In tough economy, Minn. firm faces unusual problem

Packing an order
Digi-Key employee Curt Barber packs an order for shipment in the Thief River Falls distribution center
MPR Photo/Dan Gunderson

A northern Minnesota company has an unusual problem in the current economy: It can't hire workers fast enough to keep up with growth.

Digi-Key, the fourth largest electronic parts distributor in North America and the ninth largest in the world, is hiring 400 new employees in the next three months at its Thief River Falls headquarters to keep up with demand for the electronic parts it sells around the world.

Most people have probably never heard of the products Digi-Key sells, like capacitors, resistors and connectors. But company president Mark Larson said most people use Digi-Key products every day.

"Our customers are household words. I would say it's highly probable that if you have a cell phone, that cell phone was designed with Digi-Key parts," Larson said.

Digi-Key doesn't make any of those parts. The company distributes them for manufacturers like Panasonic and Sanyo.

The company started in 1972, selling parts to ham radio hobbyists. Larson said in the company's early days, he had to beg suppliers to sell their electronic components through Digi-Key. Last year, by contract, it had 600 offers from companies who want to work with Digi-Key.

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Digi-Key warehouse
Workers prepare orders in the Digi-Key warehouse.
MPR Photo/Dan Gunderson

The privately-held company has made a name for itself in the electronics industry by focusing on customer service.

About 600 people in long rows of cubicles process orders by phone, Internet, e-mail and fax. Company policy says no caller should be kept waiting more than five seconds.

As a salesman enters the order on his computer, the order comes up on a screen in the warehouse. One worker pulls the parts from a bin and puts them on a conveyer belt. Another worker double-checks the order and boxes it. Fifteen minutes after the order comes in, it's ready to be shipped.

About three million orders will be shipped this year. Curt Barber, a Digi-Key employee, packs about 120 orders a day. Like most of the workers, he wears headphones to block out the noise and listen to his favorite music.

"It's a great job, great job. Got great benefits, nice 401k plan," Barber said. "You can't beat it around here, that's for sure."

Entry-level jobs start at $11.45 an hour, but some workers say it's the benefits that are better than the competition.

"It's highly probable that if you have a cell phone, it was designed with Digi-Key parts."

The company says it has about 8 percent annual employee turnover. All workers need to complete eight weeks of training before they take a customer order. Larson said because workers tend to stay with the company, Digi-Key can afford to spend more on training each one.

About half of Digi-Key workers live within 10 miles of the company's Thief River Falls headquarters. Digi-Key has added nearly 1,000 workers in the past eight years. Some commute as far as 60 miles from Crookston or Grand Forks.

Larson hopes to hire 400 workers in the next three months. He says the company is growing so fast, if 200 qualified workers walked in the door today, he'd hire them.

"Right now it is challenging, because we are just surging a little bit too fast," Larson said.

Some of that surge is coming from faster-than-expected growth in international markets. Larson estimates Digi-Key has about 5 percent of the North American market for electronic components, and less than 1 percent in Europe and Asia.

Larson said although Digi-Key has a tiny fraction of European and Asian markets, sales are up 160 percent in China and 40 percent in Japan -- and 90 percent of those sales come from the Internet.

Kevin Brown, who's now vice president for advertising, was a senior in high school when he joined the company part time in 1982. His original job was designing a 72-page catalog. Now he oversees a 2,800-page catalog and Web site in nine languages. Brown said the company puts a lot of effort into its Web site.

The Digi-Key headquarters in Thief River Falls. The northern Minnesota company has an unusual problem in the current economy: It can't hire workers fast enough to keep up with growth.
MPR Photo/Dan Gunderson

"Roughly four of every 10 Web searches for electronic components in the world come to Digi-Key's Web site," he said. "We really dominate in terms of traffic."

Digi-Key has customer service call centers in the Netherlands, Hong Kong, Japan and Korea. But Larson says it still has only one warehouse, in Thief River Falls.

Larson said that makes Digi-Key unique in the international market; most distributors have warehouses in every country they serve.

The building has about as much floor space as 10 football fields, and the warehouse holds a half-million different parts.

Larson said that huge inventory gives the company an edge in customer service. He points out a recent industry survey in Japan.

"Of the top 30 distributors in Japan, Digi-Key was rated No. 1 for fastest delivery. And we were the only one of the 30 that doesn't have a warehouse in Japan," Larson said.

Larson says the company is ready for a major growth spurt.

"If we can stay on our game and don't lose focus, I think the future is incredibly bright," Larson said.

The company is planning an expansion of its Thief River Falls operation, and is lobbying state and federal lawmakers for funding to expand the local airport, so FedEx and UPS can land their largest aircraft.