Globalization and the manufacturing downturn hit hard at United Southern Industries Inc. The small, family-owned injection molder saw millions of dollars of business start leaving, some of it for overseas. The company laid off 30 percent of its workforce of 350 and got rid of nearly half its presses.
For a time, USI was on ``life support,'' said Todd Bennett, president of the Forest City-based firm. ``It was touch and go.''
The strategies honed in the growth of the 1990s weren't working. The company, nestled in the foothills of western North Carolina, had grown from $8 million in sales in the late 1980s to $26 million.
But some of its key business, making components for consumer products like vacuum cleaners and power tools, was very vulnerable to the price-cutting pressures from big-box retailers and the low-cost, offshore manufacturing push that followed.
USI lost work to Mexico, Puerto Rico and then China, closed one of its plants, and in Bennett's words, found itself ``figuring out the cost of a cup of coffee.''
USI's situation isn't unique - a lot of molders faced similar challenges. It followed some traditional steps in trying to remake itself, introducing more lean manufacturing, investing in technology, and doing its first-ever marketing plan.
But it also is pursuing some ideas that are unique: The company opened up financial information for the first time to employees, talking to them about the 2 percent profit margins it was getting and things like the cost of raw materials and health care.
USI took some other counterintuitive moves - even as it was losing business, it decided to get rid of 60 smaller, less profitable customers, so it could focus on larger, well-run companies that USI thinks have staying power and more potential for long-term business.
It switched shift schedules in one of its plants, giving employees 30 hours of work but paying them for 40 as a way to cut down on carpal tunnel and other injuries. Company officials said they had to add a shift, but reduced overtime, improved morale and quality, and wound up saving money.
And it continued to make training a priority, getting 106 of its 190 workers certified as operators under a national injection molding operator-training program.
It's too soon to say if the effort will pay off. USI's attempts at transformation remain a work in progress, at least measured by the bottom line.
The company's profit margins continue to be very tight and sales have been basically flat, as it eschews following customers to low-cost locations and tries to craft a niche as a small, regionally focused molder in the United States.
On the positive side, though, the company has been able to maintain its sales at $27 million, in spite of losing what amounts to $20 million worth of annual sales in the last six years. And one key measure of productivity, sales per employee, has climbed from $90,000 to $140,000 since 2000.
``I feel like we're creating a culture, and we have a mind-set that the Japanese had [when companies like Toyota adopted quality principles],'' said Bennett. ``We're doing the right things for tomorrow.''
He's an open book
In a mid-January interview at USI's Forest City headquarters, Bennett makes frequent references to books, like the Great Game of Business, which talks about open management. And he suggests that the company needs to set itself on a path of constant improvement.
One of the changes Bennett wanted to bring was letting employees see the company financials, to understand its 2 and 3 percent profit margins: ``We had people who literally thought we were making 50 cents on the dollar,'' he said.
But he first had to convince his father, Joe Bennett, who co-founded USI in 1970. Todd Bennett said he understands why his father, a toolmaker by training who built the company on a strong technical background, was initially skeptical.
Joe Bennett had emphasized employee training and put a lot of time into developing national programs with the Washington-based Society of the Plastics Industry Inc. The two men see themselves maintaining an entrepreneurial focus, but Todd Bennett's push to share more information with employees was new.
Joe Bennett guided USI in a different era, when the industry was growing and owners had to worry a lot more about key employees leaving and starting their own companies, Todd Bennett said. ``Hell, I was a plant manager for a while and I couldn't even look at the income statement,'' he said.
``I know my Dad was really frustrated four or five years ago, and I was pushing him to do this financial open-book management,'' Todd Bennett said. The company had suffered a setback, and Bennett said his father was upset.
``He said, `Damn it, these people just don't understand the risk I'm taking,'' Bennett said.
``I said, `Dad, guess what, they're never going to understand it,' '' Bennett said. ``He said, `What do you mean?' ''
``I said, `You're carrying this big freakin' boulder on your back,' '' Bennett said. `` `You've got to turn every one of these people into an entrepreneur like you and give everyone a little piece of the rock.' ''
Joe Bennett, who remains chief executive officer but has relinquished more day-to-day management to Todd Bennett, declined to be interviewed but said in written responses that the current business climate requires a ``much more sophisticated approach to cost, speed, consistency and accuracy.''
Seeing the financial and quality information, particularly if the results are not looking good, does motivate employees to come up and ask, ``What do we have to do differently to get bonuses?'' said Stacey Byers, who manages one of the company's two molding plants in Forest City.
``There is nobody out on the floor who is shy about stopping Todd on the floor and talking to him about something,'' said Lloyd Kerley, a senior process engineer.
The company also organizes its employees into teams, some focused on practical areas like scrap reduction, where it saw a 65 percent drop in two years, and others on issues like leadership or safety training. It offers English as a second language and high school equivalency classes for employees at the plant.
It posts quality information in each plant to let employees know how the company did the day before in areas like scrap at the press. And it installed a new system of flat-screen monitors in break rooms, where it provides daily updates on company events, employee birthdays and things like health tips, a system it calls ``USI Today.''
Today, the company is a lot smaller. It has 28 presses, down from 52 in 2000, and employment is about half what it was in the glory days. Still, sales have held steady, at about $27 million.
The company has worked to take out labor: It has been moving many secondary operations to the press, trying to create manufacturing cells. In one job, a console for a lawn tractor, the firm moved stamping operations to the press, cutting the number of people needed from three to one and reducing part cost 40 percent, said Byers.
``We would have lost the job if we couldn't have done this,'' Byers said.
The company added technology like two-shot and gas-assist molding, and saw turnover drop when it shifted one plant, where employees worked on smaller presses and had a lot of carpal tunnel injuries, to a 30-hour-a-week schedule.
The company pays the employee for 40 hours, but takes away the 10 hours of extra pay if they arrive late or do not meet other conditions. The old work schedule was costing the company in absenteeism, health costs and mistakes, said quality manager Bill Burgin.
``It was taking a toll on people, and it showed in the quality,'' he said. Now, ``they are here every day, they are here on time, and there is less scrap.''
The upshot of all the efforts, the company said, is efficiency gains of about 8 percent in both 2003 and 2004.
Bennett said the company is trying to fashion itself to survive while focusing on business in the Southeast, on companies within a 250-mile radius of Forest City. It still does a lot of work in automotive and lawn and garden products, and the company sees its niche as responding quickly and having its people on-site in five hours, he said.
That strategy carries risk, however, if suppliers are mainly interested in a global, not regional, strategy.
While Bennett downplays any need to be in a lower-cost manufacturing environment, USI did explore a formal Asian joint venture for mold building.
However, executives decided against it because they weren't convinced it was worth the risk. USI continues to buy molds from overseas, as well as make some on-site.
Industry consultant Brian Tartell, who is familiar with USI, said the company does some unique things in the area of employee relations, particularly with sharing financial information.
But Tartell said that there are risks for midsize molders like USI if the customer base wants a global strategy. That probably means they are interested in vendor consolidation, he said.
``Molders with a strictly regional business plan can run more of a risk with a customer base that has a globalized approach to vendors,'' said Tartell, president of PennTar Consulting in Port Washington, N.Y.
Still, Bennett is undaunted. He sees the company as quite different from a few years ago and expects it to be quite different in another few years. He argues that the company's profit margins could be higher, but the firm invests $2 million a year in things like new technology, training and marketing.
``It's about being here tomorrow ... and building a company that can make more money down the road,'' Bennett said.