Flat may still be the new “up” in the electronics business, but Massachusetts-based Sager Electronics is trying to buck the trend by becoming more of a business creator in the traditional original equipment manufacturing (OEM) markets it serves. To that end, Sager is sharpening its focus on medical, industrial, and instrumentation customers and adding new product lines, especially in its power supply business. Company president Frank Flynn says these strategies are central to the distributor’s growth and expansion goals.
“… We’re expecting growth in this valuable segment within the IP&E space,” Flynn said of the power supply business during a recent interview with Global Purchasing. “As we see an opportunity to support design engineers at our customers at a critical point in their design of new products, developing our power program ties into our overall strategy of demand creation especially within our medical, industrial, and instrumentation OEM customers.”
Flynn sat down with Global Purchasing as part of our ongoing Top 50 executive interview series to talk about how business is unfolding early in 2014. What follows are excerpts from our conversation:
Global Purchasing: It’s still early in the year, but how is 2014 shaping up for the electronics industry in your opinion?
Frank Flynn: Like many segments of the economy, the electronics industry has been flat for a number of years. With markets like housing and automotive rebounding, economic cycles would indicate it is time to expect growth in the electronics industry.
At Sager Electronics, we are experiencing a strong daily activity level. Our bookings have been solid and consistent and we have had a positive book to bill. While the economic backdrop may be telling us that the market is flat, our goal is to move beyond the market, and our booking levels support that goal.
We are furthering our drive to be more of a business creator. We’re adding new industry-leading lines to drive further growth. We’ve enhanced our focus on OEM customers specifically within the medical, industrial, and instrumentation space.
GP: Are there any particular bright spots in terms of end markets that your company is homing in on?
Flynn: More and more suppliers are looking for support within the traditional markets of medical, industrial, and instrumentation as North American manufacturing has transitioned away from telecom, networking, and large contract manufacturers. This is welcome news for Sager as we are already well established in these spaces and are positioned to build on this historical strength.
Because we aren’t chasing new markets, we are able to focus on our customers and their needs within these end markets. For example, the medical market is evolving rapidly as the need to support home health care options increases. We’re seeing a rise in portable medical devices and other innovations to meet these changing health care needs.
Global Purchasing: There is much talk about wearable technology, medical electronics, and lighting—particularly LED technology—as key growth areas. Are those important areas for your company?
Flynn: Wearable technology is not a focus area for Sager. We do not see ourselves playing a role in high volume consumer devices.
However, as we previously referenced, medical electronics is a sweet spot for our company. As the population ages and home health care needs increase, there will be a corresponding increase in the need for portable devices and local health care centers. Medical equipment such as CPAP, dialysis, and home diagnostic devices are increasing in volume as care moves away from the traditional hospital setting.
Lighting is a large and fragmented market with many emerging customers. While the overall market may not be a focus for Sager, we are designing in and selling LED drivers as part of our power supply strategy. LED drivers represent one of the faster growing areas inside of our power supply business.
Global Purchasing: What do you see as some of the greatest supply chain challenges facing your customers today, and how is Sager helping to address those issues?
Flynn: The traditional challenges of the supply chain really haven’t changed over the years. It is still about reliability and the speed of response; it is the nature of our business. But In today’s business environment, the flow of information is even more critical. Product changes and obsolescence, compliance, and environmental issues around conflict minerals, REACH, and RoHS challenge today’s customers. Information is critical to addressing these issues.
From our new product introduction and product change notification system, News2Know, to our BOM tool, and our forecast management system, Sager has implemented a number of communication tools to keep customers well informed. We’ve put automation into our forecasting tools that pushes information directly into our planning system for our purchasing team to act on. With inventory in place to support forecasted needs, we’re able to help customers avoid problems.
Global Purchasing: What’s new at Sager these days in terms of expansion, business strategies and so forth?
Flynn: Sager is actively working on expanding our line card in the power supply area. We’re expecting growth in this valuable segment within the IP&E space. As we see an opportunity to support design engineers at our customers at a critical point in their design of new products, developing our power program ties into our overall strategy of demand creation especially within our medical, industrial, and instrumentation OEM customers. We have a strong FAE team in place, and we will continue to build this team and our technical resources to become more valuable to customers in their product design efforts.
Customers are looking to distribution for more application knowledge, design support, and product information. By increasing and directing resources to power, we will accomplish that as well as solve additional problems in other key areas such as thermal management. We will differentiate ourselves within the industry by putting a strong focus on power and thermal products.
Toward this end, we’ve made significant investments in our people, inventory, and planning systems to support our growth strategy. This better positions Sager to win opportunities and grow in the power market.
We’re also making significant IT investments. Last year we invested heavily in all areas of our IT infrastructure, making upgrades to both our hardware and software systems. This year we’re funding a major transformation of our intranet portal using Microsoft SharePoint and Oracle PeopleSoft technologies, which will strengthen our ability to track demand creation activity within our Opportunity Management system. We also plan to upgrade our warehouse management system to improve productivity as well as to handle increased sales activity.
Sager recently committed to an eight-year lease extension on our corporate facility and distribution center in Middleborough, Massachusetts. This decision ensures continuity to our strategy while providing a solid base from which to grow.
Frank Flynn is president of Sager Electronics, a wholly owned subsidiary of TTI, Inc., a Berkshire Hathaway company. Sager Electronics ranked 11th on Global Purchasing’s 2013 Top 50 Electronics Distributors report.