Arrow Electronics as a leading distributor of electronic parts faces new challenges and competitors with the advent of the information age. Profit margins had been steadily increasing through the 80fs and early 90fs with Arrowfs closest competitor trailing in sales by 20% as recently as 1996. However even at this point there was indication of stagnation as competitor Avnetfs sales had grown by 14% compared to Arrowfs 10% in that same year. At the same time Arrowfs largest group, Arrow/Schweber (A/S) had taken on new leadership under Jan Salsgiver who viewed technological innovation in product and inventory management as a way of improving the companyfs competitive advantage.
Express Parts, Inc. entered this increasingly competitive industry as an independent distributor offering an on-line service which would allow customers to compare prices among leading electronic manufacturers allowing customers to bargain hunt for the best price among rival companies. For a fee of 6% per each payment, Express would handle what had been a previously time and cost consuming process of receiving
and ordering transactional orders from customers. This process had proven problematic in the past for Arrowfs sales and marketing representatives as these orders tended to be of the Book and Ship variety and comprised 25% of the companyfs sales. Relationship customers usually dealing in Value Added requests have been more important to the company as this population represented more long-term and consistent orders as opposed to the more fickle transactional customers. Furthermore much of the companyfs focus on developing its core competency has been on improving its Value Added(VA) services as they comprised $1.443 billion of the Arrowfs $2.31 billion total services. With ...