The Digi-Key difference

A major facility expansion will allow an electronics distribution company to thrive within its rural Minnesota community.

Kaylee Cusack

December 15, 2021

Digi-Key's manager of community relations, Mark Schmitke, hasn’t yet had many opportunities to show the public the inside of the company’s new Product Distribution Center expansion (PDCe) in Thief River Falls, Minn. The four-story, 2.2 million-square-foot facility is still going through some final system checks before full operation. However, the site’s earliest visitors can see the tour guide’s pride over the intricate system of electronics picking, packing and shipping.

“If there are four parts in an order, they can be picked from different places. One part will go into here,” he said, referencing a black plastic tray before turning to point to a 70-foot-tall system of automated racking. “Then this tray will go into that ‘fastbox’ so that the order will get consolidated – all four parts of the order will end up in the same fastbox. When a packager is ready, those four trays will release and go straight to the packager.”

Mark Schmitke, Digi-Key manager of community relations, describes one of the several picking and packing processes that will take place in the facility expansion. (Minnkota/Michael Hoeft)

Digi-Key has distribution down to a science, and the new PDCe will streamline its mission of the same-day shipping of batteries, computer parts and other electronics components to homes and businesses around the world.

It’s been a long journey since ground was broken on the expansion in 2017, but Digi-Key Vice President of Order Fulfillment Chris Lauer is giddy to finally see packages rolling down the line in the near future.

“Feeling kind of like a kid at Christmas,” Lauer laughed. “We very much love our old system. We know its capabilities – and it’s very capable – and we’ve taken it well past its design capabilities. But the new system, just from a user experience for our team, is going to be much better.”

Digi-Key’s expansion houses a new best-in-class warehouse management system and OSR (order storage and retrieval system). The systems will work together to process and ship the company’s 27,000 orders a day – up from 11,000 when Lauer was hired 16 years ago. Digi-Key is nearly finished with the software-testing phase of the enterprise, and will then start to migrate 1.7 million parts from the original building to the new space. The transition will take about nine months, at which time employees will reap the full gifts of a more efficient, more ergonomic, smarter Product Distribution Center.

The new 2.2 million-square-foot Digi-Key expansion has a base floor large enough to fit 22 football fields. (Minnkota/Michael Hoeft)

But this path to “Christmas morning” didn’t come without its challenges. The project team had to navigate both a polar vortex weather event and the COVID pandemic during construction. Lauer is grateful that a reliable flow of electricity will not be an additional worry.

“Power is the key,” he said. “We have to have continuous, steady power.”

Stepping up for power

The Joint System of Minnkota Power Cooperative and Northern Municipal Power Agency (NMPA) worked with Thief River Falls Municipal Utilities to ensure Digi-Key and its neighbors have the level of power required to keep operations moving. They determined the Anderson substation, originally completed in 2000, needed a second 115/15-kV transformer to create the needed capacity of the Digi-Key expansion. The substation expansion project wrapped up in June 2020, in plenty of time for the final phases of PDCe construction.

“Digi-Key and Thief River Falls have become synonymous. It’s very much a hand-in-hand partnership between Digi- Key’s expansion and growth and the electric utility,” explained NMPA General Manager Jasper Schneider. “If we experience an outage, even of just a few minutes, it causes extreme disruptions for Digi-Key, and that has a monetary component to it. The city works very closely with Digi-Key to make sure that they have electric redundancy in place, that the power keeps flowing, that their rates stay competitive and that they’re well positioned for future growth.”

The Anderson substation expansion in Thief River Falls is similar to recent substation upgrades in Fargo and Grand Forks – all supporting communities on the grow. (Minnkota/Michael Hoeft)

Much of the PDCe’s automated racking, 22 miles of conveyors, product lifts, etc., are powered by electricity. Digi-Key takes pride in using that energy wisely. The company prioritized efficiency and sustainability in the building’s design, including elements like a sun-reflecting white roof membrane and facility-wide LED lighting. In the construction process, Digi-Key also took on aggressive retrofit projects at the existing facility, such as sensor-activated LED lights, high-efficiency water heaters and more.

Just like Digi-Key’s power partners stepped up to support this economic development, other Thief River Falls entities are also adjusting for the company’s continued growth. For example, Digi-Key collaborated with the local airport to extend their cargo capabilities and include more direct flights to key shipping areas. Ultimately, the entire region benefits from Digi-Key’s continued success.

“When you have an employer of that size, it creates all sorts of other micro-economies within the community,” Schneider said. “It supports the hospitals, the clinics, the coffee shops and the restaurants. Every community wishes they had a Digi-Key, especially an entity that large that’s headed in the right direction.”

The right place

Other regions of the country have attempted to woo Digi-Key to move its facility out of rural Minnesota and into other states. But nothing was enough to pull the company away from its roots.

“Anybody can do what we can do. All you need is inventory, a system and logistics,” Lauer said. “We asked ourselves, what makes us unique? And I absolutely believe it’s our people that make us unique.”

“We’re making a better experience for our team,” Digi-Key Vice President of Order Fulfillment Chris Lauer said of the PDCe. “We’re also enhancing our ability to send our customers accurate orders on time at the capacity we need.” (Minnkota/Michael Hoeft)

Lauer spoke of the grit and ingenuity of the Digi-Key workforce, drawn largely from a 75-mile radius around Thief River Falls. He experienced a clear illustration of that can-do attitude during the February 2019 polar vortex event. Most employees were able to make it to work and keep orders shipping, but some left their shifts to find vehicles that wouldn’t start in 75-below-zero wind chills. The Digi-Key maintenance team designed a solution.

“They put multiple big batteries on the top of this little Bobcat Toolcat we have. It had a Honda generator strapped to it, and it started cars no matter how cold it was,” Lauer recalled. “That’s the solution it takes to keep things going, and that resourcefulness is what I see in the folks around here.”

The Digi-Key team is eager to get to work in the expanded distribution center and will soon be bustling through the currently quiet building. But Digi-Key’s community partners are also eager – eager to see what new heights the company will reach in their small-town corner of the world.

“When you tie it all together, it goes back to the culture of the people and their passion for ensuring that every order is important, whether it’s a big order worth a lot of dollars or a really small order worth 50 cents,”

Lauer said. “It’s not any one of us. It’s all of us that carry that torch. That’s the magic of northwest Minnesota and North Dakota.”

MAIN IMAGE: Digi-Key Vice President of Order Fulfillment Chris Lauer stands on the second floor of the company’s new four-floor Product Distribution Center expansion in Thief River Falls, Minn.