McLendon prepares Allied for global challenges in a slow economy

Allied Electronics’ new president Scott McLendon discusses his outlook for 2013 and beyond and the road to becoming a global business.

Scott McLendon, the new president of Allied Electronics.
Scott McLendon, the new president of Allied Electronics.

Top 50 Distributor Allied Electronics (number five on this year’s Top 50 List) has promoted Scott McLendon to president, replacing longtime leader Lee Davidson. Allied is a division of Britain-based Electrocomponents plc, which also operates RS Components in Europe and Asia-Pacific. McLendon has been with Allied since 2007, most recently serving as vice president of product management and marketing. We caught up with him to talk about his outlook for the electronics industry over the next few years.

Electronic Design: You officially took over as Allied’s president in April. How is the transition going, and what are some of your goals for this year?

Scott McLendon: So far, so good. In any new role, the first time you make the cycle through all the things [you normally do], it’s tough, but it gets easier. We just went through our [2014 fiscal year] budgeting process and that was good. I’m very pleased with the feedback I’m getting internally from our employees as well. Some of my goals for the year: First and foremost is having everyone in the company get to know me and my philosophies on business and what I expect, and then for me to get to know them. I feel like I can win the minds of people through strategy and planning and education, but I also want to win the hearts of employees, too. So, I’m doing a lot of traveling. We have 53 sales offices across the U.S., and I’m trying to get in front of as many of them as I can.

Electronic Design: What are some of the greatest challenges facing companies like Allied in 2013?

McLendon: The positive side of the word challenge would be opportunity. I think our greatest challenge and opportunity in 2013 and beyond is how we transition from being a local independent [operating company] as part of Electrocomponents [to] being a very important part of a global company and what that means [for the future]. How do we support the vision of Electrocomponents through the brands of RS [Components] and Allied? How do we transition from these local [operating companies] to really coordinating the effort across the globe? Certainly it’s something that is front and center within our entire business, how we go from good to great and do that by becoming a truly global business.

Electronic Design: The economy continues to trudge along. What are your short- and long-term outlooks for the electronics industry?

McLendon: I still think that it’s slow growth. If I look at all the macro-economic indicators and some that are more specific to the industry we play in, they all are predicting slow growth. That would be for 2013 and 2014, actually. I don’t see anything coming that’s suddenly going to impact that very negatively or, conversely, positively. One of the things I think has had more of an impact than I first thought is the federal budget crisis and the sequester and the draconian budget cuts that have been put in place… Any customer that has any sort of tie to the federal, state, or local government is being dramatically affected. It’s not just the [Lockheed Martins] and Raytheons and companies like that. It’s also companies that build controls for water and waste water treatment plants, for example. With this first round of cuts, there are programs that have been cut, there are things that have been delayed. I originally didn’t think it would have as big an impact as it has. And with the Congress we have in place right now, I don’t see it getting fixed. I think it’s going to be status quo.

Electronic Design: Allied also continues to invest in its Web presence. What are some recent developments and enhancements?

McLendon: Our philosophy as it relates to the Web is that whatever you can do offline you should be able to do online. We’re committed to building all of the tools and we’re listening to the voice of the customer, giving them what they want online to deliver a great customer experience.

Electronic Design: Allied’s parent company, Electrocomponents plc, has said it wants to conduct 75% of its business via the Web in the next few years. What percentage is the company at now and how fast do you expect that to grow?

McLendon: Right now we’re north of 40%. From a dollar standpoint it’s much greater than that on the number of line items transacted. I think we can get to 50% in the next three years or so at Allied. But we still have a lot of customers that want the local touch, that still want to transact offline, and we’re not going to force them to transact online. We do business the customer’s way and we’ll continue to do so. [Doing] business online does drive some efficiencies and can drive a bit of additional profitability, too. But we’re not going to make a right-hand turn out of the left-hand lane just to drive a percentage. We’ve got the customer’s best interests at heart.

Electronic Design: Allied implemented a new enterprise resource planning (ERP) system last year, putting Allied and RS Components on the same SAP platform. Are the two divisions working together in new or different ways as a result?

McLendon: Yes, definitely. RS and Allied are working more closely than we ever have. And it’s our desire for both companies to go from good to great in their own rights. We have seven global priorities that we’re focused on [to help us get there]. One of them depends on us having a global platform, so what we’re working on first is around the global offer, which is critical to our success. Across the RS and Allied world you would think that our portfolios are common, but they’re not. There’s only about 10% overlap in the actual materials. We have many of the same suppliers, but [the portfolios look different]. Some of that you can understand because different areas around the world have different standards [and requirements]. But there shouldn’t be that much disparity. In the next five years, our goal is to have a pretty common [product] range around the world—somewhere around 75% common portfolio and the remaining 25% left up to local [needs]. This allows you to leverage your supply chain better, leverage your demand, make your global inventory visible to your customer base… and then you build your service proposition around that. Our vision is that if it’s in your country, you have it in one day. If it’s in your region of the world, it’s two days. [And if it’s] anywhere in the world, it’s three days. The vision is there for how we globalize our offer in order to deliver a great customer experience.

Electronic Design: What other issues are you most concerned about as you take on your new leadership role?

McLendon: For me, personally, it is to continue to figure out better ways to engage our employees. I believe if we have happy and engaged employees they’ll be in a better position to deliver a great customer experience, and that will mean more share of wallet from existing customers as well as attracting new customers. In the end, our top line will grow, our profitability will grow, and our shareholders will be happy with our performance.

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