In this Executive Perspectives episode, Pete Shopp, SVP of Business Operations at Mouser Electronics, shares insight into the driving factors behind the growth of the electronics market, as well as what manufacturers and distributors are doing to build supply chain resiliency across the industry.
This interview has been edited and formatted for clarity.
Tyler Fussner, Managing Editor, Supply Chain Connect
Pete, welcome back.
Pete Shopp, SVP Business Operations, Mouser Electronics
Well, thank you. Nice to see you again.
Fussner
Likewise. If you could please introduce yourself to our audience.
Shopp 0:26
My name is Pete Shopp. I'm Senior Vice President of Business Operations for Mouser Electronics.
Fussner 0:33
Pete, thank you, again, for sitting down with us. I'm excited for this conversation. I haven't spoken to you in a little while, so I'm curious. What's new with distribution? What's new this year? Do you see anything different about distribution operations in 2024?
Shopp 0:47
In many ways, I don't think there are changes. And when I say that, I say the role of distribution is still really the same. It's getting suppliers’ parts to the customer, finding customers for those parts, educating the customers so they'll know what to buy. I think in many ways, it hasn't changed as far as the role. But I do think there's different things we're doing now to make the process better. We're still doing distribution, but how we educate customers is different as far as the topics, the tools, we provide them to make their job or life easier, so they could find the parts better. That's really where I think it's different. We're doing the same basic thing. We're just making it easier for customers to engage with us and with the suppliers’ parts.
Fussner 1:39
And speaking of your customers, in your conversations with them, what are you hearing from them today? Are they facing any new challenges? Are they coming to you with new expectations?
Shopp 1:49
They are. I think there's still a lot of the same things that they've always had concerns about. Some of those concerns they didn't care about during the pandemic, because they just wanted any part. But now they're having the demands of making sure it's the date code, lock code, extra careful on [knowing] are the parts going end of life, are these genuine, authentic parts. That's why the customers really need to deal with authorized distribution to make sure the parts are legitimate. They're not counterfeit; they're genuine from the manufacturer; they haven't been through a grey market; they haven't been modified in any way.
Fussner 2:29
Pete, last time we spoke, we were talking about the massive warehousing expansion project that you were spearheading and that Mouser was undertaking. Could provide us an update—how's the warehousing project going?
Shopp 2:42
We almost have our final occupancy. I expect that any day it should be here, within the next couple of weeks. What we've been doing since January is starting the process of building the inside of the building, if you will. We are adding quite a bit of technology to make this warehouse even more efficient than our current one.
We have a lot of big plans for automation. We see this facility basically doubling our cubic space from what we currently have, and we'll run both buildings simultaneously. But we're adding more vertical lift modules. We currently have 139. I actually have 80 on order already for this new building, and they have just started building those. But we have a final planned footprint of 300 of those vertical lift modules.
Fussner 3:35
As you are building the inside of the building, as you said, what are some of the new technologies, like the vertical lift modules, that are coming in? Are you implementing any other advanced or newer technologies into the warehouse?
Shopp 3:49
We are. Specifically, we're using a product called EuroSort. It's a technology that originated in post offices where it read the zip code and would shoot envelopes off into a bag. We're going to re-use that technology in two different ways, either in sortation, or what we call consolidation. Two different processes. After we receive the parts, they'll be used in this EuroSort conveyor belt, and basically it'll drop the parts into a specific slot. Each slot will represent a section, very small section, of the warehouse, so that then all the parts will end up in a tote and that tote can be directed via a conveyor system to the actual spot where it needs to be put on the shelf.
On the other side, it'll be a later phase of the project, is that we will also use those same sortation devices to complete orders. We have a 10-line order; it's coming from 10 different parts of the warehouse. It'll all come together and be automatically put into this. A light will shine when all 10 lines are there, and then we'll be able to pack it up and send it on its way to the customer.
Fussner 5:06
And stepping out of the warehouse for a second, I'm curious, is Mouser developing or offering any new capabilities that can help their users manage their projects or engage with Mouser?
Shopp 5:18
We are. Certainly, we continue to do automation to make things easier and faster. Much more order taking via EDI, APIs. We're using that and implementing more and more. The ability to update orders via EDI and APIs so that a customer can really manage their orders better.
We also have the capability, we've added some new items on the website, so they can really track their part history and their BOMs, those types of things, so that they can gather everything together and once they're ready to execute, it's ready to go for them.
Fussner 5:55
It sounds like it's almost creating a nice little workspace within the Mouser experience, that users can come in and do what they need to do before they are just coming in and out for a part.
Shopp 6:05
The engineer… I think the one thing we're finding, especially because of the pandemic, engineers became very individually resourceful. They weren't having salespeople call them. So, if we can provide them the information they need on the parts, reference designs around a certain solution, having that all available, having them design, play with their parts, figure out exactly what they want and then they can execute the order.
What is interesting is that we have some of our carts or some of these BOM build-outs, sometimes the engineer will be working on them three to six months before they finally make the order as they continue to do more research and tweak the design a little bit. It's a very different lifecycle than my wife buying something on Amazon and when she picks it, it is usually at our door the next day.
Fussner 7:02
Now, unfortunately, it seems all too often we are seeing supply chain disruptions on various scales, whether it's conflict in the Red Sea, the collapse of the bridge in Baltimore, earthquakes in Taiwan. Have any of these recent disruptions impacted Mouser, or more generally, how does Mouser prepare itself and then navigate through supply chain disruptions?
Shopp 7:25
Let's say none of those impacted us directly. I don't know of any of our suppliers’ parts that were stopped from making it to us. But it does greatly impact the overall supply chain only because a delay in one spot can create a delay in another spot. So, it does have a general impact. The other thing that those delays do is add cost. We certainly feel that.
I think the most important thing that has really became apparent, like in the pandemic with the supply chain issues, is that it is very important to have inventory, inventory on the shelf, to meet customers’ needs—known or unknown—needs that they have. And that really is the Mouser model. We have invested heavily in inventory. Over 1.1 million SKUs in stock; almost $2 billion of inventory in the building under one roof. We have the inventory available. That really is the value of distribution: supporting the customer. It also adds value to the supplier and maintains that connection between them, but act as the backup; act as the buffer; really, act as the bank for the customers and the suppliers.
Fussner 8:45
Having been able to successfully navigate these disruptions, especially the major one in COVID, I'm sure that was an eye opener for a lot of customers. Do you have some advice or guidance on how customers can prepare themselves to navigate certain disruptions?
Shopp 8:59
Certainly, I think it's very important for them to make sure they stay up to date on if a part is becoming end of life. We provide that information to our customers. If they've designed something recently, if it's going end of life, we'll let them know so that they can plan ahead to modify their design. But really, it's important for them to have that information up front. If they're starting a project today, they need assurances that there'll be parts available three, four or five years down the line and be confident that the parts will be available. We're working more and more on providing those types of tools so they know exactly the status of the parts they have that they're planning to use that they're available.
Fussner 9:42
It really does come down to communication and transparency. You have to be aware and raise your level of awareness so that you're not caught blindsided.
Shopp 9:52
That's really what it is. We use mouser.com as a conduit for so much information for a customer. It's not just about a voltage or a value, but really this whole entire process of the status of the part. What's available? Is it from a well-known supplier that they can count on that's going to be there for a long time?
Fussner 10:13
Maybe not so much a disruption, but there have been recent setbacks in the construction of new semiconductor fabrication facilities here in the U.S. I'm curious if you could offer your perspective on what that means for distributors? What does that mean for the domestic chip market? What does that mean for customers?
Shopp 10:33
First of all, let’s just say, it's not that surprising. It takes a while to build a chip factory. And anytime you have to do an application process through the U.S. government, I don't think anybody really thought this would be a quick solution.
I have spent this week at EDS talking with the suppliers that have changed their manufacturing footprint; different countries that they're going to, having multiple sources, multiple places that they can source parts, multiple factories, multiple countries. I think that's a key to ensure that the supply chain stays together and does flow.
Fussner 11:13
It's an exciting time to see this much support and backing behind the domestic chip production expansion, with things like the CHIPS Act. It’s exciting to see.
Shopp 11:22
The other thing this is going to do is bring solid manufacturing jobs to the U.S. Those are good paying jobs, vital for U.S. interests to be less reliant on certain countries that aren't as friendly towards the U.S. That part is exciting that the government did make this investment in U.S. manufacturing, specifically the semiconductor industry.
Fussner 11:52
Pete, I am going to ask you to shift perspectives here and to have a forward-looking perspective. Do you see any verticals or industries on the horizon, say in the next six to 12 months, that are potentially poised for some growth?
Shopp 12:05
Certainly, right now, the most growth-oriented one is the defense industry, aerospace. Unfortunately, it's probably not for the best reason. But it is very strong right now. I expect that to continue for a while until some of these geopolitical risks are over with.
We're still seeing a lot of activity in the automotive sector, especially with electric vehicles. I think that will continue.
Where we're seeing a lot more activity is industrial automation. I just look at the stuff that I'm putting into our new warehouse and I realize all the ways to move things from spot to spot, and the industrial automation that is capable now is pretty amazing. I think that's going to continue; tying robotics into that. I think those will be the strongest.
Fussner 12:59
We're about halfway through the year. If we had to boil it all down to something, what do stakeholders in the electronics market need to be prepared for come 2025?
Shopp 13:11
That's a tough question. There's going to continue to be some geopolitical risk. There's going to be an unknown disaster, or a flood, or an earthquake or something like that. It is important to have your supply chain in order. The challenge is, inventory is seen as expensive. And it is expensive to hold and just have it sit there. But it's also really expensive if you can't get parts when you need them. And so, I think people have to balance the supply chain resiliency versus the cost of building that resiliency. I think that's the big challenge.
The encouraging thing is, the manufacturers are doing a lot to beef up their own supply chains. You have people like Mouser and other people in the industry that are distributors that are investing in inventory, continue to invest in inventory so that it'll be available for customers.
And the true positive is, any way you look at it, the U.S. and the global economy are growing. Electronic components are in more and more items. A car is a computer now that happens to have wheels on it. And that's going to continue. Electronics grows two times the GDP, on average over time, twice as much. So that will continue.
Fussner 14:40
It's refreshing to hear a positive outlook because I couldn't agree more; the electronics industry isn't going anywhere. If anything, it's only going to continue to grow. It's an exciting time to be involved in the industry.
Shopp 14:51
I definitely agree with that.
Fussner 14:53
Pete, I want to thank you again for sitting down and joining us today. I really appreciate your insight and expertise that you were able to share with our audience.
Shopp 15:00
I really enjoyed this time we spent together. Thanks so much for having me on.
