Fusion Worldwide is expanding with record hiring and good sales growth this year, on track for an even better 2017, company executives Peter LeSaffre and Paul Romano told Global Purchasing earlier this fall. Technology advances, supplier consolidation, and strong hiring practices are some of the keys to that growth, as new opportunities arise for independent distributors of electronic components. We asked LeSaffre and Romano to weigh in on these and other issues facing the electronic components supply channel. What follows are excerpts from our conversation.
How is business shaping up at Fusion Worldwide at the end of 2016?
Peter LeSaffre: This year has been good for us. As a company, we’ve been on a growth tear. We’ve had record hiring, new customers, and we will exhibit at electronica for the first time this year. We also updated our website in the last year, with a new look and logo. I expect 2016 and 2017 to be years of growth for the industry. [At Fusion], we’re seeing very good growth because of all the industry changes—the disruption and more need for independent distribution, for example. We’re not seeing the slow growth others are seeing.
Paul Romano: The immense wave of consolidation [among component manufacturers] is one reason for that. All of this creates disruption. And it creates [component] shortages, which are opportunities for us. As an independent distributor, our role is to fill the gaps—and there are always gaps. Technology is another example. The Internet of Things, automated cars, cloud computing, data management—these are areas that represent opportunity as well.
LeSaffre: Where we were, it was difficult to hire enough people to sustain the kind of growth we were seeking. The talent pool is here. We’ve hired 30 people globally in the last 18 months. We’re still hiring, and we plan to continue to hire.
What are some of the greatest challenges facing your company today?
Romano: For one thing, shifting trends in the marketplace. For example, the shift from OEMs to contract manufacturers—and we’re seeing some control shifting back to OEMs—and the shift of business out of China to other regions of the world. All of that is affecting what’s happening in the marketplace and will begin to affect component demand.
As an independent distributor, we have another set of challenges—particularly, trying to determine what is going to be “hot” next. Hard drives shifting to solid state drives is one example; how long will that take? The shift to SoC [system on chip technology] is another one. That is going to drive significant change. The challenge for us is, how do we predict how that will impact the supply chain?
Ten to 15 years ago, it was fairly easy to start [an electronic components distribution company]. It’s much tougher today due to all of these changes, along with the need for quality certifications and a global business strategy.
Along those lines, what kinds of demands are customers placing on your company today? How has that aspect of the business changed?
Our customers are putting more demands on us for services such as financing, shipping, and labeling. They want us to be their partner more than ever before. This is a big change. In the early days, we were simply an afterthought. Today, that’s not the case. Customers want you on their [approved vendor list]. They want more of a financial contribution from you.
Inventory management is another area. We have the ability to be adaptable and flexible, to help them manage their supply chain. [End-of-life component] issues are a good example. We can make the buy for them; we spend the money, get the parts, manage them, and sell them as needed. We also buy inventory and manage it on their floor for them. They use it as needed and pay as they use it. Those kinds of inventory management solutions are a big change. Today, we’re doing much more value-added supply chain management.
As an independent distributor, what is your assessment of the state of the counterfeit electronic components issue? What new strategies are companies like yours using to keep counterfeits out of the supply channel?
Romano: We don’t do a lot of work with defense [customers], but this is still an important issue for us.
Counterfeit is still a major problem in the industry, and counterfeit mitigation involves a lot of different steps. It begins with purchasing—know who you’re buying from. It involves communicating with customers, and there is a testing element as well. It’s a constant fight. Recently, we started working more with the Department of Homeland Security on these efforts. The [trade group] IDEA [Independent Distributors of Electronics Association], which we are a member of, began working with Homeland Security on training to understand and work together to identify bad vendors, bad parts, and get them out of the system. Customs and border control officials see everything that comes in; we need to train them on what to look for.
But again, it all starts with purchasing. If you never buy a counterfeit part, you’ll never sell a counterfeit part. That’s why, as a company, we focus on relationships, to ensure we steer clear of counterfeits. It starts with purchasing and knowing your vendors.
Peter LeSaffre is founder, president and CEO and Paul Romano is COO for Fusion Worldwide, a Boston-based independent distributor of electronic components. With 2015 sales of $340 million, Fusion ranked 14th on Global Purchasing’s 2016 Top Electronic Components Distributors list.