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Jameco Electronics

Jan. 18, 2022
Q&A with James-Farrey, CEO at Jameco and Gil Orozco, Vice President of Product Management at Jameco

1. What has been the impact of the supply chain shortages and other pandemic-related issues on Jameco revenue growth in 2021?

Jameco, along with the rest of the world, was compelled to respond to the pandemic in 2020. Our business has been in existence for 45 years. Throughout that time, we have worked diligently to establish ourselves as the go-to supplier for a diverse range of customers, from corporate accounts to the typical home enthusiast. This requires both diversification of our product range and the flexibility to take purchases in smaller amounts.

Due to the economic uncertainty generated by the Covid 19 virus, the first half of 2020 proved to be difficult for larger corporate accounts. We instantly witnessed an uptick in demand from our Hobbyist customer base. Due to the need for everyone to shelter in place, many households were obliged to bring activities indoors. Our electrical kits and components were the perfect fit for enthusiasts of all levels, from novice to expert, looking to stock up on creative, engaging activities to perform at home.

Our Educational Organizations had another challenge. Students who previously had access to on-campus labs now lacked access to both product and curriculum. Our ability to provide educators with the option to create lab kits customized to their curriculum and have those kits mailed straight to their students has proven to be a lifeline for these schools.

We have always offered kitting services, but demand has increased exponentially. We rearranged some warehouse operations, and before we knew it, we were distributing tens of thousands of kits to schools worldwide. Growth in these markets and our ability to identify and pivot to growth sectors were crucial in achieving revenue growth in what turned out to be a record year.

Some corporate accounts did begin to return in late 2020. The pent-up demand from the early 2020 slowdown emerged and remained high through early 2021. We always focus on maintaining healthy inventory levels, which did not change in 2021. With inventory available for immediate shipment, we were able to thrive early in the year. With news of raw material shortages and logistical bottlenecks in the supply chain, the growth forecast was suddenly jeopardized. We were once again in a good position because we had inventory on hand, but we quickly realized that our entire supply chain needed to be re-evaluated.

The length of lead times was increasing at an alarming rate. When assessing order levels, we found ourselves adjusting our forecasting tools. When planning their operations, our customers were also forced to look further into the future. Because our company has been a strategic partner in ensuring timely product availability for many years, we could leverage that relationship and provide customers with the assurance that their products will be available on the dates we agreed to.

We've added a significant number of new customers due to the shortage. This could be because their more well-known distributors ran out of stock, and they were obliged to look for someone who did, or the customer saw the importance of supplementing their supply chain during these difficult times. They immediately learned that not only can we frequently obtain the products at a lesser price, but we also give superior customer service. As a result, in 2021, we had the best of both worlds. Our enthusiasts and educators have remained loyal to our products and services. Additionally, we have been a resource for returning corporate customers and a new resource for customers to obtain items.

2. What part of the business was most impacted by these challenges in 2021?

The challenges of 2021 had the most significant impact on our Product Procurement and Sales departments. They were caught in the crossfire of managing logistics and consumer expectations in a constantly shifting environment. The combination of resurgent demand and a supply constraint was a prescription for disaster.

As the supply chain deficit intensified, Sales received orders from customers with critical ship dates that may have been endangered if we had not moved swiftly enough. As a result, customers would risk missing manufacturing runs. We saw this was unacceptable because they, too, were reestablishing their businesses in the aftermath of the slowdown in 2020. We immediately pivoted and assigned the appropriate inventory for these customers.

As previously indicated, our procurement team's attitude needs to adapt as well. We required estimates that extended considerably further into the future and provided data that enabled us to place orders for shipments scheduled to arrive in 2022. At times, we needed to communicate excessively to ensure our customers knew what was happening and manage their expectations. They needed to understand that they, too, required advance planning. Our staff worked extensively to guarantee that our customers received a viable solution. Additionally, we learned that we were working with first-time customers. They required a great experience to encourage them to return and solidify our status as a preferred provider.

3. What do you expect in terms of Jameco revenue growth in 2022?

In 2020 and 2021, Jameco's revenue increased, and we predict that trend to continue in 2022. We envision a very promising year ahead, matching those of industry experts and what our key performance indicators are reflecting. All evidence indicates that growth will be double digits in the first half of next year. Our customers are now placing orders months in advance to ensure inventory availability, providing us with a complete picture for early next year.

We are sure that the increased demand will continue in Q1 and Q2. Additionally, we concur with other industry leaders that forecasting Q3 and Q4 is tough. As the supply chain normalizes in the second half of next year, customers may lower the elevated inventory levels they maintained during the supply shortfall. We estimate that the third and fourth quarters will be relatively flat compared to the second half of this year. Nonetheless, the first-half growth will convert into double-digit growth for Jameco, allowing us to continue investing more to guarantee we have products at the lowest pricing and can deliver them to our consumers with exceptional customer care.

4. What is Jameco's capital investment priority in 2022? (e.g., inventory expansion, digital marketplace, new product categories, new end markets, etc.)

Jameco's priority is always to reinvest profits back into the company while also ensuring that our customers are satisfied and see Jameco as a value addition to their organization. The year 2022 will be no different. Inventory expansion, new product introductions, and expanding our digital marketplace will be areas of focus.

We have always believed that having products available for our customers is critical to our value proposition. This year served as a stark reminder that inventory is a means of retaining current customers and attracting new ones. We are constantly working with our Product Team and reviewing key product indicators to identify areas to invest more. We want to make sure that our inventory is positioned to succeed and benefit our customers.

To compete as a distributor, we must be a solution for both our current and future customers. Manufacturers in the electronic component marketplace are constantly developing new products that are more efficient and provide solutions to customers' ever-increasing demands for quality and functionality; as a result, we must stay ahead of those demands by making these products available to the market. We will distinguish ourselves by providing the best customer service, the best prices, and a solid supply chain that delivers the products on time. We will also make significant investments in new product introductions.

One thing we already knew, but it became abundantly clear during the pandemic, is that our website and digital presence are critical to our success. As offices moved to remote locations, people relied on the internet and eCommerce to new heights. People needed a way to do the work they used to do in the office but now do it from home and were completely reliant on online access for every aspect of their day. We did everything we could to ensure Jameco was included in the conversation when sourcing parts, but there is always more that can be done. We've set our goals for 2022 and investing in our Digital Marketplace is a top priority. Our investments will be focused on improving our website, seeking outlets such as Source ESB to showcase Jameco, and seeking value-added tools that will bring customer needs to the forefront and allow us to anticipate what they are looking for and needing.

5. What plans does Jameco have for enhancing the digital marketplace in 2022, and why?

Jameco aims to provide customers with a one-stop shopping experience for their product needs. We listened to customers who were having trouble finding products using our current search engine. Our industry is unique in that Jameco, and our competitors carry tens of thousands of products, each with a long list of attributes and specifications. It is not as simple as it sounds to populate and organize all this data in a way that is useful to our customers. We have partnered with an industry-leading search tool to provide our customers with the most efficient and direct path to our products. Our customers require that this tool be simple to use and that the navigation controls use specific search criteria. This will improve shoppers' ability to sort and filter, improving their shopping experience and meeting their needs.

An updated business center will be added in the coming year as well. This will assist our customers in managing their accounts, payments, quotes, and scheduled shipments, thereby streamlining their ordering process, and making their job easier. We are confident that the new tools and functionality will make everyone's job easier and more efficient.

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