2013 MDM Market Leader Profile

Earlier this year, Englewood, CO-based Arrow Electronics launched a new brand platform for the global electronics distribution company – the first such initiative in the company’s history. Tim Kolbus, vice president of global logistics services for Arrow, spoke with MDM Associate Editor Jenel Stelton-Holtmeier about the new brand platform, the challenges of doing business on a global scale and the direction the electronics industry is taking.

MDM: What is Five Years Out, and what was behind its launch?

Tim Kolbus: For the 70-plus years of Arrow’s existence, we haven’t really marketed ourselves. And we wanted to crystallize what it is we do as a company. We’re so much more than a distributor today, and we wanted to be able to articulate what it is we do for our customers.

In the past, we had talked about how we’d tell our grandmothers what Arrow does. How would we tell our children? I’ve struggled with that with my own kids.

We started with soliciting feedback from our employees, asking: What does Arrow mean to you? What do you feel we do for our customers as well as our suppliers? We received thousands and thousands of responses on what Arrow is.

The brand Five Years Out comes from the concept of guiding innovation forward. We want to help our customers and suppliers figure out where they want to be in five years. We focus on how we can help take their product to market, whether through design services, end-of-life services, or something else. We do a lot more as far as solution selling and services than people may realize. The brand was intended to get that message out.

MDM:  Doing business on a global scale has its own set of challenges. What are some of those challenges and how do you address them?

Kolbus: There are so many. You have tax issues. You have import/export laws. You have the transportation challenges of moving product in and out of a country. Environmental compliance – each country has different regulations that we need to adhere to. And then we also have the fact that we’re a U.S.-based company, and we have to adhere to the U.S. regulations, as well.

In general, we handle it by having specialists in each of those areas, people that are really good at tax rules or very good at trade compliance. We also have business generalists within the different divisions of Arrow. These are the customer-facing positions that really understand the customers in those particular business segments, and they know who the specialists are so they can tap into that knowledge to help them create a solution to solve specific problems for customers around the world.

MDM: Is culture a challenge when doing business globally?

Kolbus: Absolutely. We have training online as well as classroom training that we’ll send employees through that are going to be heavily involved in global activities. It is huge, and it takes a long time to really get a sense of how to do business in that area if you’re going into a new country or area.

Recently Arrow opened a facility in Brazil, and I was in the original group of folks that went down there to get it set up. Some of the cultural differences were operations-related. How do you get certifications? How do you negotiate the lease contracts with landlords?

The relationship side of working in Brazil is also very important. We had to start creating a relationship with the local Arrow employees because they’re the ones who have the deep relationships within Brazil and who will be representing us there. 

The relationship side in this industry is very important in any country, but in some countries, if you don’t develop that relationship part, you’re not going to be successful in that country.

MDM: How does the internal culture of Arrow help it be successful as a global company?

Kolbus: Arrow is about creating solutions for our customers, and I think everyone within Arrow is in tune with that. We’re used to dealing across functional groups. Our employees are used to dealing with problems and solving those problems for customers and suppliers. That’s ingrained in our culture. When we’re dealing with a problem in a particular country, it’s just a different type of challenge that our employees will rise to.

MDM: How challenging is the global economy?

Kolbus: The global environment is very dynamic right now. Over the last 10 years or so it’s moved faster than ever before.

We do have certain things that are tried and true, such as how we handle forecasting in one region versus another. But then you deal with other economic or business continuity issues, and we’re learning that as we go.

As a global company already, we’ve been doing it for years now. That framework helps us, but I don’t think anyone has a playbook on how to do it for every single nuance that will come up. The team we have in place is able to handle that, but it certainly is a challenge for a global company like ours.

MDM: What are some of the key changes you’ve seen in the electronics industry and the electronics distribution industry in recent years?

Kolbus: The time to market has shrunk. Customers are coming to us more than ever before to tap into the services and solutions that we offer. They may need design services to bring a product design to market faster. At the end of the process, they ask for support in end-of-life services, or what we would call reverse logistics. How do you handle the data risk with disposing of products that have reached the end of their useful lives? Five or 10 years ago, the concerns around data risks or environmental impact weren’t as prevalent in electronics as today.

MDM: Have you received any requests that seemed outrageous at the time?

Kolbus: All the time. But that’s part of what excites people at Arrow, they’re helping come up with those very, very crazy ideas that no one has ever come up with before.

MDM: It sounds like a lot of these moves have been customer-driven.

Kolbus: Our suppliers, as well. We have over 1,000 suppliers on our line card and over 150,000 customers, so when you’re dealing with that scale of reach, everybody has different requests and different focuses. I see it coming from both sides.

MDM: What are some of the key issues driving the electronics industry right now?

Kolbus: One I touched on already: electronic asset disposition, or end-of-life services. Each country is looking at this differently as far as how they want to manage the electronic scrap when its usefulness is over. And it varies by state, as well.

The other one is counterfeit parts on the components side. How do we support our customers in ensuring that those parts we’re selling to them aren’t counterfeit? What quality controls can we put into place to ensure that?

Ten years ago, people weren’t as concerned or attuned to where their product went when it reached its end of life; they are today. And people are getting more sophisticated on counterfeit parts, so that’s become more of a challenge in the electronics industry.

MDM: Where do you think the industry is going next?

Kolbus: We continue to see our customers looking for more and more services, so adjacent services in our space.

And there are still a lot of emerging countries that we’re not deep in, that our customers or suppliers aren’t deep in yet. Brazil is a great example of that. There’s a huge opportunity for growth in those markets.

MDM: What’s the most exciting thing you’ve worked on in the last few years?

Kolbus: For me, it’s the electronic asset disposition. In the last couple years, Arrow made seven acquisitions in North America alone related to reverse logistics, really building out our solutions in this space.

It’s exciting to me because it addresses environmental issues, it addresses data security issues, and it’s a unique value proposition that we have.

And it’s wide open. There are a lot of opportunities still out there that we can provide for our clients. It’s exciting to see my employees getting involved in things they haven’t been involved with before.

MDM: What has been the most challenging?

Kolbus: The global challenges on the logistics side continue to be the most challenging. The global aspect of doing business and offering the breadth of services that we’re trying to offer around the world is daunting.

Each country has unique requirements. That to me has been one of the biggest challenges I’ve had to face in recent years.