The automotive market has been doing well despite sluggish global economic growth. Distributors say the trend is even greater in the broader transportation market, which includes non-automotive categories such as commercial vehicles and agricultural and construction equipment.
TTI Inc. formed its transportation business unit about seven years ago, grouping automotive and non-automotive vehicle businesses under one umbrella. The group has outperformed TTI’s other segments over the past few years, says vice president Joe Venturella, adding that he expects more of the same in the months ahead. Global Purchasing caught up with Venturella in early May to talk about the transportation sector and where it’s heading.
Global Purchasing: Many distributors describe the automotive/transportation market as a bright spot in the slow economic recovery. Do you agree? What is your outlook for this market over the next few months?
Joe Venturella: This market segment has done very well for us, and we expect this to continue for the balance of 2013. This segment has outperformed our other segments for the past couple of years, and we see this continuing in 2013. Our presence in this segment is less than a decade old, and we continue to see growth opportunities for TTI.
Typically, when the OEMs go into production, whether on a combine or a bulldozer or an automobile, their production schedules are set for a 12- to 18-month period. So, we’re pretty optimistic based upon meeting with our key customers that the balance of 2013 is going to continue to be pretty positive.
GP: What are your key goals in serving transportation market customers?
Venturella: We have the same goals in place for the transportation customers as we do for the balance of our customer base, and that is to be the most preferred electronics distributor worldwide, delivering the right parts to the customer on time. This is our corporate mission statement. We take that and use the same goals for our transportation customer base.
GP: Are you seeing any particular trends in this customer base?
Venturella: Yes. The transportation segment has embraced outsourcing for probably going on 30 years now, where the OEMs in the segment have outsourced a lot of their electronics production—at the [printed-circuit board] and wire harness levels. So the customer base we service as a distributor in terms of the actual order transactions are what are referred to in this market as the “tiers.”
OEMs have continued to put more and more very stringent demands on their tiers in terms of flexibility of production schedules. For example, one of our key tiers [promises its customers that it] will react to any schedule fluctuation within a two-week period. The challenge that gives to the tier is that somebody in the supply chain has to be carrying inventory to be able to react to a schedule change like that. That’s a trend that we’ve really seen: the OEMs putting a lot more demands on their tiers in terms of delivery flexibility.
One of the strong points for our company is the ability to share forecasts with our customers and to pipeline that inventory to make sure we have it in place so when those schedule fluctuations occur we are ready and prepared to meet those [changes].
GP: What types of products are most in demand among automotive market customers today?
Venturella: The trend there that I think is applicable to all electronics is the smaller, faster, lighter demands of the marketplace today. [Manufacturers] are packing a lot more electronics into the same chassis, engine, etc., so they’re looking for smaller components that take up the same space, with the same extreme performance characteristics.
GP: The electronic content in vehicles of all kinds continues to grow. Does this affect how you approach this market when it comes to service?
Venturella: What we’ve seen is that our customer base is looking for experts in the subject matter that can bring multiple solutions and multiple application recommendations through a single point of contact. They are looking for a single point of contact that can bring in new products, show them the technical specifications, deliver the samples, and give them the 3D models and other things they need to do their design.
In response, we have added a technical application engineering team as part of my group. They are strategically placed throughout North America with a dual role: they call on key OEMs, working with their design engineering staff and also serving as a technical resource for our field sales organization throughout North America and the world. So when a field sales rep calls on a customer designing a fuel system for a tractor, they have a resource they can go to that’s part of the team.
Suppliers have always put significant resources into the automotive space, so most of our key suppliers have full-blown automotive divisions with selling and technical resources. In the last five years or so, with growth in the non-automotive segment our suppliers have been looking at some of their distribution partners to lead the way with similar resources.
GP: Are there any other issues or trends you’re seeing in the transportation sector?
Venturella: We think the electronic content in this transportation umbrella that I talk about is going to continue to grow. When you think about it, back in the day when the farmer got into his combine or his tractor to go plow the field, he sat up in the cab and looked at the rows and that’s how he kept his vehicle straight. Now most of them have GPS built in. The “comfort” electronics have grown so much, and we think that’s going to continue to happen. This will continue to be a big market for us, and we’ll continue to invest resources in this business.