Being selective about customers a winning Formula for Flannery

Business has been strong for Formula Plastics Inc., an injection molder and contract manufacturer with operations on both sides of the California-Mexico border.

Part of the reason is because company officials made a strategic decision to "fire" some of its customers and focus instead on the industries that, in their view, can help them succeed now and in the future.

Now Formula is adding engineers, operators and machines at a rapid clip to keep up with the expanding business.

Formula is legally incorporated in Tecate, Calif., but it does manufacturing a few miles away in Tecate, Mexico. The company is headed by Tom Flannery, who was promoted to president in January. He had joined the company about two years ago as general manager and vice president.

Plastics News estimates that the company's injection molding sales grew from $25 million in 2019 to $35 million in 2020. Publisher Brennan Lafferty talked with Flannery about the business for the recent "What Keeps You Up at Night" podcast. This is an edited version of that interview.

Q: I know it's early days, is there anything about the move to president that has surprised you?

Flannery: Really not much at all. When Alex Mora, our CEO and my business partner, when we started working together back in early 2019, it was a natural progression. I was coming on board to run the business and develop our strategy and execute that strategy. Really it was a natural progression to take that title.

Q: How do you explain to new customers what Formula does to separate it from its competitors?

Flannery: Historically, Formula was your typical contract injection molder. You had a mold, we had a machine; you give us a purchase order, we give you parts. It was very transactional in nature. As a result of that, over the years, we had accumulated customers on top of customers on top of customers and really weren't doing a very good job of servicing any of them. So one of the biggest changes we undertook in 2019-20 was really focusing on fewer, larger customers who appreciated us as an indispensable part of their plastic product supply chain.

Q: When you make that transition, is it difficult to say no to business?

Flannery: Absolutely. You have to fire some customers. And that's never an easy thing. The reality is I went around to many of our strategic customers and listened very intently to what we were doing well and what we were not doing well. And in some cases you come to the realization that there's no future for you to support a particular customer, and it's best for both parties to recognize that and move on.

When we tried to determine who was strategic and who was not, that led us to three fundamental questions: Is the customer innovative in their market? Are they growing? And is what we do fundamental to what they do, or not?

We used that relatively simple filter to look down our customer base and decide who we could be more than just a transaction for. Of those 20 customers that we identified, I would say more than 80 percent have grown, since 2019, more than the growth of the market itself. And in some cases, some of our larger customers have more than doubled in size.

Q: Tell me about your facilities; you're located there in Mexico. How many machines are you running, and what capabilities do you offer?

Flannery: Formula Plastics has been in Tecate since the early 1990s. We just brought in six new machines, so we're at 80 machines now. Our tonnage ranges from 6 tons up to 600 tons. We're on a 10-acre campus; we have eight freestanding buildings with approximately 250,000 square feet of manufacturing space.

We employ 750 team members; about 80 of those are degreed engineers. And that number has tripled in two years. That has to do with the high service, the focus on technical services. We're not just injection molders; we see ourselves as a contract manufacturer. We focus in three main areas: mold design and fabrication, technical molding and assembly, and medical device manufacturing.

Q: Which markets hold the most opportunity for you?

Flannery: Our quality systems and our capabilities lend themselves to highly regulated markets. That's medical device, that's life sciences. And it's also other areas that benefit from controls and process consistency: automotive, aerospace and others.

I would say in five years, I see the majority of our business being in life sciences and medical devices. Those customers, once you get a customer who is pleased with your service and you become an extension of your capabilities, they're going to continue to deliver for you as long as you continue to deliver for them. It's too difficult for them to add to their suppliers.

We've built three clean rooms over the last 18 months. Our fourth, we're going to start construction soon, and it will be complete by the end of 2021. So we'll have over 40,000 square feet of clean room space. The majority of our growth is in controlled-environment, clean room contract manufacturing.

Q: The pandemic has changed so much of our business lives and our personal lives. Is there a lesson that you've pulled from it as it relates to Formula Plastics?

Flannery: There's so many lessons. You have to react to what you see happening in the market. The companies that didn't react went out of business. We're at 750 employees. Pre-pandemic, we were at 500. We went down to half of that in March. And then, every operator that we had to furlough we hired back, and more.

It's been a very stressful year. And I think we've had to really make sure that our employees have felt supported. Alex and I took a 100 percent pay cut. All of our salaried employees took a 20 percent reduction in pay. And I'm proud to say that we paid every dollar of that back, plus.

Our employees really, I think, have a high degree of trust in what we're doing and our mission. I think we're really living up to that, in many cases. Not to say we're perfect by any stretch. But we have a motto: We suck less than the competition [laughs]. And we like to joke about, and we still want to look in the mirror and challenge ourselves every day.

So the lesson learned is it's all about the people who we work with every day and about making sure they feel supported. And my role is as their servant. I'm the third-shift janitor. I'm the cafeteria staff. I'm whatever I need to be to make sure our team members feel like what we do here matters. I think we're living up to that, and I'm proud of that.

Q: What, if anything, keeps you up at night?

Flannery: Making sure that we continue to be focused on delighting our customers and that we have the right resources, and just executing and meeting our commitments. When you're doubling the size of your business, and you have a pipeline to double again, our biggest risk right now is execution risk. It's all about making sure you have the best and brightest and most engaged employees that are focused to delight our customers.

I can't say it keeps me up at night, because it's something that I really enjoy personally. This is a passion for me; I love what I do. I hope that my passion, and our passion as a team, I hope that rubs off on our customers. And our financial results suggest that is happening.

See , Page