What Is a Secret to the Success of Indiana Manufacturers?

November 7th, 2013

News Coverage:

What Is a Secret to the Success of Indiana Manufacturers?

By: Michele Nash-Hoff

Posted: 11/07/2013 10:15 am

Many companies in Northern Indiana were hit hard by the recession and the dramatic downturn in the auto industry, but some manufacturers were able to weather the storm, recover rapidly, and resume good growth well before the rest of the country. Manufacturing in the U.S. is undergoing a renaissance, and Indiana ranks as the top state where manufacturing contributes the most to the nations total economic output. For example, Northeast Indiana's medical device companies control 34 percent of the worldwide orthopedic market, translating into $12 billion in revenues. They are market share leaders in the $37 billion orthopedic and biologics industry, and combined together, they control 60 percent of the worldwide hip replacement market and 64 percent of the worldwide knee replacement market. Three companies shared their stories with me in recent interviews.

Micropulse Incorporated

I interviewed Brian Emerick, CEO, who founded Micropulse in 1988 and is the sole owner of the company. The company now manufactures from a state-of-the-art 100,000 square foot facility with over 200 employees next to the farmhouse where it was originally started.

Micropulse prototypes and manufactures the most demanding instruments and implants in the medical device industry. They don't have their own product line and make custom parts for OEMs. They are a contract manufacturer selling to the orthopedic industry. About 50 percent of their business is spine related, and the rest is a mix of hip, knee and other joint implants.

Their employees have been trained in "lean manufacturing" principles and tools using the local Manufacturing Extension Program and courses at the local community colleges. They have several black belts now on staff, and they do regular Kaizen events and utilize Six Sigma practices and tools. Their quality system is certified to ISO 13485.

Brian said:

We started being impacted by competition from offshore, especially China about 10 years ago, but business is coming back. Some of our bigger customers like Johnson & Johnson and Zimmer set up plants in China. We do more work with smaller companies that don't have their own plants in China because the quality requirements for implants are too stringent to use Chinese contract manufacturers.

They were flat in 2009 during the recession, but the orthopedic industry as a whole was down about 25 percent. They have great customers and started growing again in 2010. Their growth since has been about 10 percent per year. They recovered by not buying much and cutting expenses.

They spend about $2 million per year buying new equipment and updating software systems. They are considering adding another 60,000 sq. ft. within the next 18 months.

Brian said, "The secret to our success is the employees that make up our team. We have a solid workforce with very low turnover and have quality customers."

C&A Tool

Richard Conrow founded C&A Tool in 1969 in a garage in Churubusco, Indiana as a tool and die operation with 10 employees. C&A Tool is a poster child for the manufacturing revival in the U.S. As a privately held company, C&A Tool has continued to add jobs, machinery and square footage each year. Having sustained 44 years of economic ups and downs, the company has grown to employ more than 530 people with 750,000 square feet of manufacturing space.

I interviewed Rob Marr, V.P., who said, "Our services are contract machining and high precision grinding. We don't have our own products, but do a lot of prototype and development for our customers." They bought Direct Laser Sintering equipment to be able to do Additive Manufacturing, also known as 3D printing, which utilizes 3D CAD data to produce a part. In the case of C&A Tool, the parts are metal, not plastic, made by Direct Laser Sintering. This technology produces metal prototypes and production parts in a matter of hours.

Their main markets are: orthopedics for instruments and implants, automotive, electric motors, fuel system and aerospace. The company currently has four facilities and has invested in new capabilities, adding new equipment to support jet engine, power generation and industrial markets. This market mix means that they are ISO 9001:2008 certified, as well as TS949, AS 9100 and ISO 13485 certified.

Training the next generation of manufacturers is critical for the future. Rob is passionate about educating the manufacturing workforce, the general public and his local community that manufacturing is not the dark and dingy days of our forefathers. For the past 36 years, C&A Tool has partnered with the local high schools to offer part time jobs to more than 60 students during the school day that allow them to have on the job training and transition from the classroom to the workplace more seamlessly. In addition to training high school students, the company brings in math teachers to show them the real world of manufacturing.

They have been impacted by competition from offshore, especially China, but have been getting business back for a couple of years. They compete more with Europe than China because of their high precision machining and grinding.

They were impacted by the recession, particularly their automotive business. During part of 2009, their business was down by 40 percent. New development was down, but they didn't lay off any one and even bought another facility in 2009. They did not do anything special to recover, just continued their business culture.

They focus on investing heavily in capital equipment and software every year, even during the recession. They buy new equipment as their motto is "to maintain an excess capacity of square footage and equipment, even if it doesn't have the customer base to support the investment at the moment to be able to take advantage of new opportunities."

Rob said:

The secret to our success is that our founder laid a foundation for the company with the right people and equipment. We have evolved over the years. It really comes down to the people and allowing them to succeed and learn from their mistakes. We do what's right by investing in people and equipment so our employees can take pride in their work and we elevate the industry.

Forest River Inc.

Forest River was founded in 1996 by Peter Liegl. He foresaw an RV company dedicated to helping people experience the joy of the outdoors by building better recreational vehicles. After purchasing certain assets of Cobra Industries, the company started manufacturing pop-up tent campers, travel trailers fifth wheels and park models.

Continually growing, Forest River now operates multiple manufacturing facilities throughout the Midwest and West coast producing motorized Class A, B and C vehicles, travel trailers, fifth wheels, pop-up tent campers, park model trailers, destination trailers, cargo trailers, commercial vehicles, buses, pontoons, restroom trailers and mobile offices.

They were acquired in 2005 by Berkshire Hathaway, but Mr. Liegl has remained the CEO. Forest River shares 80-81 percent of the industry with two other companies, leading with a 35 percent market share.

Doug Baeddert, GM of 14 operating units, said:

We don't sell direct to the public; we sell through dealers focused on their main markets of recreation, commercial businesses for vehicles, pontoons, and mobile offices, and municipalities for buses and restroom trailers.

Their plants are non-union, and 85 percent of all production occurs in Indiana. The industry is an assembly-based industry not a vertical industry. They rely on their suppliers and are basically an "assembler" of parts, components, and assemblies that are manufactured by their vendors. For example, many of their wood assemblies are made by small Amish wood shops that are located in Northern Indiana.

They have not been impacted by offshore competition for their products, but over the last 15 years, the imported content of their vehicles has grown. It reached a peak a couple of years ago and is leveling off now.

Doug said:

In 2008-2009, there was a 33-34 percent reduction of manufacturing of RVs industry-wide. The consolidation of companies has been healthy and good for the financial stability of our industry. There has also been a consolidation of dealers so there are about one-third fewer dealers than prior to the recession.

During the recession, they didn't cut any salaried or sales personnel because they weren't top heavy. They downsized some of the production workforce, but not significantly. They haven't noticed any effect from sequestration nationwide, and their growth is up 40 percent this year.

They don't have a formal budget for investing, but they are continually doing new product design and improving their existing products. Each division is autonomous in product development and is very entrepreneurial, innovative, creative, and visionary in their design work for new products. They can make minor changes from concept to prototype in as little as three days. However, a major technology change, particularly vehicles, can take up to a year.

Doug said,

The secret to our success is the right leadership of our founder, Pete, our people, our products, and our processes. We give enough rope to our people to succeed or fail and have a very low turnover.

In answer to my question about their secret to success, they all said their core competency as a company is the talent and expertise of their people from management on down the line, not just their equipment or facilities. My own experience in business and as a writer has convinced me that it is the team of people that make up a company that is the key to its success or failure. These stories are examples of achieving the American dream of being a successful entrepreneur.

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