Digi-Key, Success By the Numbers
It is easy for me to
write about Digi-Key, having been a customer of theirs for more than
30 years. This company has grown from a small local concern to an
international supplier of electronic parts. Interestingly,
international is now 40 percent of Digi-Key’s business. They sell
to manufacturers, which order parts by the truckload, as well as to
design engineers and small companies, like mine, ordering components
for building and servicing broadcast equipment.
ICs, transistors — you name it, they probably have it. I remember
when the Digi-Key catalog was something like the shopper in a local
newspaper. It grew to a whopping 2,896 pages before being
discontinued in 2011 in favor of their online version. With 960,000
parts on hand in an 800,000-square-foot facility, I can see why the
change was necessary. How did they do that?
Well, the story goes
back to 1972, some 42 years ago, when Ron Stordahl, N5IN, was looking
for parts to build a “digital keyer” for his amateur radio
transmitter. He purchased more than needed and then sold parts to
others. One thing led to another and he had a company that grew into
a $1.5 billion-per-year concern.
It takes 2,600
employees to make this company run, in a town of only 8,500 people in
northwestern Minnesota. No fewer than 650 suppliers feed the demand
at this place. Some 3.3 million orders are processed annually. They
ship as many as 17,000 orders in one day, mostly by UPS and FedEx,
both of which have direct flights daily from Thief River Falls to
their respective national hubs.
add and subtract items from the conveyor belt, which never stops. Bar
code readers on green arms keep track of everything.
Is Ron Stordahl still
involved? Yes, he still owns this privately held corporation, but has
turned over the presidency to life-long friend Mark Larson.
I took the opportunity
to interview Larson recently to learn more. He said the company pays
competitive wages but enhances the employee relationship with strong
benefits including college tuition in some instances.
On average, employees
stay at Digi-Key for seven years. A Midwestern work ethic and
management style have led to Digi-Key be rated number one for
customer service by independent surveys, I’m told. Some 150
employees are engineers helping design engineers select parts.
It is interesting to
note that the cell or smartphone that you carry today was probably
prototyped with parts from Digi-Key. A huge part of their business is
catering to electronic designers worldwide. The time between order
entry and a box with parts ready to go out the door is 20 minutes or
less. An order can be on the other side of the world in 54 hours or
less. Customers order online 24/7 or call in an order to
knowledgeable order takers. I noticed a tracking chart showing delay
time between a call and when a sales representative answered. It
averaged 4 to 5 seconds.
Employees pick parts
from bins in their immediate area and put them, wrapped and bar
coded, on conveyor belts, which move the items to a shipping station.
That location will receive parts from other sections of the plant
until the order is complete and ready to be packed. Automatic bar
code readers handle the sorting process quickly and efficiently. That same conveyor belt delivers parts to stock locations at the same
time. Very clever!
Years back I received
an incorrect part from Digi-Key. It took less than 60 seconds on the
phone to determine that the part came from the right area and the
right distance from the conveyor, except that it was from one row
over. The person I talked to knew how this must have happened and
sent me the correct part immediately.
Another time I ordered
a wrong part, and Digi-Key has happy to take it back and refund all
but the shipping. I understand the system in place now makes that
kind of mistake almost impossible.
After visiting the
plant, I can see why Digi-Key is a well-respected supplier of parts
to the electronic repair industry, and sixth-ranked electronic
component supplier in the world. Interestingly, CBS took note of
Digi-Key recently in an Osgood File report; visit
radioworld.com/links for the transcript. And visit the company
website at www.digikey.com.
Mark Persons, WØMH,
is a professional broadcast engineer certified by the Society of
Broadcast Engineers and has more than 30 years’ experience. He has
written numerous articles for industry publications over the years.
His website is www.mwpersons.com.