A Tour of Digi-Key Electronics’ Product Distribution Center Expansion
At a Glance:
- Digi-Key Electronics has added a 2.2 million square foot facility at its headquarters in Thief River Falls, Minn. to pick, pack and ship electronic components.
- Digi-Key President Dave Doherty and Chris Lauer, vice president, order fulfillment, discuss the milestones of the Product Distribution Center Expansion (PDCe).
- There are 27 miles of automated conveyor inside the building, and an average order will travel more than 3,200 feet inside the building.
For Machine Design editors, every opportunity to tour a facility is carefully evaluated for its ability to deliver on at least three factors: an opportunity to learn, the ability to assess a process and the independence to share information collected. The event marking the opening of Digi-Key Electronics’ Product Distribution Center Expansion (PDCe) in Thief River Falls, Minn. would meet the criteria.
To Learn: Why This Location Matters
With distribution operations in two distribution locations—Fargo, N.D. and Thief River Falls—the global distributor of electronic components and automation products offers more than 13.4 million products and processes more than 6.4 million orders annually. Its website notes that 99.9% of orders are shipped same day. The large majority of orders is shipped from Thief River Falls.
The new facility located at Digi-Key’s headquarters in Thief River Falls adds 2.2 million square feet to the existing premises. That’s a footprint of more than 22 football fields, or 1,045,600 square feet.
The PDCe building was designed by Minnesota-based Widseth, and McShane Construction served as general contractor on the project. Digi-Key has partnered with KNAPP, a warehouse logistics and automation specialist, to design and implement the internal automation and operational equipment.
Improving productivity, efficiency and time spent on collecting and packing orders and eliminating waste are among the key reasons for selecting this state-of-the-art electronic picking, packing and shipping solution, according to Digi-Key President Dave Doherty.
But why would an enterprise that already sells and ships more than six million orders a year to 180 countries invest in a $400 million warehouse expansion at a remote location in northwestern Minnesota?
The rationale deftly unfolds at a press briefing following the invitation-only ribbon-cutting event. “Productivity is all about continuing to allow us to scale,” said Doherty at a press briefing following the invitation-only ribbon-cutting event. “And it’s a mixed blessing. We make no apologies for being in a remote area because it’s pushing us into that automation for the right reasons.”
The roots of that mixed blessing can be traced back to 1972, when Digi-Key was founded by Ronald Stordahl, an electrical engineer. The company became a pioneer in the mail-order catalog business and a key resource for design engineers. Today, Digi-Key ranks as the fourth largest electronic component distributor in North America and the fifth largest electronic component distributor in the world.
Three River Falls has remained the hub where most of the activity takes place. With more than 3,600 of Digi-Key’s 5,200 employees based in there, the reputation of the city and the enterprise have become intertwined.
“Growth at this level is a win for the employees of Digi-Key, it’s a win for the Thief River Falls community and it’s a win for the state of Minnesota,” touted Steve Grove, commissioner of Minnesota DEED, in a press release. “The opening of this facility is made possible by local and state economic support, which will contribute an additional $500 million in economic output, as well as the addition of more than 1,000 new jobs.”
Doherty said Digi-Key closed 2021 with a 65% growth rate and that bookings in 2022 were up 25% year-over-year as of the grand opening. Digi-Key has added 680 new employees since work began on the PDCe project in 2018.
To Assess: Developing New Methods for Order Picking
The most impressive feature housed in the PDCe is a conveyor system made up of 27 miles of automated conveyor and spanning four floors. Scalability was clearly prioritized in the design of nearly fully automated conveyor system, which in fact is made up of two primary conveyors that provide redundancy in the event of breakdown. An average order might travel more than 3,200 feet inside the building, according to Digi-Key.
That picking parts are the only task done by hand is a conspicuous change from Digi-Key’s former picking process. “The old building was really remarkable in its day,” explained Doherty. “One of the coolest things about it was you didn’t require chokes. We had a crossbelt that was only about half the speed [of the new conveyor system] and it meandered through about half of the second floor. You could put picks, typically small plastic packs, and just drop it right on the belt. Some of the drawbacks were the walk time—people had to go up and down the aisles to get to the part—and inaccuracies.”
In addition, it took up to 300 people to “turn on the lights because parts were stored all over the two floors,” added Doherty.
Not only does the new system reconfigure the way work is organized, but it also eliminates ineffective work processes and provides an “upfront edge,” said Chris Lauer, vice president, order fulfillment at Digi-Key Corporation. “In our old pick base, you were looking at 100 parts. In the new picking system, it’s an average of about 2.3 parts that are in front of you. The new system points pickers to the bin they should pick. Ultimately, we’re looking to pick up our accuracy as well as better performance.”
Staff now manage the flow of orders from a control room. The new warehouse management system and OSR (order retrieval system) provides the advantage of streamlining paper trails and documentation.
“We bought the best of the best because we felt we had to do that,” said Lauer, who spent about six months working on system requirements. “Our old system is like a Ferrari, but you need a Ferrari mechanic to support it. The [new system] becomes a lot more scalable.”
To Share: Potential Value of Modeling for Future Growth
Aside from the customized conveyor system, the facility itself showcases value-added engineering features. The construction incorporated 17,000 tons of steel, 1,860 pieces of precast concrete and a 328-ft steel bridge connects the expansion to the current headquarters.
The building features six backup diesel engines and pumps along with a water tank built for fire suppression. Sustainability features include the roof’s white membrane, which reflects the sun’s heat, and sensor-activated LED lights to minimize electricity usage. The facility also has its own storm sewer and run-off ponds to mitigate any flooding or storage concerns in the community.
When asked how long the new warehouse will meet Digi-Key’s needs before another upgrade would be warranted, Doherty quipped: “You tell me what you see in the industry and I’ll tell you the next time.”
Industry insiders who understand the ebb and flow of supply chain cycles would be familiar with longer-term trends as well as short-term factors. The past few years of serving demand for products such as connectors, capacitors and microcontrollers provide a quick study in dealing with inventory shortages.
For Doherty, having cornered a niche that allows Digi-Key to aggregate inventory in one location and serve global demand gives the company a leg up in spite of the pandemic‘s emotional constraints. “We are serving some of today’s demand, but we’re really trying to serve tomorrow’s demand,” he said.
