Consolidate suppliers!

It's the battle cry of the new economy and electronics distributors know it. But distributors also know that buyers at OEMs and contract manufacturers are looking for value-added services and technical expertise. Going to one distributor for all the components on a bill of material may mean sacrificing some value-add capability and expertise. At least that's what TTI Inc., Fort Worth, Texas, is banking on.

TTI bills itself as a "specialty distributor of passive components and interconnects." As the consolidation of the electronics distribution industry continues, finding a component specialist like TTI is becoming more difficult and more valuable for some OEMs.

TTI was founded in 1971 by Paul E. Andrews, a former buyer at General Dynamics in Fort Worth.

Andrews' business philosophy was that the industry did not need another broadline distributor focused on high-dollar, active product. While passives represent only 10%-15% of total component dollars, they typically total 70%-80% of electronic line items and a late delivery of a 10¢ resistor can cause as much grief as a late $50 semiconductor.

TTI started out supplying resistors, mostly to military sources, and moved into capacitors in the mid-1970s. In 1988, the company added connectors to the lineup. Today, passives represent 80% of TTI's business and connectors the other 20%. Last year TTI cracked the $1-billion mark in North American sales. It increased revenue 91% over 1999.

In 2000, the company expanded an existing relationship with Tyco Electronics of Harrisburg, Pa., to distribute Tyco's entire AMP interconnect line in the U.S. and Canada. Today, TTI does 35% of its business with contract manufacturers and the remainder with a combination of military, industrial, medical, communication and computer firms.

Craig Conrad, senior vice president of global sales and marketing at TTI, says buyers are looking for value-add services and technical expertise from a distributor, not just a low price. Focusing on the passives market allows TTI to better package its expertise with more value-add services. Conrad says the majority of TTI's business has some value-add including EDI and auto-replenishment or component-level services like packaging and marking.

TTI plans to expand it e-commerce capabilities. It offers various online services through its Web site, but to date very few buyers have adopted the Web-based option. TTI is also a strong proponent of the RosettaNet standard and last October became one of the first non-board members to put the RosettaNet initiative into practice.

Eventually Web-based buying will catch on because it lowers the cost of the transaction. That's important because the cost of passive components is low and the majority of cost comes from the transaction, not the product itself.

TTI's rival Kent Electronics is being acquired by Avnet, but TTI plans to stay privately held. Conrad says private ownership allows the company to grow and adapt without having to answer to profit-hungry shareholders at every turn.