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How a multi-billion-dollar distributor operates out of a small city in Minnesota

19th September 2023
Paige West
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Thief River Falls, sometimes referred to as Thief River or TRF, is a city in the northwest portion of Minnesota.

Taking its name from the falls of the Red Lake River, which loosely translated means ‘stolen-land river’ or ‘thieving-land river’, the city has a population of just 8,674 (as of the 2021 consensus).

Thief River is home to one of the largest electronics distributors in North America – DigiKey.

In 1972, Dr. Ronald A. Stordahl's passion for ham radio ignited the inception of the company. He embarked on assembling and marketing digital electronic keyer kits to fellow ham radio enthusiasts, enabling them to transmit radiotelegraph messages. This innovation was christened the Digi-Keyer.

The history wall in DigiKey's main campus

Fast forward to today and DigiKey is now a multi-billion-dollar distributor with 5,000+ employees, 2,400+ suppliers, 929,000 customers, and 14.9 million+ products available. In 2022, the company opened its 2.2 million sq. foot Product Distribution Centre expansion (PDCe), one of the largest warehouses in North America.

Electronic Specifier’s Editor, Paige West, paid a visit to Thief River to explore the new warehouse and get a feel for how such a successful company operates out of such a unique location.

A bridge to innovation

If you look back at history, there have always been problems that the world’s engineers and scientists have been trying to solve. But there has, arguably, never been more problems than the world faces today – climate change, alternative energy, healthcare, the need to be more connected, AI, electric vehicles. The list goes on.

The question is, who is going to help address these needs?

Dean Kamen, engineer, inventor, and businessman (Founder of FIRST Robotics) believed that politicians weren’t going to change the world – scientists, engineers, and technology will. He believed that we should celebrate scientists and technologists the way we do athletes and film stars.

How does that resonate at DigiKey? Well, it resonates with its slogan, ‘We get technical’.

“Our customers are trying to solve problems and [in order to do that] they need information, they need data, they need connectivity,” said Dave Doherty, President, DigiKey. “We’re not just a storefront that sells parts, we want to be deeper engaged with [customers] to help them do what they do.

“Our mission internally is to be the bridge. We’re the bridge between an amazing group of suppliers and an even more amazing group of customers.”

‘We get technical’ is a relatively new slogan for the company (a part of its brand refresh in early 2023) but the concept is by no means new.

“For 50 years, DigiKey’s focus has centred on accelerating progress for every engineer, designer, and builder,” said Doherty. “Our updated look and feel reflects that inspirational progress, our leadership position in the industry and our commitment to digital experiences and solutions that move goods and ideas forward.”

The updated logo and brand system is an evolution of the company’s historic look that allows for design flexibility across digital platforms while reinforcing an engineered feel in a more modern, timeless way. It was designed to emphasise progress and connection with suppliers and customers while reflecting DigiKey’s digital-first, forward-looking perspective. The refreshed brand identity also features a simplified company name to better reflect its deep technical product and digital solutions portfolio.

“We want to tell more stories about how we’re using technology to help our customers,” notes Tim Carroll, Global Head of Marketing, and eCommerce, DigiKey. “I think it will differentiate DigiKey as an innovator in making sure we make the buying process and shopping process as seamless as possible.”

An exciting expansion

One of the biggest stories has been the unveiling of DigiKey’s new PDCe, which is the size of 38 football fields – I certainly got my steps in when I went for a tour.

The new facility allows DigiKey to pick, pack, and ship nearly three times the previous daily average of 27,000 packages to customers in more than 180 countries around the world. DigiKey currently have the capability to process 36,000 orders a day and around 170,000 details (the individual parts).

The new facility is nearly fully automated, the only task that is truly done by hand is the actual picking of parts. Among the racks of components, carts are wire-guided so that the only thing a cart driver will have to worry about is where to stop. The wire-guided system will save more than 10% of time and is significantly safer.

“With the new system, everything is right there at your fingertips,” said Chris Lauer, PDC Packaging Manager, DigiKey. “It’s leagues ahead of being able to have all your tools and availability and, from a user perspective, [it’s] a nicer ergonomic environment because you’re not reaching to the top shelf and you’re not bending down to the bottom shelf. It all comes in at waist height and it has a really nice fit and finish to help make our team successful for the customer.”

The PDCe features two primary conveyor systems to provide redundancy in the case of a breakdown and provide opportunities for future growth. Scalability and growth were top of mind in the plans and design of the new building, and the majority of the fourth floor is currently open for the time being. There are over 27 miles of automated conveyor belt in the new facility, and an average order will travel more than 3,200 feet inside the building.

The migration from the old to the new warehouse is still ongoing but the goal is to be at 98% on-time shipment for all orders by the end of 2023.

But why Thief River?

To make it clear, DigiKey ships 100% of its components from Thief River Falls. There is no other DigiKey warehouse in the world and there’s no plan to build one.

Why? you may ask. Well actually, when DigiKey was looking to build the new warehouse, it was a given that it wouldn’t be in Thief River. The plan was to move somewhere with a better labour pool (and maybe slightly warmer winters…). But the closer it got to decision time, the more the company realised something.

“We’re here because our owner and Mark Larson were residents here and so it just seemed natural [to stay]. Mark [Larson] said that at some point it clicked for him that rather than a liability, [Thief River] was an asset,” notes Doherty.

The company has a rich history and strong roots in Thief River, and above all, a fantastic community. One thing I noticed as I walked around the site, was the amount of people in DigiKey branded shirts or hoodies. Now, they aren’t told to wear a uniform, they choose to because they’re proud to work for DigiKey. The company may be privately owned, but it’s just as much the employees’ company as it is the owners.

“This PDC here is really the heartbeat of DigiKey … and no one voluntarily signs up for a heart transplant,” notes Doherty.

The community spirit was just one reason for staying put in Thief River. Believe it or not, logistics was also a pretty strong contender.

“I look now at the struggle just with a bridge connecting [the new PDCe with the old one], trying to migrate the parts and if we were 300 or 400 miles away, trying to create a new labour pool, I don’t know how we would have survived,” said Doherty.

“The number of SKUs that we offer, you have to aggregate global demand with a supplier of MOQ [minimum order quantity]. If we split up into three warehouses, there’s more inter warehouse shipping going on that’s just not productive.”

Speaking of productivity, even with just one warehouse, DigiKey can ship products in most cases second day. And customers are happy with that, because at least it’s in stock and on the shelf.

Making ship happen

The overall mission at DigiKey is to support engineers, designers, builders, and procurement professionals with a wealth of digital solutions, frictionless interactions, and tools to make their jobs more efficient.

The company has significantly expanded its portfolio in the first two quarters of 2023 by adding 300 new suppliers across its core business, DigiKey Marketplace and Fulfilled by DigiKey programme.

Some of the key suppliers added to the DigiKey portfolio so far include Alps Alpine, Amphenol LTW, Ambiq Micro, HELUKABEL, and Zettler Magnetics. Long-term suppliers also continue to expand their offerings by adding new products from different divisions. DigiKey is rapidly expanding in the industrial space, controls, sensors, motors, and advanced products in industrial automation.

DigiKey also announced that direct shipments from European suppliers to European customers are now available through its Marketplace programme. The environmental and cost savings are realised when products do not have to be shipped to the US facilities in order to be shipped back to Europe, eliminating costly shipping prices, additional time, and impact on the environment due to shipping.

With products not needing to be shipped outside of Europe, more types of products are able to be sold including lithium batteries, heavy automation equipment, chemicals, adhesives, solar products.

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