From a box of radio parts, Digi-Key grew into a $2.3 billion anchor of northwest MinnesotaMarch 22, 2018 8:46am

March 21-- THIEF RIVER FALLS, Minn.-If you were going to pick a spot to locate a worldwide shipping company, this wouldn't be it.

An hour from the nearest interstate highway, with an airport terminal that's smaller than the local curling club, Thief River Falls is a place where the recent arrival of a Tractor Supply store was big news.

Yet this city of 8,700 residents about 300 miles northwest of the Twin Cities is home to one of the state's largest employers outside of the metro area, a company started by a ham radio enthusiast that has become one of the biggest distributors of electronic components in the world-and is poised for another round of expansion.

Digi-Key Electronics has exploded in recent years, racking up sales gains through the worst of the Great Recession. The company's revenue of $2.3 billion last year was more than double what it posted in 2010, and it now employs more than 3,500 people.

Its success has been a boon to the city and the region. Workers start about $16 an hour, and the company says the average value of its total pay and benefits package is about $58,000 a year. That has helped northwest Minnesota become one of the higher-wage areas in the state, ranking fourth among the 13 economic regions tracked by the state Department of Employment and Economic Development (DEED).

"What Digi-Key means to that region cannot ever be underestimated," said Kevin McKinnon, DEED's deputy commissioner for economic development. "The leadership of Digi-Key and the people of Digi-Key have made this into a remarkable treasure for the state."

This spring, Digi-Key plans to break ground on a 2.2 million-square-foot expansion, more than tripling its warehouse and shipping space. The $300 million project, with a footprint the size of the Metrodome, was finalized after the state and local governments agreed to grant the company about $45 million in tax breaks over 10 years.

In return, Digi-Key has promised to create at least 1,000 jobs during that time. It says it has already added 170.

"They definitely are an example of, if you give them a helping hand, it can really generate tremendous steam and growth in the community," said LeRoy Stumpf, who retired from the state Senate in 2016 after representing the Thief River Falls area as a DFLer for 34 years. "I think that's really a tremendous, positive thing."

Founder remains sole owner

And it's all owned by one man.

Ron Stordahl grew up in Thief River Falls and returned home after earning a Ph.D. in electrical engineering at the University of Minnesota.

Now 74, Stordahl, a ham radio operator, created a digital key that improved the transmission of Morse code. After successfully selling his "Digi-Keyer Kit" to other ham operators, he branched off into the electronic components business in 1972.

His brainstorm was selling parts in any quantity, no matter how small. Other suppliers sold only in bulk. But if you needed a single transistor or capacitor, Stordahl would ship it.

The company grew quickly, moving in 1984 into its current location, a building of nearly 1 million square feet that it bought from its next-door neighbor, Arctic Cat. Inside are miles of shelves holding more than 1.3 million parts. When an order comes in, it's picked from the shelves and put on a conveyor belt that snakes through the building for nearly 3 miles.

In less than 10 minutes, the order is on a truck that will take it to Thief River Falls Regional Airport, where 98 percent of the outgoing freight comes from Digi-Key, according to Joseph Hedrick, the airport manager.

Six to eight jets take off every night on direct flights to the UPS hub in Louisville, Ky., and the FedEx hub in Memphis. The airport shipped more than 27 million pounds of freight in 2017, Hedrick said, an 11 percent increase over the previous year.

Stordahl remains the sole owner of Digi-Key, though he long ago turned over day-to-day management to others. He comes to the office every day and even helps to pick parts during crunch times, company employees said. He's active in the community and often can be seen rollerblading around town.

But he avoids media interviews and declined to be interviewed for this story.

Where to get workers?

As Digi-Key grows, it faces the same challenges as other large employers in rural Minnesota. Key among them: Where will the workers come from?

The company already draws employees from a dozen or more counties in thinly populated northwest Minnesota and across the North Dakota border.

It even runs a regular bus service to bring in employees from several of the larger towns in the area.

Thief River Falls would love to entice those commuters to live permanently in the city, but shortages of housing and day care are problems. In 2015, the city helped create 104 units of workforce housing, "and they rented right away," said Mark Borseth, the city's community services director. "The vacancy rate was pretty much zero before those units opened."

More are needed, and the city recently laid utilities that could serve up to 1,000 units near Digi-Key's planned expansion. City officials are actively courting developers, and the possibility of an economic boom has them excited.

"We were a small town that was comfortable with what we were," said Mayor Brian Holmer. "Now we really need to plan for growth."

Though Digi-Key's presence benefits many local businesses in its supply chain and others that serve its employees, the company also puts upward pressure on wages in the area. People stuck in lower-paying jobs can almost always find a spot at Digi-Key.

On a recent visit, state Education Commissioner Brenda Cassellius noted that job competition has made it challenging for the school district to make new hires. Health care jobs also are affected, said Stumpf, the former state senator.

"Go to any of the nursing care facilities and they will say they have lost workers (to Digi-Key)," he said. "And I bet it would be true in the hospital and some of the other health care areas.

"Quite often they don't have the same ability to offer increases the way a business like Digi-Key would have."

A 'cool thing'

Digi-Key's unlikely success story has been authored by its employees, said Rick Trontvet, the company's vice president of administration. In a cutthroat industry, facing global competition, Digi-Key isn't the lowest-cost supplier. It wins with superior service that keeps customers coming back, he said.

"Our workforce is our differentiating factor," he said. "Our people want to do a good job; they take service seriously."

Digi-Key is also a place where employees see the opportunity for advancement and turnover is low, Trontvet added.

"We probably hire 80 percent of our people through entry-level sales and distribution," Trontvet said. "If you have an interest and a passion, you can make a path."

The company's growth is a source of pride throughout the region, showing that rural Minnesotans can compete on a world stage.

"The cool thing," Trontvet said, "is how we can do this in such a small town."

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(c)2018 Star Tribune (Minneapolis)

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