Engman-Taylor Company underwent some restructuring as a result of the economic slowdown. But as Keith Regan learns, the hard times have been put to good use by expanding internal capabilities and strengthening a sales force to pave the way for future growth.
Engman-Taylor Company (ETCO) assists its customers in the manufacturing sector by helping to re-engineer and reconfigure processes in ways that reduce overall costs. By combining products from cutting tools to lubricants from 1,300 manufacturers with expertise in the form of application engineers who spend extensive time at customer locations to understand the processes they use, ETCO has been a trusted supplier for more than 65 years.
While its services remain in demand in all economic conditions, the downturn did prompt changes at ETCO. Last spring, headcount was reduced by 34 people, many of them in back-office positions that have since been automated or reallocated as much as possible.
“We certainly didn’t want to lay anybody off,” says president and chief executive officer Rick Star. “But we were forced to, and in so doing, we realized that the process was providing us with a unique opportunity to analyze the return on our personnel investments. In many cases, the return was there; in some cases it wasn’t, and that led us to the next step in the analysis. We looked at common denominators in both high- and low-return environments. The results showed that the high-return areas related primarily to customer-oriented positions, and the low-return positions related primarily to task-oriented positions. This conclusion was not particularly surprising, since customers provide revenue. It also pointed out that we had deviated too much from our core philosophy of financially justifying any new hires, as we had too many positions that provided an inadequate return.
“So as we have recovered,” he continues, “we’ve been very diligent in making sure that any new personnel are in positions that relate to customers. Tasks that are unrelated to customers have been eliminated, automated or reallocated. For example, our document management process is now entirely electronic, so we don’t need file clerks to file and retrieve hard-copy files. If we keep our floors clean as we work, then we don’t need to pay people to clean them. The tasks that have been reallocated are targets for eventual elimination or automation.
“The bottom line is that we improved the company as a result of the downturn. We are better today as a result.”
ETCO has also made investments to enhance its ability to test new solutions for its customers. The company recently added a vertical machining center that boosts its ability to test, demonstrate and tweak new process approaches. The machine, made by MAG/Fadal, is a vertically oriented spindle that turns at up to 10,000 RPMs and is equipped with a 25-tool changer and a sophisticated CNC connection.
“It’s very flexible in terms of what we can do with it. In the past, typically when we would go into a customer with a new solution, it would get tested within that customer’s facility,” Star notes. “So while we are always confident our solutions will work, no one can know exactly what it will look like until it’s run. Now, we can replicate the process right here in our showroom and that not only enables us to give a more finished solution, but it avoids the need to shut down or take a factory offline to do testing.”
ETCO’s product lineup has expanded recently, too. For the first time, it has added a number of different paper and cleaning products, from shop towels to toilet paper and janitorial supplies. “Historically we have been known as a pretty technical company and that is still what we are,” Star says. “Stocking that type of material is a departure for us, but it is going well. It enables us go to into end users who don’t use the engineered stuff we sell as much and it also allows us to sell more to the customers we already have. We have always called on metal working shops, but now we can go to places that are entirely different sorts of businesses, including service companies. The key in the space is to be competitive on price and we’re buying in big enough quantities to make that possible.”
One of the other challenges of the recession has been handling customers who sought to extend credit terms well beyond traditional time frames. “The recession really exacerbated the trade credit issue,” Star says. “We’ve put an intense focus on credit worthiness so that we don’t get burned by customers who simply can’t pay.”
Growth has already returned to ETCO, with sales up over the summer of 2009, when the recession was at its deepest point in the trough. The Menomonee Falls, Wisconsin-based company, whose traditional base has been the Midwest and Southeastern parts of the United States, where manufacturing is most heavily concentrated, is on the verge of an expansion into Mexico. It recently won a contract to supply an Emerson Electric plant in Monterrey, Mexico—an area that has seen a dramatic increase in manufacturing activity in recent years. “We’re moving in on the sales side first and are considering incorporating in Mexico,” Star says, adding that no final decision has yet been made.
While traditionally serving manufacturers in the industrial, motorcycle, and marine spaces (Brunswick’s outboard division and Harley-Davidson are among its largest customers) Star says ETCO also has the ability to serve growth industries such as aerospace and medical device companies. “The people are here on staff to service those types of customers,” he adds.
Moving forward, all of ETCO’s expansion and growth efforts will be built on the foundation of its Cost Circles model, which Star points out is the only distribution model that bears a registered trademark. “That’s the basis of what sets us apart from our competitors,” he says. “Driving those cost savings in the core manufacturing processes and supply chains of our customers is what we are committed to doing no matter which direction the economy moves.”
ETCO uses 36 different metrics to track its business on a daily basis, and daily sales began to turn upward early this year. “It’s come back quicker than we thought it would,” Star says. “Right now, we are putting an enormous focus on new business.” In fact, the company is devoting a great deal of energy on what it calls a New Business Imperative. “We are emphasizing that this is something we have to do as a company.”
A new position was created to oversee business intelligence and use databases to provide support to its already robust outside sales force. “In the past, a lot of sales depended on relationships or knowing someone. We are trying to augment that with a more scientific approach to identifying and locating those new business opportunities.”