CASE STUDY 1 ARROW ELECTRONICS - vRAL

CASE STUDY
Arrow Electronics, Inc COLLABORATE EXPRESS PARTS IDS

.OR
EXPRESS PARTS IDS COLLABORATE ARROW ELECTRONICS ?
( An Opportunity for whom ? Who needs more ? A Mutualism Symbiosis ? )
Executive Summary
Arrow Electronics, Inc Arrow/Schweber Overview Express Parts, Inc.

Background
Semiconductor and electronic component Arrow/Schweber is the largest working Express Parts, Inc. was a newly
suppliers often dealt directly with large group within Arrow Electronics, with established independent distributor that
OEMs, accounting for 65% to 75% of their $2.07 billion in sales in 1996. introduced an Internet-based trading
sales. system centered around a multi-
distributor bulletin board.
Arrow Electronics, founded in 1935, had Jan Salsgiver, appointed as president in Express claimed its search engine could
grown through acquisitions and 1995, focused on increasing technological swiftly identify equivalent parts from
leadership changes. expertise and investments in product various manufacturers based on part
management. numbers or technical descriptions,
potentially benefiting over 50,000 OEMs
across the United States.
By 1992, Arrow became the number one Express proposed that A/S could tap into
electronics distributor Under CEO this extensive market, potentially
Stephen Kaufman, increasing sales at a fraction of the cost
compared to the branch network
By 1997, Consolidation in the distribution
industry had resulted in a small number
of large companies dominating the
market.
Arrow's closest competitor, Avnet Inc.,
trailed by over 20% in sales.
Arrow's North American operations were
divided into five operating groups with
distinct product and strategy focuses.
Semiconductor and electronic component
suppliers often dealt directly with large
OEMs, accounting for 65% to 75% of their
sales.
Problem Statement
 The primary customer base for Arrow/Schweber in 1996 consisted of mid- and small-sized original equipment
manufacturers (OEMs), making up 56% of sales.
 These customers were too small for suppliers to serve directly, so they engaged franchised distributors.
 Distributors provided benefits like small quantity orders, short lead times, credit management, and value-added services.
 Even larger OEMs considered distributor services when they reached a certain stage.
 Another growing market was Contract Manufacturers (CMs), producing circuit boards and industrial computer systems.
A/S's business through CMs grew to 20% of total sales by 1996.
 A/S also served customers manufacturing PC clones exclusively for 11% of its business.
 The final segment included customers purchasing entire systems or assemblies for industrial equipment, requiring highly
customized solutions.
 Designated shippers would retrieve the parts from the distributor and directly ship the orders to customers. Once the
shipment was complete, the shipper would inform Express electronically. Express would then bill the customers directly.
 Distributors received payment, with Express deducting a 6% fee. Payment was made 30 days after the orders were
shipped.
 A/S's complete inventory list and associated prices were sent to Express on a nightly basis, along with similar lists from a
select group of other distributors.
Financial Impact / Result

Business Insight and Executions: Acceptance the Express In
 Arrow electronics can control the price and value-added service as well. The business process Wing to Wing. (Including but
not limited to Market Price, Value Added, Supply Chain, Inventory)
 Arrow electronics can monitor, evaluate and make an adjustment to the material displayed on internet periodically.
 Bringing Customers Closer and Easier to Access and keep update with what is Offered by Arrow Electronics and make arrow
electronics in the top of search engine.--> Beside commonly internet base , so Program Application maybe needed.
 Ensure that express part IDS system can cut business process costs as optimally as possible, so that Arrow electronics can give
the lowest price with the same value or more.
 Express can help to Arrow to simplify the business process and to make the organization Lean , so Arrow can response to the
market faster.
SUBJECTIVE
A. Express Parts IDS :
1. Express had developed an Internet-based trading system that would enable
distributors to post inventories and prices to a bulletin board giving customers large
and small an opportunity to shop for prices.
Note : Give an opportunity to distributor to reach customers that they can’t sell
using their current business model.
2. Standarized pricing over Internet can minimize Distibutor efforts and even make it
worthwhile for Arrow to significantly cut their costs to serve these customers.
3. Express “ Responds to Demand ”
B. Arrow Electronics :
1. Arrow need to know three things:
 How we create value for our customers for the prices we charge;
 How this value is different from what our suppliers can provide to our
customers.
 Whether firms like Express can offer the same value or more for lower prices
Notes :
 The main purpose is to Gain Customers and give most value for the price they
pay.
 But with express proposal  Arrow is vulnerable to the internet for competition
and depends on express’s system.
 As long as we are the lowest, we will always get the sale  Big “N’omerous
Customers  ( Remember BPJS strategy )  Lower price & Universal Coverage.
 Arrow” Creates Demand “
2. Questions:

How many of A/S’s customers were likely to switch some of their purchases to
Express?  Hopely abundant
 How would this affect A/S’s sales and profitability?  Hopely Increase sharply
 How would A/S’s suppliers react to Express?  Hopely Suppportive and
Happy
 Is Express a threat to or an opportunity for A/S?  It has to be an
opportunity
 The goal is to benefit the company
3. Arrow has a Websites but did not incorporate purchasing capability, it only
functioned as information center.
C . Customers :
1. When customers get large enough , they want to buy only direct from suppliers, who
can provide them with the technical support and low prices they want.  But it can’t
be happen with the suppliers.  this is the opportunity for distributor like Arrow.
2. Customer doesn’t expect pays high prices for the value-added services that
distributor’s provide.
3. They want is to shop around for the lowest price.
OBJECTIVE
A. Arrow Electronics :
1. During 1995-1996 the sales was increased but the net income and common share is
relatively plateau.
2. Roughly 25% of the sales come from transactional customers. Typically, a majority of
these sales are of the book-and-ship (BAS) type.--> can’t Ignore it.
B. Express Parts IDS

1. Its search engine could quickly cross-reference equivalent parts from multiple
manufacturers based either on part number or technical description and estimated
that more than 50,000 OEMs throughout the United States.
2. Express proposed that access to such a large market would enable A/S to increase
sales at less than half the cost of doing so via its branch network.
3. Express work like a Distributor’s Provider that mediate customer to distributor. ( Just
like broker or shopee nowadays )  they pick up 6% for fee service direct from
customer.
 Note : This “ can affect the distributor’s price “.
4. It means  there is a tansaction switching of purchasing, from Arrow to Express.
Note : Who control the business ?
ASSESMENT
1. Express Parts IDS Need to propose Arrow Electronic for joining their Internet-based
trading system as a marketplace.
2. Arrow electronic needs to expand their sales and gain customers.
3. Customers wants to shop for the lowest price and the best value.
4. There is no matter with the supplier as long as arrow sustainable to create demand
PLANNING
As President : Arrow/ Schweber Electronics ( Jan M. Salsgiver ).
To Express Parts IDS
Accept the proposal with condition :
 Arrow electronics can control the price and value added service as well.
 Arrow electronics can monitor, evaluate and make an adjustment to the material
displayed on internet periodically.
 Bringing Customers Closer and Easier to Access and keep update with what is
Offered by Arrow Electronics and make arrow electronics in the top of search
engine.--> Beside commonly internet base , so Program Application maybe
needed.
 Ensure that express part IDS system can cut business process costs as optimally
as possible, so that Arrow electronics can give the lowest price with the same
value or more.
To the CEO Stephen P. Kaufman
Assure that by joining Express parts IDS, the market reach will be wider and consequently sales
will increase. And if the number of sales is abundant, then to attract more customers, it can be
emphasized in prices with the same value or more, as needed and desired by customers.
And if we can assure keep the sustainability of the customers, then we can also assure to keep
the demand.
The advantages are we can cut our costs and offer the best price for customers, also we can
expand customer reach.

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CASE STUDY

Arrow Electronics, Inc COLLABORATE EXPRESS PARTS IDS

Arrow Electronics, Inc Arrow/Schweber Overview Express Parts, Inc.

Financial Impact / Result

B. Express Parts IDS

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