Arrow Electronics: He did it his way

CEO led distribution industry's fee-for-service push

By Heidi Elliott -- Movers & Shakers, 8/15/2002

Though his tenure as Arrow Electronics CEO lasted a scant two years, Francis Scricco certainly made his mark on the distribution industry.

“Nothing is for free. We’re saying, ‘Here’s what it costs. If there’s value to you, then pay for it.’” Francis Scricco, Former CEO, Arrow Electronics

Scricco took the helm as CEO of Arrow Electronics in July 2000 and resigned in June, citing his desire to spend more time with his family. Though his time was brief, Scricco saw the gamut of market conditions during those 23 months. He enjoyed a few months of breathtaking prosperity—before the entire industry was struck down by a quick and severe economic downturn that still has its teeth in the electronics industry.

Despite this, Scricco stayed focused on his goals for Arrow, including the priority that the company increase its levels of profitability. On his watch, Arrow was the first to usher in the fee-for-service trend with its own subscription-based service offerings in May 2001. The company offers services that look to improve the efficiency of the supply chain. Since then, the rest of the distribution industry and industry analysts have been watching Arrow and its giant competitor Avnet to see how well they succeed in actually getting paid for services. Executives hope that going after new customers with existing services—and offering new services to existing customers—will result in acceptance of these fee-for-service offerings.

Since that launch, Scricco worked tirelessly to spread his message that distributors should get paid for the services they provide because those services cost them money. “Fran’s big quote is, ‘We’ll do more [services] for more [revenue], or less for less, but we’re not going to do more for less,’” says analyst Robert Damron with SWS Securities. “He has already taken the necessary steps to do that.”

“Nothing is for free,” Scricco has said. “We’re saying, ‘Here’s what it costs. If there’s value to you, then pay for it.’”

Scricco not only had to sell the new attitude to the supply-chain community, but also had to preach it to Arrow employees. He charged them to “be creative” and was beginning to see some results on that front. For example, Before his resignation, Scricco cited a large OEM that had a lot of inventory recently sold its plants to three contract manufacturers and told the contract manufacturers to buy the inventory from it. However, there are a lot of daily changes in production at the contract manufacturing level “which made the OEM crazy trying to track the inventory—they’re not set up to do it,” Scricco said. “The OEM said, ‘We’re really being the distributor, why don’t you do it for us?’

“In the old days, we would have bought back the inventory at a low price then marked it up. The contract manufacturer would have wanted low margins. We would have eventually been stuck with some inventory. Instead we said, ‘We’ll consign the inventory. We’ll manage it and we’ll pay you five days after the contract manufacturer pays us’ [per month, per transaction]. We’re not taking it on the chin. We’re getting paid for what they want us to do—we’re getting paid to parcel it out.”

And if Arrow had done it the old way, Scricco said, “it would have been a lousy deal for us, and three years ago we would have done it exactly that way.”

Scricco, 53, joined Arrow in August 1997 as executive vice president and chief operating officer. He was named president in June 1999. Prior to Arrow, he served as a group president at Fisher Scientific International, a distributor and manufacturer of laboratory, scientific, and medical equipment. Scricco was previously president of Whirlpool Canada. His professional experience includes managerial positions at General Electric and several years with The Boston Consulting Group, an international management-consulting firm. Scricco received his undergraduate degree in engineering from Worcester Polytechnic Institute in Worcester, Massachusetts, and a master’s degree in business administration from the Columbia School of Business.

Stephen Kaufman, Chairman and Interim CEO, Arrow Electronics

Scricco took over the CEO role held by Stephen Kaufman for 14 years. Kaufman is credited with turning Arrow from a floundering debt-laden company into the leading distributor of electronic components in the world. His push for acquisitions took Arrow, and the industry as a whole, into a consolidation mode that only recently showed signs of slowing.

Arrow describes Scricco’s resignation as a “mutual decision” of the Arrow board of directors and the former chief executive. While the company searches for a new CEO, Kaufman—who was set to retire completely as company chairman to continue teaching at the Harvard Business School—has agreed to resume the CEO role on an interim basis. “Steve [Kaufman] is a very profound individual—a visionary,” says analyst Clarke Walser, principal with Walser & Associates.