North America, then there's Future, a different kind of company. It's not better nor worse; it's just different." McAneny described himself as 'comfortable' in highlighting the differences. "There are two key things," he said. "Firstly, Future is private and has grown organically. Being private means we don't have the pressure from Wall Street; we're not appraised by the quarter. That means we can use cash differently; deep inventory, for example." Deeper inventory, he claimed, leads to better service. "Our turns model (how frequently stock is replaced) is much lower than for a public company. During the last year or so, when supply has been tight, that has worked to our advantage." Future works on three turns a year, equivalent to holding four months inventory at any time. "With a public company," he continued, "this could be six or seven turns and a different level of service." This level of stocking may also prove to be an advantage as the effects of the Japanese earthquake continue to be felt through the supply chain. "There has been a lot of volatility in the last few years," he said, "with shortages and allocation to a level that nobody expected; we have never seen such a situation. Then came the earthquake. We still don't understand its full impact because of the complexity of the supply chain. It's not just about whether fabs were affected, it's the whole supply chain from resins upwards. It will probably take the rest of 2011 to play itself out." The other main difference claimed by McAneny is organic growth, rather than acquisition. "Future opens branches and invests in people, rather than making acquisitions. That means there's only one infrastructure; one system for the world." His view is that every time you buy a company, you buy another infrastructure, another warehouse and another culture. "With Future, there's one of everything. " It adds up, he claimed, to one global seamless system. "That's fantastic," he enthused. How does McAneny position Future: is it a broadliner? "We certainly have a broad range of technology," he said. "If you look at the portfolio, we clearly have semiconductors – and lots of them – as well as passives, connectors and emech products, important as we continue our drive into the embedded market. So I'd say broad technology, rather than broadliner. Our strategy isn't to collect suppliers, it's to build a portfolio of complementary suppliers for whom we can add value." Supporting designers is another major issue for McAneny. "People have less time than they used to, so having access to information when they need it and in a format they want is critical. The web is phenomenal in this respect." But the web is only one way of reaching engineers. "Future has a programme called Board Club, in which we take technology and put it onto a board to save design time. While the board won't be produced in the way it has been designed, it helps engineers to start designing and get product to market more quickly." What about the rise of web based distributors? "They have their place," McAneny accepted, "but they are in a different part of the market. Their portfolios are much wider than any volume distributor and if you compare one of their warehouses with one of Future's, they will be different. They're a complementary part of the market." Having said that, McAneny admits there's not a lot 'left in the middle'. "The industry has changed; regional distributors, such as Nu Horizons, have disappeared. Now, there are web distributors, niche distributors with specific expertise and the volume companies." He referenced a quote by Pasquale Pistorio, the one time president of STMicroelectronics. "He said there were companies that were too big to be small and too small to be big." These companies, McAneny implied, have been the ones acquired in the last decade or so. Yet he believes customers want choice. "The thought of a duopoly in the volume sector isn't seen to be healthy and Future offers an alternative." How does he profile the UK market? "There are companies designing things that won't be made here; they'll outsource. These companies have a high level of IP and creativity. There are small companies designing and building products and the embedded sector, where design customers have decided their core competence isn't manufacturing. At the extreme, there are large companies that design and build. Future services them all." He believes the UK still has a strong industrial base. "This suits Future well," he claimed. And the UK continues to change. "Thirty years ago, it was big tv companies; 20 years ago, it was comms. That has gone, as has the pc sector. But UK electronics has been able to continue reinventing itself and will continue to do that," he concluded. Chris McAneny Chris McAneny has spent more than 30 years in the electronics industry, beginning his career with Toshiba in 1980, where he filled a number of roles, including general manager for UK/Eire. In 1995, he moved to Arrow Electronics, where he spent 13 years in roles such as director of advanced embedded solutions, managing director of the product services group and managing director of Arrow Jermyn. In 2008, he joined Future Electronics, where he is strategic business development director for EMEA, responsible for new technologies, new suppliers and new markets.