|
|
|
|
|
|
In 2004, we continued the journey we began two years ago – a journey to become the clear number one worldwide provider of products, services, and solutions in the electronic component and computer product distribution industry. We set clear goals for measuring our progress. Deliver sales growth that outpaces the market. Grow our profits at a higher rate than sales. Improve continuously every aspect of our operations. Engage our employees at all levels in the leadership of our company. 2004 represented a significant milestone for us – a year in which our operating income* exceeded 2002 and 2003 combined. 2004 MILESTONES
A JOURNEY WITH MANY OPPORTUNITIES In 2004, electronic product manufacturers across the globe purchased more than $300 billion in components. The creation of electronic devices that transform our everyday lives, the continued conversion of electrical and mechanical devices to electronics, and the automation of manual work are the main drivers of the growing demand for components. Combined with the breadth of our customer markets – telecommunications, information systems, automotive and transportation, medical and life sciences, industrial equipment, consumer electronics – we have significant opportunities to drive organic sales growth. The fastest growing electronic manufacturing market is the Asian marketplace, where an estimated $400 billion in electronic products were manufactured in 2004. This year marked several milestones for our business including surpassing $1 billion in sales, expanding our franchises with several global suppliers, and opening six new locations across China, India, and Taiwan. More than 40 percent of the world’s components sales originate from this market. Our Asia/Pacific business represents slightly more than ten percent of our revenue, and we will continue to invest in this business to realize our full potential in the region. In both North America and Europe, Arrow holds the number one position in electronic component distribution. In these more established markets, we have delivered sales growth that has outpaced market growth by expanding the services and solutions we offer to our current customers and by targeting new customer markets. Arrow North American Components (NAC) leads the region in engineering services, giving us early visibility to new products. Customers use the supply chain solutions Arrow NAC offers to reduce their costs and to lower their capital requirements. In Europe, we expanded our presence in the Eastern European market, where double-digit market growth is projected. To respond to the increased use of electronic components in automotive manufacturing, our European team launched our first specialized automotive services group. In 2004, the execution of our growth strategy in all of our components businesses increased our global component sales by 26 percent and our operating income by 76 percent, compared to our results in 2003.
THE JOURNEY FROM CONCEPT TO MARKET In today’s world, the journey from concept to market for electronic and computing products has become increasingly complex. Our customers and suppliers turn to Arrow to manage that complexity and to simplify and accelerate the journey to market. For our customers, our work begins at the earliest stages of the new product concept and continues until the product is delivered to their end customers. In the early stages, Arrow engineers create designs. As the product moves to production, customers outsource to Arrow materials planning and inventory management to reduce costs and inventory liabilities. In our computing solutions centers, we complete custom systems integrations and configurations. During 2004, customers outsourced to Arrow the programming of 66 million components. For our suppliers, fulfilling the demand for differentiated technology requires that they dedicate significant resources to developing new components and computer products. To reach the broadest customer base, our suppliers outsource to Arrow technical design support and sales, inventory and supply chain management, and financing services. Arrow connects the technology innovations of our suppliers with the product design and manufacturing needs of our customers. From concept to market, we are an outsourcing partner at every critical juncture of the supply chain for electronic and computing products.  A CONTINUOUS JOURNEY – OPERATIONAL
EXCELLENCETo achieve sales growth that outpaces the market and profit growth that exceeds our sales growth, we must operate our business with speed and efficiency. In 2004, our continuous process improvement initiatives resulted in growing our operating income* at more than three times the rate of sales growth. At the core of our strategy is the belief that we cannot be satisfied with our progress, but must be constantly looking for ways to improve. To that end, we began the next phase of continuous improvement with the launch of our Lean Sigma program. Lean Sigma combines the Six Sigma principles of process accuracy with the Lean Manufacturing principles of speed and flexibility. In 2005, we will launch projects aimed at improving customer and supplier satisfaction, profitability, and working capital utilization. Lean Sigma provides a powerful combination of tools for achieving the fastest rate of improvement in efficiency and return on invested capital. INNOVATIONS THROUGH SHARED LEADERSHIP Accelerating the journey of new products requires constant innovation. Innovation is hard to achieve if leadership and decision making rests only at the top of an organization. Two years ago, we set another milestone for ourselves – to adopt the practices of shared leadership. For Arrow, shared leadership means driving decision making and accountability for our performance deeper into the organization. In late 2003 and throughout 2004, shared leadership teams of employees in every major business began their work. In Arrow NACP, employees launched a new sales program they named One Arrow Mind. Their idea was simple – offer more of our existing customers a total Arrow storage and enterprise computing solution. Fueled by their enthusiasm, this grass roots initiative generated close to $50 million in incremental sales. In Arrow Asia/Pacific, several hundred employees participated in developing new business plans, including a sales campaign that added $100 million in commodity components business. We have more to do to drive shared leadership practices throughout our business, but these early results show us what is possible. Independent and strong corporate governance is also essential to being an industry leader. In 2004, we increased the number of independent directors on our Board with the election of M. F. (Fran) Keeth, President and Chief Executive Officer of Shell Chemical LP. Fran has extensive international and financial leadership experience, and we are delighted to welcome her to our Board. THE JOURNEY CONTINUES As we enter 2005, we see our journey as a continuous one; every milestone we pass leads us to set a higher standard for performance. Accelerating our progress is the commitment and hard work of our more than 11,500 employees worldwide. Thanks to their efforts, Arrow was named for the eighth time to Fortune magazine’s list of America’s Most Admired Companies. In schools, hospitals, governments, and businesses, you can see the impact of their work and the technology innovations of our customers and suppliers. In our partnerships with customers and suppliers, we help bring their technology solutions to market and demonstrate our commitment to their business success.  William E. Mitchell President and Chief Executive Officer * Click here for a reconciliation of this information. |
||||||||||||
|
|
| © 2005 Arrow Electronics, Inc. All rights reserved. |
