Augat clipping distributor network

Electronic News, Oct 5, 1992 by Richard McCausland

ATTLEBORO FALLS, MASS.--Augat plans to terminate 10 distributors by year-end as part of an effort to reduce the overall roster from 86 to about 25 firms within three years.

As reported (Off the Shelf, Sept. 21), Augat withdrew the Alcoswitch portion of the line from Hall-Mark and from the distributor's Allied Electronics catalog subsidiary, plus dropped New York-based Astrex.

"We've notified four more (distributors about termination), but we're in the 30-day period and, by mutual agreement, we told them we wouldn't make public who they are until after that expires," said Lyle Pirnie, manager of distribution sales for Augat's Interconnection Products division. "We will probably terminate three more by the end of the year."

As for the revenues in question, Mr. Pirnie noted that "Between when we started in July and December, if we do what we think we are going to do, we will have terminated about $15 million in POS (point of sale)."

Distribution, includeing some 400 MRO (maintenance, repair and operations) firms, accounts for more than half of Augat's U.S. revenues, said Mr. Pirnie, without elaboration.

"One of the anomalies we have is that we have a significant portion of our business going through distribution, yet we go up againsts companies like AMP who dominate this side of the industry," he said. "We feel we have to grow significantly our distribution side of the business to compete with those guys.

"Now having an array of products as broad as AMP's is important, but it's not as important on the distribution side, I don't believe, as on the OEM side. We believe on a mix-weighted basis, we can do much better in distribution than we can in OEM. We don't have the number of special items that an AMP or a Molex would have; we certainly don't have the connector array that they have."

Mr. Pirnie said Augat is "down to a little under 80 (distributors), with the intention of getting to about 25." He explained: "Given the kind of line we are, and given the kind of mind-share we're looking for in distribution, we think we have to become a lot more significant with a fewer number of distributors."

He further noted "We have less than 10 percent of the markets we serve in distribution," citing connectors, sockets, (Alco) switches and terminal blocks. "We feel, probably justifiably so, that unless we can grow our market share at least over 10 percent, we're going to continue to have unfulfilled expectations in distribution."

Looking ahead, Mr. Pirnie envisions probably "between five and 10 distributors accounting for at least 80 percent of its business, and they won't necessarily be nationals. "We're not the kind of company that could do well with copying a semiconductor supplier's array of distributors. There are some regional distributors who do extremely well for us right now, and they will be part of our focus group. And locals, for that matter. It's just that kind of line." These include Avnet subsidiaries Hamilton/Avnet and Time, Arrow subsidary Capstone, Sterling, Milgray, Control Design, Cal-Switch, Sager, Electronic Supply and catalog house Newark Electronics.

It is expected the final 25 Augat distributors would eventually have access to the entire product line in all locations.

How will Augat determine which distributors make the final cut? "We're looking to double our POS in two to three years," Mr. Pirnie noted. "Since the whole is equal to the sume of its parts, we're going to be asking for some fairly significant growth from those 25" remaining industrials and "as much as anything else, financial stability" is another criterion. "We're also looking for administrative compatibility. We haven't been systemized heretofore; we developed a system that we're just now introducing to the field, so were looking for people who can go on line with us with relatively little difficulty."

On MRO distribution, he said "The business, in my opinion, is fairly well managed; it's made money. I think if anything (the 400 MRO distributors) are starving for lack of products. They could certainly pump a lot more product through that business and be a lot more successful with it." He indicated he would be studying that segment of the business more closely over the next six months.