EnterpriseMinnesota 2100SummerSt.NE,Suite150 Minneapolis,MN55413 Harvard’s supply chain guru tells Bob Kill how manufacturers can protect themselves from future shocks. It’s PartnershipsAboutVIEWFROMTHETOP How Seacole’s Gregg Elliott intends to navigate future economic challenges. Helping Manufacturing Enterprises GrowFALLProfitably2022
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Wired for Success Under new ownership, MNSTAR has doubled revenue in each of the past two years.
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Enterprise Minnesota’s Bob Kill interviews Willy Shih, Harvard’s supply chain guru, about how manufacturers can protect themselves from future shocks.
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Expert Insight America’s go-to supply chain authority — and a longtime business friend — tells us what’s ahead.
Tim and Mary Jo Harris launched Harris Hardwoods in 1994 out of their garage. They’ve grown exponentially by staying true to their mantra and believing in people.
For the Want of a Nail Popp Brothers Lumber plots strategic growth while wary of supply chain disruptions. Upward Mobility Developing and promoting talented employees helps workers and companies alike.
22 Visit the Enterprise Minnesota website for more details on what’s covered in the magazine at enterpriseminnesota.org. Subscribe to The Weekly Report and Enterprise Minnesota® magazine today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit enterpriseminnesota.org/subscribe.
The insights included in the Q&A run the spectrum — from the roots of the sup ply chain crisis and building partnerships with suppliers to how companies can use technology to take advantage of funda mental shifts in the economy. I hope you will enjoy reading it as much as I enjoyed asking Professor Shih the questions
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The Robert and Jane Cizik Professor of Management Practice in Business Ad ministration at Harvard Business School, Dr. Shih regularly writes for — or is interviewed by — major national business media outlets, includ ing the Wall Street Journal, Forbes, Harvard Business Review and Bloomb erg Markets.
Bob Kill is president and CEO of Enterprise Minnesota. hen I talk with — can win the workforce battle. In the same way, because the pan demic has fundamentally upended major segments of our economy, supply chain expert Professor Willy Shih believes that suppliers no longer work for OEMs — OEMs work for their suppliers. In other words, companies that create long-lasting strategic partnerships with their suppliers can take a step toward winning the supply chainManybattle.ofour clients rely heavily on sup pliers as they manufacture final products. Others supply larger companies with com ponents. And many of our clients really play both roles. They manufacture inputs that are used by larger manufacturers, but they also rely on suppliers for parts or materials for their own products.
That’s why the Q&A with Dr. Shih (p. 30), a leading national expert on supply chain issues, is relevant to all our readers.
Expert Insight
I first met Willy Shih decades ago. He was an executive at Silicon Graphics, and they were a great partner of ours when I was at Ciprico. He was different from a lot of executives in that, even then, he talked a lot about the importance of relationships and dependency on each other. That’s a theme you will read throughout the Q&A. Dr. Shih’s career includes time with several major technology manufactur ers — including IBM, Digital Equipment and Eastman Kodak. Because of that, he brings a wealth of experience to his pro fessorship that is unusual in the academic world. His business experience gives him a practical and pragmatic approach in what he does and how he speaks. That style has him in high demand as the supply chain crisis continues. In recent weeks, Professor Shih has testified before the U.S.-China Economic and Security Review Commission as well as the House Foreign Affairs Committee.
America’s go-to supply chain authority — and a longtime business friend — tells us what’s ahead.
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Wired for Success
MNSTAR senior vice president of sales Jim Johnson says price has been and contin ues to be a big consideration for customers, but other factors have come to play a bigger role.
Tammy Wersal, the company’s chief operating officer, says the company prides itself on the quality and reliability of its products, with each harness individually tested before shipping.
Of course, MNSTAR has faced its own supply chain challenges. As the company picked up new busi ness, it ramped up orders for materials, and Wersal says some suppliers were alarmed by the surge in orders, suspecting MNSTAR of “panic buying” and occasionally limiting deliveries to the company until they could
Under new ownership, MNSTAR has doubled revenue in each of the past two years.
“I worked out a deal with the creditors and the other folks who were involved with the deal and really have never looked back. I have enjoyed the wire harness business immensely,” he says. Klus says his enthusiasm for the industry is so great that he expects to close on a sec ond wire harness manufacturer in the third quarter of this year: Precision Manufactur ing Co. Inc. of Dayton, Ohio. Wersal says MNSTAR initially was overstaffed and had to slim down post ac quisition. But since then, the company has grown steadily. The business now has 47 people on its payroll, and Wersal says she hopes to grow to 60 by year’s end. She adds that MNSTAR has benefited from the supply chain issues that disrupted wire harness deliveries from China and elsewhere, bringing offshored business back to the U.S. domestic market.
“We picked up a lot of new customers and a lot of new business, and our proto type and engineering department was busy beyond belief,” Wersal says.
“What’s overriding price right now is delivery. If you can’t make your deliver ies, it doesn’t matter what you paid for the product. If you can’t get it out the door, you’re not making money,” he says, noting that even the price advantage of foreign product has eroded, considering heightened international shipping costs.
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Tammy Wersal, COO, MNSTAR
TGROWTH
ucked away on a dead-end street called Autumn Lane that overlooks the U.S. Highway 169 traffic hissing through Bovey, Minn., is MNSTAR — a quietly emerging force in the wire harnessWiringindustry.harnesses go into a mul titude of products and speed up the manufacturing process for MN STAR’s diverse and growing pool of clients, from players in the marine, emergency response, energy and construction industries to agriculture, road maintenance, material-handling and truck equipment and acces sory markets.
In August 2020, George Klus of Highland Holdings LLC acquired the business, drawn to the then-27year-old company by its diverse client base and solid reputation, even as the COVID-19 pandemic roiled the economy.
Jim Schottmuller, a business development consultant for Enterprise Minnesota, says businesses often benefit from working with an experienced ISO partner to maintain fo cus, speed, and achieve meaningful results. As of June, Wersal says MNSTAR was about 80% of the way toward earning ISO 9001:2015 certification. However, she says there have been a couple of unexpected bumps in the road that have delayed the process, including a May outbreak of COVID-19 that temporarily took down 47% of MNSTAR’s workforce. Through it all, Wersel says Enterprise Minnesota has provided useful support, paying biweekly visits, except during the May outbreak. According to Johnson, “Obviously, first and foremost, our job is to sell product and get it out the door. That does take precedence, but we do recognize that ISO is a necessary component to additional long-term success. So, while we’re very concentrated on doing our immediate jobs, this is something else that we need to do to move to the next step.”
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“They’re putting their heads down and doing a good job, following through on the effort and the homework, and they’re com mitted to getting this completed during Q3 of this year,” Gadacz says.
Keith Gadacz, an Enterprise Minnesota business growth consultant, has been work ing closely with MNSTAR since January and says he believes the ISO certification will help the company, particularly in its dealings with larger original equipment manufacturers who often view the qualifica tion as a crucial credential for its suppliers.
“I really believe that the future for MNSTAR is right here in the Coleraine/ Grand Rapids area, and it always will be,” Klus says. “We’ve got some very dedicated people who have been there for a long time. They’ve seen some ups and downs, and their loyalty means a heck of a lot to me.”
“We have a small-town atmosphere. Eve rybody’s like family here,” Wersal says.
Johnson agrees that the ISO certifi cation should expand the company’s markets because sometimes it’s a requisite credential. “So, that obstacle should be removed,” he says. But Johnson predicts the ISO certifica tion will also help the company up its performance. “Getting ISO-certified should give us a better framework to guide our operations. It will assist us in making much faster and bet ter decisions, which will support our overall growth,” he says. Gadacz says the com mitment of MNSTAR’s new management team is evident. “Tammy and Jim are both dedicated to making sure they get there.”
“They like what they do. They’re very passionate about what they do, and they take great pride in their work,” she says.
“Those are the folks who really built this company. They’re the ones who have made up our workforce. They delivered the quality. They helped build the brand. So, companies like that belong in their com munities,” he says.
Wersal says MNSTAR had hoped to break ground on a new facility this summer, but that will require the company to connect to city water and sewer systems. The exist ing plant relies on an independent well and septic system, deemed acceptable due to a grandfather exception. The new plant, how ever, will need city utilities to meet updated code and fire-suppression requirements.
To recognize and hold onto valued em ployees, she says MNSTAR has increased wages by 33 to 37% since Highland Hold ings acquired the business and has also offered more generous benefits.
verify the orders were driven by actual increased production and sales, not a desire to stockpile. Part costs skyrocketed, too. Wersal says a connector that would have cost $1 in pre-pandemic times now sells for around $22, and a stainless-steel panel box went from $150 to $409. The harnesses MNSTAR produces range in size from inches to 24 feet long or longer and in complexity from a few wires to as many as 500+. The company also makes power distribu tion panel MNSTAR’sboxes.typical six- to eight-week lead times for many products have been stretched to eight to 10 weeks during the pandemic.“Itwaschallenging, and we had to do one temporary layoff last summer because of a supply chain issue. But as products started coming back, we were calling our employees back,” Wersal says. MNSTAR doubled its sales from 2020 to 2021 and expects to double its revenue again this Althoughyear.MNSTAR certainly isn’t hurting for business, the company is taking steps to expand its market, as it pursues ISO certification. The company sought but did not achieve the same qualification under previous ownership. This time, however, Klus says he has no doubt MNSTAR’s management team and staff will success fully complete the effort.
Despite site challenges, Klus says he has no desire to uproot the enterprise and run the risk of losing valuable employees.
MNSTAR often works around employee scheduling challenges and even has been known to provide impromptu daycare services when needed.
Wersal says some of MNSTAR’s workers have been on the job for 20-plus years.
Meanwhile, strapped for space inside its existing 24,000-square-foot plant and already anticipating increased production demands, the business is planning for an additional 30,000-square-foot facility. Until the project moves ahead, some of MN STAR’s inventory has temporarily spilled into about a dozen steel shipping containers located behind its manufacturing plant.
She says MNSTAR is working with the city of Coleraine, IRRR and DEED on grants, funding and logistics to bring that necessary infrastructure on site, likely push ing back the project start date to the spring of Despite2023. site challenges, Klus says he has no desire to uproot the enterprise and run the risk of losing valuable employees.
While MNSTAR has taken significant steps to speed up production in the past couple of years by investing in new ma chines, Wersal says the business continues to rely on its talented staff.
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“A lot of our customers have a vision, but they don’t have an engineering team, or they don’t have a design. That’s when our design team, our engineers, will go on site, they will take measurements, they work with the customer on what their vi sion is and what their needs are, then they come up with solutions and a design,” Wersal says, pointing to some harnesses her team had recently designed for Min nesota Department of Natural Resources (DNR)Gadaczwatercraft.refersto
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“Because we are a custom wire harness manufacturing plant, there are a lot of things we cannot automate. We’re not cookie cutter, where we’re making the exact same harness all day long, 10,000 units per day. That’s not us,” Wersal says. “We have customers who come to us with their drawings, their schematics and say: This is what they need. Every product is designed and manufactured specifically for that particular customer,” sheMNSTARsays. also lends its engineering expertise to clients.
MNSTAR as “a go-to solution provider for their customers.” Klus has no illusions of an easy road ahead.“As we head toward a recession, which I think is coming, we know that things will probably slow down some. But I think that MNSTAR is diverse enough and working with different types of indus tries that we will be fine,” he says. “Right now, I don’t see us slowing down. I’m sure it may happen in the fu ture, but right now things are very strong for us, and we will continue to move for ward with the opportunities that continue to come our way.”
Success happens one step at a time. Let’s talk about your next one. Strapped for space inside its existing 24,000-square-foot plant and already anticipating increased production demands, the business is planning for an additional 30,000-square-foot facility.
“You just look for the little things you can do to help the flow go more smoothly,” Brad Wischnak, vice president of opera tions,Thesays.purpose of upgrading old equip ment, finding new uses for automation, or streamlining manufacturing processes is always about making the work easier, never to replace someone’s job.
“We try to make the job as easy as we can so people are not physically exhausted at the end of the day, and they want to come back to work the next day,” Wischnak says.
TINCENTIVES
“The big thing is continuous improve ment,” company president Brian Becker says. “Whether it’s the procurement of the product or bidding of commercial jobs, we’re constantly looking for efficiencies.”
“We’re working for each other,” Becker says. “That’s the glue that keeps us to gether.”D&M became fully employee-owned in 2006, which means each employee is truly invested in the success of the company, according to CFO Dan Otto. “That’s part of what do you as an employee-owned company, you do what needs to get done. There’s no ‘that’s not my job’ in a company where you’re part of the ownership group. And people are definitely willing to do that,” Otto says. During 2021, D&M’s rapid increases in sales occasionally threatened to exceed its production capabilities. During especially
6 / ENTERPRISE MINNESOTA FALL 2022 he executive team at D&M Industries is looking for every efficiency to keep pace with its explosive growth. But after 40 years of manufacturing doors, frames, hard ware and windows, most observers think the secret sauce of its success lies in the fact that it is 100% employee-owned.
Chasing larger facilities, it moved across the river to Moorhead, Minn., in 2006, consolidating sales, production, and administrative functions into one 65,000-square-foot building (though an additional 43,000-square-foot warehouse was later added). Today, D&M also has operations in two Wisconsin communi ties due to its 2018 acquisition of Capital Finishing. Though most of the company’s residential work is confined to the Midwest, D&M serves customers nationally. A recent order from Alaska means that it has shipped products to 49 of America’s 50 states — all butTheHawaii.company has added 26,000 square feet of warehouse space since 2020 to keep up with demand. Now employing about 175 people, the company’s leaders hope to be at 185 by the end of the year. With signing bonuses, referral bonuses, and a successful partnership with a job placement organization for drug and alcohol recov ery, they’re confident they can raise their numbers.Manypeople credit D&M’s employee ownership structure for its ability to navi gate sometimes rough waters.
During especially busy times, employee-owners from all areas of the company would head to the shop floor after their normal shifts ended. The company even held occasional “blitz weekends,” in which doorsweekendvolunteeredemployee-ownerstospendthehelpingbuildandshiporders.
Working Together
CFO Dan Otto: “It really is amazing being a part of a company that is 100% employee-owned. We’re not working for some nameless shareholder; we’re working for the person to the left of us and the person to the right of us.”
D&M’s newest technological additions include an automated exterior door line and a door milling machine.
Originally named for its service of North and South Dakota (D) and Minnesota (M), D&M opened its doors in Fargo in 1982 with seven employees, one of whom still works at the company. It soon expanded to residential products and grew its physical presence to keep up with its growth, build ing more office space, warehouses, and production shops.
Employee-owned D&M Industries lets no challenge impede its ability to serve clients.
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“We would have anywhere from 20-30 people and 300 exterior doors to make,” Wischnak says. What would normally take weeks took just a weekend. “Those are the types of things we were willing to do to get the job Wischnakdone.”has been with the company for 25 years, starting as a 22-year-old machin ing operator. He credits D&M’s success to the company’s policy of always saying “yes” to customers. If a client wanted a new type of product, he says, they made it happen; if they had never before shipped to the client’s location, the company adapted. Otto also cites the strong relationships they’ve cultivated with partners and clients.
“We’ve had customers who have been here since the beginning,” Otto says. “We like to think about D&M as a company that builds multi-decade partnerships with customers and vendors.”
“Our strategy is about growing the core business,” Otto says. “We want to maintain profitability during these tough economic times.”“D&M is a special company,” he adds. “We don’t like to toot our own horn; we quietly do what we need to do in order to service our projects. But it really is amaz ing being a part of a company that is 100% employee-owned. We’re not working for some nameless shareholder; we’re work ing for the person to the left of us and the person to the right of us.”
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FALL 2022 ENTERPRISE MINNESOTA / 7 busy times, employee-owners from all areas of the company would head to the shop floor after their normal shifts ended. The company even held occasional “blitz weekends,” in which employee-owners volunteered to spend the weekend helping build doors and ship orders.
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Despite a very real worry that the com pany would not survive, Bush credits the proceeds of the PPP loan to pay his eight employees for 50-hour weeks, without ever missing a paycheck. Excelsior Tool has been designing and building precision plastic injec tion molds in Maple Plain since 1979, growing to specialize in automotive, aerospace and medical devices. The company has made a niche specializing in quick turnaround projects. Thomsen envisioned ISO certification as a way to smooth out the vagaries of demand. “We were always kind of up and down with work. I was hoping we could level out our schedule to have a more consistent workload,” he says. He reached out to Enterprise Minne sota to help execute the ISO application. It was an all-hands-on-deck process that required “a lot more paperwork than I thought it would,” he says. “Getting it set up was a lot of work. Everybody was involved after work, before work and during work.”
Enterprise Minnesota president and CEO Bob Kill helps commemorate Excelsior’s ISO designation. From left to right: Enterprise Minnesota business development consultant Kari Rusing, operations manager Scott Thomsen, president Bob Bush, and Joel Scalzo, Enterprise Minnesota business development consultant.
he management team at Excelsior Tool started its recently-awarded ISO journey with fresh memories of how unforeseen market forces can rip into a company.
“That was a very hard year, the worst year we ever had,” Bush recalls.
Barely a month after Bob Bush and a couple other long-time employees finalized a company ownership deal in 2020, the COVID-19 pandemic swept across America and sucked the life out of the company’s sales.
TISO8 / ENTERPRISE MINNESOTA FALL 2022
“We really had to a wrap our heads around what was going on and where we were spending money just to stay afloat,” recalls Scott Thomsen, Excelsior’s opera tions manager and co-owner.
Ravaged by the COVID-era economy, Excelsior Tool achieves ISO certification to help stabilize its marketplace.
“We really had to a wrap our heads around what was going on and where we were spending money just to stay afloat.”
In Search of Stability
“It was worth the investment,” in part, he says, because he helped the company cope with unprecedented lev els of sales as the market recovered.
“We followed the worst year ever with the best year we ever had,” Bush says.“Things just really took off.”
“Now that it’s up and running, it’s not so bad,” Thomsen adds.
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“Thereconsultant.aremany different ways to grow your business,” Lian says. “Not just through revenue growth and profits, but through people. Businesses are made up of people, and there are so many ways to grow those individuals.”Lian’sexperience spans working with sensor intelligence manufacturers, precision medicine companies, and computer hard ware manufacturers, to name a few. Before joining Enterprise Minnesota, she worked as an HR freelancer in the Minneapolis area.
icole Lian is bringing 20 years in hu man relations experience to her new role as an Enterprise Minnesota business growth
“That allows me to understand my clients’ needs and eventually come up with projects that will help them grow their business by not only growing profitably but also growing their employee base so they’re happy and engaged.”
Enterprise Minnesota Adds a Business Growth Consultant N
Nicole Lian
Lian’s eager to share her experience in strategic HR with manufacturers across Minnesota.“Employees are a company’s lifeblood. So, Enterprise Minnesota’s focused attention on talent and leadership development is meeting the incredibly high demand of our current and future marketplace.” But most importantly, Lian says, it’s about listening to build connections.
Though a native Minnesotan, her first foray into HR was in London, England. She returned to Minnesota where she worked 13 years in human resource leadership at SICK, Inc. She then stepped out for 18 months to travel around the world — literally — visit ing multiple countries and three continents. Following that adventure, she joined the HR staff at OceanTech before forming her own HR consulting business.
10 / ENTERPRISE MINNESOTA FALL 2022
WEDUCATION
MBFC knows SBA 504 financing like no other lender in our field. With our expanded service area, you now have a great opportunity to use MBFC for your SBA 504 needs in Minnesota, North Dakota and Wisconsin. To help the manufacturing world continue to thrive, our sta of small business experts will help you navigate the lending process from start to finish. For today's best options, program advantages, and lowest rates—from lending to refinancing—MBFC is in your corner.
• On October 26, Ally Johnston will deliver an encore presentation of “Cre ating a Culture of Continuous Improve ment” to a statewide virtual audience. You can register for events at Right At Your Fingertips
SMALL BUSINESS FUNDING
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Minnesota’s premier continuous improvement experts, presented, “Creating a Culture of Continu ous Improvement” at an event exclusively for manufacturers on July 27 at Lake Supe rior College in Duluth. She demonstrated productivity from their organization by building a ground-up culture that includes allEnterpriseemployees.Minnesota’s manufacturing workshops, offered both virtually and in-person, have evolved into one of the organization’s most popular offerings, according to Lynn Shelton, vice president of marketing and organizational develop ment. “Manufacturers have been pleas antly surprised by the relevant hands-on insights they can receive in just a couple hours,” she Upcomingsays.workshops include the fol
Enterprise Minnesota’s experts plan an ongoing series of diverse learning opportunities for manufacturers.
FALL 2022 ENTERPRISE MINNESOTA / 11 hile the principles of lean manu facturing and continuous improve ment have long been in the DNA of most successful manufacturing operations, Ally Johnston wonders whether manufacturers are doing enough to exploit the strengths of iconic practices in the face of today’s chal lengingJohnston,marketplace.oneofEnterprise
• In a live workshop on October 11 in Owatonna entitled, “Investing in Your People to Create Leaders at All Levels,” talent and leadership expert Abbey Hellickson will describe how effec tive leaders create environments that can adapt to change, foster innovation and solve problems, as well as give a workplace a better sense of well-being. She will also underscore why leader ship development is critical in today’s environment.
• In a virtual workshop on September 28 called “Ensuring Business Continuity through Succession Planning,” Steve Haarstad, one of Enterprise Minnesota’s most experienced strategy and revenue growth experts, will lay out the founda tional strategies for creating an effective succession plan.
Serving all of Minnesota and North Dakota, as well as Western Wisconsin. We’ll come to you! MBFC.org | Offices in St. Cloud ● Excelsior ● Detroit Lakes ● West Fargo | 320-258-5000
Bonine then began thinking about growth and expansion of Popp Brothers. But just as he was getting settled in, COVID-19 complicated his plans.
“Now it was time to put on my sales hat and find customers,” he says. “I went on the road and found two new customers during that time frame, and then thankfully everything started to pick back up again in theAsummer.”temporary increase in demand was cut short by supply chain issues. When inven tory problems caused the company’s nail supplier to halt deliveries to Popp Brothers, Bonine’s team leveraged connections with other pallet manufacturers to borrow nails until their shipment arrived.
opp Brothers Lumber had been a family-run business for 53 years when Wes Bonine bought the Hutchinson-based company in fall 2018. The majority of Bonine’s background was in the corporate world, so he learned pretty quickly how important his then new team of six employees would be during the transition of learning the pallet and crate manufacturing business. It was a change that would require an education in both running an operations-based business and keeping it rooted firmly in customer-centric and smallbusiness values.
“In a corporate environment, I knew I was only as good as my employees, and your success was going to be predicated on how well you did as a team,” Bonine says. “But running your own ‘small’ business — especially one with just six employees — is when you really start to appreciate how dependent you are on them.”
Generations of the Popp family had run the company well for decades, finding a niche in the lumber industry making pallets and crates for customers within a 100-mile radius of the facility.
Bonine took over a business with employ ees having eight to 12 years of experience at the company, and he was able to add an additional full-time position.
12 / ENTERPRISE MINNESOTA FALL 2022
Pandemic stalls progress Bonine was feeling good after the first year.
For the Want of a Nail Popp Brothers Lumber plots strategic growth while wary of supply chain disruptions.
“I liked that the company had a smaller, experienced team dedicated to their craft, and I was looking forward to the challenge of creating efficiencies. It was a good fit for me and my leadership style,” Bonine says. “When you have employees committed to product and service quality, then you have a fighter’s chance of growing the business.”
PGROWTH
Wes Bonine, owner
“We’re good on nails now, but wood is still a moving target in terms of availability and cost,” Bonine says. “But (operations manager) Ryan Dobratz has been phenom enal in his efforts to find the wood necessary to keep our current customer base happy.”
“I definitely wasn’t prepared for the pan demic,” he says. In April 2020, the company enjoyed an upsurge in revenue as companies ramped up their pallet inventories in antici pation of a nationwide shutdown. “And then everything tapered off.”
Cash flow became a big concern. To pur chase the business, Bonine took out an SBA loan and leveraged the equity in his family’s home as collateral. Maintaining targeted revenues was critical to being able to pay back the loan as scheduled.
Planning for growth As the dust settled on the pandemic chal
“With these foundational items in place,” Bonine says, “we can then de velop evaluation criteria to help us make informed decisions that are aligned with our strategic direction, whether it’s new machines, adding resources or even mov ing to a new location.”
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Haarstad says there are a variety of paths toward growth, one of which in cludes an investment in additional equip ment to increase capacity.
Bonine says their recent work has included creating one-year goals. “In my experience at the corporate level, the exercise of creating goals can sometimes seem like a necessary evil, and the connection is less than organic,” Bonine says.
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Bonine knows supply chain issues, in cluding the cost and availability of wood, will have to be factored in when planning for expansion. Such details will come into focus as the strategic plan is fine-tuned and a path for growth is chosen, Haarstad says.“We’re right in the middle of some of that strategic decision-making to deter mine which growth strategy makes the most sense,” Haarstad says. “We first thought broadly about a number of options and have been working on narrowing the list through the use of different decision factors and comparative tools.”
Bonine took over a business with employees having eight to 12 years of experience at the company, and he was able to add an additional full-time position. lenges, Bonine returned to thoughts of expansion.Foradvice, late last year he recruited Steve Haarstad, an Enterprise Minne sota business growth consultant, to help develop a plan to strategically create efficiencies and expand. Under Haarstad’s guidance, Bonine started defining the company’s purpose and core values and setting short- and long-term goals.
—Amanda Dyslin
The Sum of His Experience
He’s worked with everything from thermoplastics and batteries to multi million-dollar yachts and houseboats. At SkipperLiner Industries, he connected with a supplier, Mid-City Steel, to which he eventually moved. The owner was looking to retire but didn’t have any willing succes sors; a few years later, Bear and two others purchased the metal fabrication company where he grew revenue to over $30 million annually in 2012.
An ongoing series.
“[Before that] I didn’t have a full ap preciation for the impact of finance on manufacturing,” Bear says. “It gave me a different perspective on the process.”
“We’re all the sum of our experi ences,” Bear says. “Wherever you’ve been, whatever you’ve done, that becomes your foundation.”
BPEOPLE
JIT Manufacturing and Supply is mostly a cash management tool and a Zero Defects quality program in operations assures clean accounts receivables.
He started studying engineering at UW Stout, then received a master in manufactur ing engineering from St. Thomas, and even tually earned an MBA in finance. The Univer sity of St. Thomas was on his way home from work at Thermotech, in Hopkins, so instead of just picking up milk on the way home, he jokes, he picked up an MBA degree.
And for Bear, his past experiences are an opportunity to offer hard-won lessons, but also to warn against making the mistakes he’s made and witnessed.
“It was a very worthwhile experience, helping owners and executives of Minne sota businesses. Because quite honestly, I think every business owner who’s 55 to 65 is trying to figure out, ‘What am I gonna do with my business?’ [Mid-City Steel] was a great transition, and Barry [the founder] was a great guy,” Bear says. His lengthy co-ownership of Mid-City Steel and nearly 20 years of leadership ex perience make him a natural fit for working with Enterprise Minnesota’s peer councils. He was instrumental in forming a new council that meets in Owatonna. Enterprise Minnesota has led manufac turing peer councils for the past 22 years. These small, candid, and confidential meetings offer manufacturing business
MinnesotaEnterpriseInside
14 / ENTERPRISE MINNESOTA FALL 2022 usiness developer Kurt Bear joined Enterprise Minnesota two years ago. He’s worked with Minnesota manufactur ers since 1982 in executive positions. Some of his most valuable experience comes from helping companies transition through times of ownership change or succession.
“I’ve been through most of the things that keep business owners awake at night,” he says. “And it’s a great privilege to come alongside them and help them through the difficult circumstances they might find themselves in.” Bear is able to put his vast experience to work at Enterprise Minnesota, where his consulting responsibility includes analyzing the needs of manufacturers and prescrib ing services that might help improve their productivity and their overall profitability. These services include expert guidance and insight in five key service areas: Strategy and Revenue Growth, Talent and Leader ship, Manufacturing Peer Councils, Contin uous Improvement, and Business Manage ment
Kurt Bear leans on his own 40 years as a manufacturer to help manage change.
MostSystems.ofhiscareer since college has been spent with private, family-owned manufac turing companies, not unlike the clients he now works with every day.
FALL 2022 ENTERPRISE MINNESOTA / 15 leaders a place to meet, exchange ideas, and talk out problems. Some groups even tour each other’s facilities, sharing best practices and celebrating progress.
While Bear is passionate about his in volvement, the meetings “are really for the members to hear from one another.”
—Grace Bureau “I know from my prior experiences that I wish I had been part of a peer council. I was not, and I see them as a really opportunity.”valuable
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At the end of the day, Bear says he enjoys how Enterprise Minnesota can help initiate incremental improvements for his clients while they focus on their core, day-to-day operations.
Today there are nine peer councils operating throughout the state, with 81 participants as of June this year. Each is led by a facilitator and a second chair. Bear serves regularly as second chair for three groups: the Op erations Management Council, the Owa tonna PBA council made up of owners of manufacturing companies, and the Southern Minnesota Manufacturing Executives Peer Council. All meet in the southern portion of the state, usually in Mankato or Owatonna.
“Those who attempt to self-perform and are successful are few and far between,” he says. “The most accom plished outcomes are from the wise use of trusted advisors like Enterprise Minnesota. I love it when a customer calls and asks if I have ever experienced a situation like theirs and then we find time to connect and brainstorm the situ ation for a desired outcome.”
“It’s just a great opportunity for the participants,” Bear says. “I know from my prior experiences that I wish I had been part of a peer council. I was not, and I see them as a really valuable opportunity. I believe they value the process of the peer council as they also connect with one another between meet ings via email, etc.”
I think the workplace internship, dual-training and apprenticeship programs we’re putting together right here in Minnesota are key. The appren ticeships and dual-training through our manufacturing programs generally last a couple of years, whereas an intern ship might be one semester. We call it “Work, Learn, Earn” at South Central. The students earn a wage from the employer as they advance their skills. There’s a sense of loyalty with those students as well with that employer, so they tend to stay at the company when they finish their on-site experience. We also are expanding our services to adult learners. We recently received a $2 million grant from the U.S. Department of Education to advance guided learning pathways for adult learners who are 21 and older as well as underrepresented students. Underrepresented students include first-generation college stu dents, those who are Pell Grant eligible, and students of color. Guided learn ing pathways provide students with a detailed roadmap to ensure they are taking classes relevant to their program of study so they can be successful and graduate as soon as possible. How do you prepare students for the manufacturing industry of the future? We’re starting a new initiative that enhances how we communicate with ourFederalemployers.lawrequires our technical programs to have advisory committee meetings, where you bring in the em ployers twice a year and talk about their progress and get feedback on what they great with that. But doing so doesn’t really look at how fast the industry is changing and what the employers need 12-18 months from now so that we can get ahead of it. Sometimes employers say the colleges are slow to respond. We’re thinking about the snapshot of where we are today, and we have processes to implement curriculum like an employer has in implementing a new product run. But with this new process, we ask, “What do you need 12-18 months from now?”
The challenges facing the manufac turing industry today are multi-faceted, and one key challenge is that the workforce of the future is just not there — particularly, the workforce with the skills companies need. I’m talking about technical skills and also soft skills.
Dr. Annette Parker, president of South Central College H
So, South Central College’s role in that is to partner with employers and understand what they need in a work force. We tailor a program that meets manufacturers’ needs, making sure that we’re really listening to what skill sets they need and ensuring that’s part of the student experience — whether it’s something we teach at the college or they learn in the workplace on site as part of their educational journey.
ow is South Central College responding to the workforce challenges facing the manufacturing industry?
INNOVATIONSFour Questions 16 / ENTERPRISE MINNESOTA FALL 2022
Dr. Annette Parker has been the president of South Central College for nine years. She has four decades of experience working within or alongside the manufacturing industry, beginning her career at General Motors. She served on the external Advisory Board for the Massachusetts Institute of Technology (MIT) Task Force on Work of the Future, as well as President Obama’s Advanced Manufacturing Partnership Steering Committee 2.0. Most recently, she began serving on the National Institute of Standards and Technology (NIST) Manufacturing Extension Partnership (MEP) Advisory Board.
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FALL 2022 ENTERPRISE MINNESOTA / 17 table, and I’m excited about that. We will do this annually. How did South Central College become designated a Leader College of Achieving the Dream? I used to stop students in the hall and ask, “What are you studying; what are you doing?” and they’d say, “I’m just taking my generals.” They had this idea that they wanted to then transfer to a university. I know some of them will, should, and could make that transfer, but I would then ask, “What are you going to do after that?” And they had no idea.
As part of this, we brought in advisors who shared the career opportunities available in numerous fields, especially manufacturing, so that students under stand what those opportunities are.
In 2017, we joined about 300 institu tions across the country in a movement called Achieving the Dream (ATD) that creates an evidence-based culture of student success.
After these past four years of ATD, our retention rate for students of color went up in our gateway courses (initial courses in a program of study) by 150%. In English gateway courses, our Hispanic student retention went up 83%. And we’re still implementing some of our goals. What I say about our job market in manufacturing is that it’s all hands on deck. We don’t have the workforce that we need to help our employers be successful. We need to not lose these students, so we help them understand where those opportunities are and how to get there. What experiences in your career will help you as you serve on the MEP board? My career started in manufacturing. I understand the critical questions —”How do you achieve that workforce? How will manufacturers have that workforce?” — because I’ve lived it. I understand it as a person who started in manufacturing, in production, and went to community college to advance and do more highlevel things in manufacturing. And then to now be president of an institution, I bring all of that wealth of experience to the conversation. So, that’s going to be what I bring to the board. Each one of us on the board brings a unique skill set, and the other members have done an amazing job of bringing di versified skill sets into the conversation. We’re completing a new strategic plan right now, and I think the key role for me is being part of the conversation on our future workforce. experienced,
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So, when they start at SCC now, they know what programs and career opportunities there are, and can set an individual academic plan with a specific career in mind. It helps them pick something in our job market with opportunities. Our core economy in southern Minnesota is man ufacturing, agriculture, and health care. Students will be aware of the opportu nities in these fields, get on a path to pursue that area of interest, and if they change course, they’ll get some advice on how to change course effectively.
18 / ENTERPRISE MINNESOTA FALL 2022 Interview ElliottGregg The RecessionGreat taught Seacole’s CEO to challengesfuturenavigateeconomicwith diversified products, increased internal sophistication, and unending attention to relationships. View from the Top An occasional series of conversations with Minnesota’s top small- and mediumsizedexecutives.manufacturing
“It made it easier for big companies to do business with us. They like to see that qual ity component that comes with certifica tion.” The ISO designation also enabled Seacole to join the National Association of Chemical Distributors, a key organization of industrial chemical distribution in North
Like many manufacturers who devel oped the been-there-done-that aplomb of having endured and eventually prospered in the Great Recession, Elliott doesn’t appear to have too much anxiety about what might happen. But that doesn’t mean it didn’t inflame some immediate heartburn at the time. “It almost put us out of business,” Elliott says. The Great Recession of 2009 hit Seacole at a time when it was both riding high and financially vulnerable. In just a half-dozen years, Elliott had transformed a small acquisition into a diverse $10 million company that had just bought and occupied new headquarters in Plymouth.
“It was a perfect storm,” he recalls. Buy ing the new building stretched the limits of Seacole’s budget but had been a strategic move that would facilitate the company’s expected growth and harmonize diverging cultures between its separate operations in Delano and St. Paul by putting them under one roof. At about the same time, Elliott got the news that Seacole had lost one of its biggest customers, hurting revenues. “And then the economy went into the tank. All those things together were tough onLikeus.” other CEOs, Elliott sorted through the effects of the crash. Many observers were surprised by the calculated calm among manufacturers who chose not to panic but to pick through the chaos for op portunities to retool and expand.
“The only way we could compete for that business was to become ISO certified,” he says. Seacole contracted with Enterprise Minnesota to help achieve its ISO certifica tion, which Elliott says formalized practices and documented procedures and processes.
Unlike when the Great Recession ambushed the American economy in 2009 and caught virtually all manufactur ers flat-footed, everyone has had plenty of time to contemplate the state of this economy. Will it further roil the insecurities of the manufacturing marketplace, or will it, as some manufacturers are saying, provide badly needed breathing room from over heated demand? Might it ease the choke points in the supply chain? Could it relieve the competition for an already-scarce sup ply of workers (and perhaps persuade them that they can’t merely quit at lunchtime with the certitude they’ll find another job across the street)? And will it puncture the inflationary uncertainties in pricing? “Great questions,” says Gregg Elliott, president and CEO of Seacole, a diversi fied chemical manufacturing and distri bution company that operates out of a 90,000-square-foot facility in Plymouth. Elliott has grown his company from $2 million in 2002 to an operation now bear ing down on $30 million in sales.
KOWALSKIMATTBYPHOTOGRAPHS W
FALL 2022 ENTERPRISE MINNESOTA / 19 hether the pandem ic-era economy will tumble into a full-on recession might be less interesting than how small- and mediumsized manufacturers are prepared to respond to it.
All told, Elliott says the experience of enduring the Great Recession made Seacole a stronger company.
“That’s exactly how we looked at it,” he says. “We struggled, but I think there were only a couple of months where we actually lostElliottmoney.”double-checked the efficiency of his operation, weeded out less productive employees, watched his cash flow, and used credit sparingly. “We had to nurture our relationships without banking partners,” he says. And then he looked for opportunities to find new customers. Elliott says he dis covered a number of his competitors were struggling more than Seacole, some even abandoning the market altogether. He also looked to upgrade Seacole’s internal processes so it could pursue busi ness with more prominent companies. His eyes were on Dow Chemical, which was looking to shutter an underperforming plant and subcontract its manufacturing.
“So, if we lost an employee who had that tribal knowledge, we didn’t lose his or her expertise,” Elliott says. Seacole secured the Dow business, which he adds, sparked a domino effect.
Elliott was named J.T. Baker’s national salesman-of-the-year after four years of repping the company in five midwestern states. Executives flew him to Phillipsburg in the hope of persuading him to join the management team of its New Jersey head quarters, but its location in a neighborhood of decaying smokestack industries and a culture very much unlike the Midwest left Elliott feeling that he “didn’t want to live in New Jersey,” he recalls. Instead, he joined Hawkins Chemical in northeast Minneapolis, where over 16 years he climbed the company hierarchy and helped it expand beyond the narrow margins — and intense competition — of large volume commodity chemicals into more lucrative smaller-quantity special ties like food chemistry, electronics and pharmaceuticals. His career legacy from Hawkins, he says, is the mentorship he received from Curly Hawkins, its founder. Hawkins taught him that “a little knowledge, the ability to build strong relationships and a strong faith in God, and a lot of luck, you can be very successful at business.”
“It was a reasonable purchase,” El liott recalls. He named the new company Seacole, a combination of the first names of his two children, Sean and Nicole. Elliott assumed the lease of a facility with five offices, a laboratory and a manufacturing warehouse. He retained a nucleus of em ployees, including John Bell, who remains today as Seacole’s CFO.
“It
America. “It gets you into the club,” Elliott says. The Dow contract also created a certain pride within the plant, he contin ues, because the rigor of ISO certification “became a call to action for everybody to getAllinvolved.”told,Elliott says the experience of enduring the Great Recession made Sea cole a stronger company. caused us to realize that if we diversi fy our markets, we’re more insulated from economic ups and downs,” he says. He learned some “hard lessons” about banking and realized that a strong team can weather just about anything.
The requirements of starting a new chemical plant from scratch in the intensely regulated world of chemical manufactur ing would overwhelm his capabilities, Gregg says. There was first the need to navigate the vast and exacting government requirements, and then to develop a line of products, recruit a base of customers and find employees to service them. The most efficient path was to buy a company that provided a platform to build on. Gregg found Circuit Research Corpo ration in Delano, a printed circuit board chemistry company whose competitors in China swallowed up 80% of its business. Complicating the company’s circumstances was that its patriarch had passed away, leaving the company’s future uncertain.
As Hawkins’ management shifted, El liott sought a new opportunity. Instead of looking for another employer, he decided to engage a genetic disposition to launch his own company. He had long admired watch ing his dad, Chuck, experience an “Ameri can success story,” as a manufacturing entrepreneur in Rochester. Chuck Elliott was an early employee at Crenlo, a metal fabrication company specializing in cabs for big tractor companies like John Deere and Caterpillar. He devoted almost 50 years to growing the large company, eventually owning it, and at the time being the third largest employer in Rochester.
Along with a minority partner, Elliott grew the company “pretty handily” from Delano. They diversified its products into food chemicals, pharmaceuticals and elec tronics, while still nurturing the company’s exiting circuit board customers.
Growing up in the shadow of Roches ter’s Mayo Clinic, Elliott set his earliest aspirations on a career in medicine. After graduating from John Marshall High School, he studied chemistry and biology at St. Olaf College, choosing the North field college in part because at the time it was placing the highest percentage of its students into medical schools. He attended graduate school at the Uni versity of Minnesota while twice getting on the waiting list for admission to the U’s medical school, but twice falling short of the cut. A fellow grad student alerted him that J.T. Baker, a prestigious 150-year-old chemical manufacturer in New Jersey, was setting campus interviews for sales reps. Of 30 applicants, Elliott got the job. “I’d never heard of them. And I ended up falling in love with it.” He says the experience introduced him to the vast marketplace for chemistry. He worked with a wide variety of customers, from food plants to medical companies and defense contractors. “Every day was completely different,” he says.
20 / ENTERPRISE MINNESOTA FALL 2022
“We grabbed at everything we could,” Elliott says. Within five years, Seacole’s sales already approached $10 million. In 2007, Elliott acquired C&H Chemical, a $4 million manufacturer based in St. Paul.
As for the recession: “I’m not panicked,” Elliott says. “On a scale of one to 10, with 10 meaning the sky’s going to fall, I’m probably at a five right now.”
* * * * *
“It helps if somebody comes to us with some experience, but we can train anybody with no Elliottexperiencechemicalwhatsoever,”says.
“I’m not panicked,” he says. “On a scale of one to 10, with 10 meaning the sky’s going to fall, I’m probably at a five right now.” “I think the economy’s going to slow down, and that’s going to help correct an overheated market,” he adds. The supply shortages, skyrocketing freight costs, and the worker shortage are a few of the issues always on his radar. At the same time, Elliott says, “we got through the last recession looking for op portunities, and I think the same thing will happen this time. We just have to be nimble and react quickly to whatever happens.”
FALL 2022 ENTERPRISE MINNESOTA / 21
The C&H acquisition added to Seacole’s product diversity, blending products to custom specifications for hundreds of small customers and a large-company clientele that included Burlington Northern, North west Airlines and 3M. In September 2021, Seacole acquired Phyton, a company that began with formulas developed by two chemists at the University of Minnesota visiting from India. They had developed and patented a product to cure Dutch Elm disease, a prob lem that was ravaging neighborhoods in St. Paul. Although St. Paul determined it was cheaper to remove the trees than to cure them, the University sold the patent to a lo cal group that discovered other applications for the fungicide, curing disease on crops like apples, pecans, oranges and coffee. El liott was introduced to the company when technical problems with one of its products needed attention, and manufacturing con tracts were issued to Seacole. The grateful owners offered Elliott a seat on the board and eventually sold him the company. “Now we’re in the ag business,” El liott says, who attributes the company’s “significant” recent growth partly due to its regenerative green products that work systemically and enable farmers to use less chemistry when fertilizer prices are rising dramatically.
Another challenge has been that COVID encouraged senior people to retire. He’s al ready lost two, Elliott says, “with a couple more waiting in line.”
He continues to look for product diver sity. “We’re into a lot of different markets,” he says. “Not all markets drop at the same rate in a recession. We’re in agriculture, electronics, transportation, and all markets that move independently of one another. If we go into a drastic recession, we don’t think agriculture will follow as quickly. Electronics will be strong, no matter what, and defense contractors are also going to do well.”
* * * * *
The same goes for customers: “We treat our customers very well so that they will give us more of their business when a re cession hits rather than spreading it around. They’ll concentrate on the people who treat them the best.”
Like all manufacturers, Seacole struggles to find employees. “We would hire five to eight production employees today if we could find them,” Elliott says. “It helps if somebody comes to us with some experience, but we can train anybody with no chemical experience whatsoever,” Elliott says. The company works hard to make it an attractive place to work. Seacole has upped the starting wage for production employees by 20% in the last six months. It now offers a four-day second shift with Fridays off and a flexible PTO program. At the outset of the pandemic, Seacole gave every employee an extra week of PTO to help them cope with the demands of COVID.
Bottom line: “There is always a need for what we do,” Elliott says. “Every manufacturing company uses some type of chemistry, and we know we’re going to be essential somewhere to somebody. We’re not panicked that customers will stop using our products because they value our ability to supply their manufacturing facilities.”
That includes “treating our employees as best we can,” he says. “That will help us get through anything.” He cites the lesson of watching his father operate Crenlo. “He would walk through his plant with a thousand employees and know the names of almost everybody there.”
Like all manufacturers, Seacole struggles to find employees.
Elliott envisions future growth for Seacole. The company’s existing plant is expandable by 20,000 feet, he says, but a growth limiter might be his ability to fill his plant with an adequate number of staff.
“We would hire five to eight production employees today if we could find them,” Elliott says.
What about the prospects of a possible recession? Elliott will navigate the chal lenges of the current economy by nurturing good relationships with employees, suppli ers and even competitors.
22 / ENTERPRISE MINNESOTA FALL 2022 Profile Built on Grit
By Robb Murray
and SAWdust
Tim and Mary Jo Harris launched Harris Hardwoods in 1994 out of their garage. They’ve grown exponentially by staying true to their mantra and believing in people.
H
Along the way they’ve also taken the kind of steps that any manufacturer would be wise to take in terms of leader ship, including taking a hard look at their management structure and making the kind of moves shrewd business owners make. They’ve embraced planning, but not just the kind that gets done once and then gets forgotten. They’ve put in place a system that forces everyone to return to the draw ing board, study the progress of the previ ous 90 days, and determine if anything in the previous three months has caused them to deviate from their goals.
These were the early days of Harris Hard woods, a company built by two people who came from woodworking. They were born, as they say, “with sawdust in their veins.”
FALL 2022 ENTERPRISE MINNESOTA / 23 arris Hardwoods is an industry leader in manufac turing cabinet components.
Since then, the couple has grown Harris Hardwoods from one man and one planer in a three-car garage to being a successful player in the cabinet component business. They’ve weathered chaos, labor shortages and a pandemic all by sticking to a mantra that’s as true to their business as it is to their lives: Grit and SAWdust — a small-town work ethic that never forgets its purpose.
“We didn’t have a forklift,” Mary Jo says. “We had to borrow one from the creamery two blocks away. It was a dif ferent world at that time.” Tim would go to the Co-op Creamery in Foreston, drive the forklift a few blocks through town to their home where he’d unload the lumber and stack it neatly inside their three-car garage. In the garage, Tim used a 12-inch planer to cut wood to any thickness. Their startup was still new, but Tim’s years of experience in the lumber and sawmill industries gave him dozens of contacts at small, mostly one-man cabinet-making shops in the region.
But there was a time when the business was so new — so still-in-the-garage new — that when lumber shipments arrived at their home by semi, Tim and Mary Jo Harris sometimes needed a little help getting that lumber off the truck.
The company’s revenues approach seven figures. It’s a well-oiled machine that utilizes strategic planning and maintains an entrepreneurial spirit.
The company, which employs about 40 people, began humbly by providing lumber to small cabinet makers. Today it manu factures hardwood cabinet components, mouldings, millwork, and edge-glued panels for the kitchen and bath industries.
Harris Hardwoods’ story illustrates the value of staying true to who you are but remembering that change is necessary to survival. Good wood A glimpse at the company’s website reveals the heart of Harris Hardwoods.
Tim’s experience in the woodworking and lumber industries supplied the foundation for what would eventually become Harris Hardwoods. And that experience started ear ly. As a 15 year old, Tim worked at Weichert Brothers Millwork sweeping floors, stacking lumber, and running dry kilns. Soon he moved on to Woodcraft Indus tries, where he spent 17 years as a purchas ing agent, learning about lumber, sawmills As the Harrises watched the demise of the small cabinet maker, they connected with a thirdparty distributor.
“We both grew up in woodworking fami lies where the smell of sawdust lingered at the dinner table,” it reads. “Hard work was expected and a ‘good name’ was valued.”
and supply needs of cabinet makers. After that he spent five years as a cabinet maker for Crystal Cabinets. All that knowledge prepared him for the moment in 1994 when Tim launched his own“Hebusiness.tookthat
“We helped them as owners get clarity on what the business was and where they were trying to take it,” Haarstad says. “Af ter they were grounded in that, we could bring in the rest of the team and make adjustments based on their input.”
Still, the Harrises felt their management structure needed further assessment and attention.
“It opened the doors to a lot of opportu nities,” Mary Jo says. “They were able to get us in the door, as we say, playing with the big dogs.”
“What makes us stand out is Tim’s ability to buy really great lumber, nice and clean white hard maples,” Mary Jo says. There’s a scene from the great sitcom The Office where a pair of Dunder Mifflin salesmen make a sale by convincing a cus tomer that, although they may be smaller than their competitors, their size allows them to provide top-shelf customer service.
They recruited Steve Haarstad, a busi ness growth consultant with Enterprise Minnesota, to help prepare a strategic gameplan for growth. According to Haarstad, Harris Hardwoods had already done a great deal to help themselves before he arrived on the scene.
“We like to have that personal contact,” Mary Jo says. “I think that was a good part of our success early on; we had closeness to the customer.”
While Harris Hardwoods isn’t remotely like Dunder Mifflin, they subscribe to the same approach of putting customers first.
As the Harrises watched the demise of the small cabinet maker, they connected with a third-party distributor who could introduce them to customers who deal in larger vol umes. This way, they could compete with the likes of Woodcraft Industries, St. Croix Valley Hardwoods, and Indiana Dimension, among others.
The company had adopted the tenets of the Traction company’s Entrepreneurial Operating System (EOS), a holistic ap proach to leadership and management that stresses vision, execution of a vision-cen tered strategic plan, and top-level attention to the needs of the entire team.
leap of faith and started on his own,” Mary Jo says. “Part of it was related to seeing his dad working in that business, seeing my dad work in that busi ness, and seeing my brothers working in thatThingsbusiness.”started small — like borrowing a forklift from the town creamery small. But as time went on, Tim’s deep knowledge of the industries, and the company’s size at the time, enabled the company to pivot to meet customers’ needs. “When I buy my lumber, I know what my customers need. I know the specific colors they’re looking for,” he says. “And you have to go out and source that lum ber from the different regions. It’s very specialized.”Theybegan by providing lumber to local cabinet shops, beginning with their own families. Mary Jo’s father, in fact, was Harris Hardwoods’ first customer. When customers needed it, they added services such as ripping, planing, and moulding in an effort to save the custom ers time and money.
Before connecting with that third-party distributor, the Harrises tested the “big dog” market without much luck. The distributor gave them credibility. They no longer had to convince larger cabinet companies that they could handle large-volume orders. Working with that distributor allowed them to grow. And as Harris Hardwoods grew, they used their profits to expand, to upgrade equipment, and to train employees.
Eventually, though, the area’s number of smaller cabinet makers started to dry up, falling prey to bigger competitors. But by then, Harris Hardwoods had figured out their next move.
“I think they felt like, even though they were utilizing this system, they weren’t get ting ‘traction,’” Haarstad says. “They were having trouble making the system trickle down into the organization.”
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Haarstad helped the Harrises get their leadership team aligned with their vision for the company by identifying and com municating the company’s core values.
promotesHardwoodsitselfas a “second chance” employer, providing opportunities to people who may not survive a background check at other manufacturers.
Playing with the BIG BOYS
Harris
Harris Hardwoods was humming along nicely servicing the needs of one-man cabinet-making shops. They grew, thanks to Tim’s industry knowledge and network of potential clients. Mary Jo took on a leadership role, they hired more workers, and they built a true production facility on their Foreston property.
Those initial discussions persuaded both the Harrises and Haarstad that change was
“That world just kind of died,” Mary Jo says. “It just dis appeared. It was like you either grew and developed or you died. And that’s what happened to a lot of those small cabinet shops. They just disappeared.”
“We have Enterprise Minnesota come in and facilitate those meetings because we can get lost in our own mire and muck,” Mary Jo says. “It’s hard to see sometimes when you’re in it, and they help direct us through those processes.”
“It’s just turn and burn sometimes. And It’s hard to find them. We’re experiencing it just like everybody else. Recruiting, ghost ing — that’s a big deal. ‘Yeah, I’m coming, I’ll be there for that interview, I really want this job, I’m so interested.’ And then they don’t show. Or you call them and say, ‘We feel you’re a great candidate and we really want you on board,’ and you never hear from them again,” Mary Jo says. Or, worse, often they’ll be further into the hiring process where the company has paid for drug testing and a background check, only to have the new employee walk away from the job after his or her first break.Asone solution, Harris Hardwoods pro motes itself as a “second chance” employer, providing opportunities to people who may not survive a background check at other manufacturers.Whenasked why, Mary Jo pauses. Strug gling to hold back tears, she says, “Eve rybody deserves a second chance. We all make mistakes. Right? Everybody deserves that second chance. Now, mess that up and I don’t think you’d last long here. But you get that second chance.”
“If business is growing, over time it will reach these plateaus — with the tools you have, the equipment, the systems, the process, the people, the experience, you can grow to a certain level. And then you start to just kind of tap out. You reach the extent to which those things can get you to where you are,” Haarstad says. “In order to then start growing again and move toward the next plateau, something has to change.”
recognizing obstacles to growth is the key to beginning the process of moving beyond the kind of plateaus that vex so many businesses.
Haarstad also helped Harris Hard woods get on the 90-day rhythm schedule, in which the leadership — along with Haarstad — gathers every three months to assess progress and adjust goals if neces sary. The Harrises say they love the peri odic opportunities to focus on the business’ plans and goals.
It might be expanding the facility, up grading equipment or improving processes. Or it might be finding new leadership to take you to the next level.
FALL 2022 ENTERPRISE MINNESOTA / 25 necessary to implement Tim and Mary Jo’s vision for the company, such as bringing new people into the management fold who shared that
“We need labor. Without our people, we are nothing,” she says. People are everything to the Harrises. They started a company in a garage with one person, and built it into a flourish ing business. But they don’t plan to cut wood forever. While there are no buyers yet for Harris Hardwoods, and they don’t plan to retire this month, they are look ing down the road to a time when they can sell the business. Until then, they and the rest of their team will continue to work by a mantra they’ve officially adopted just in the last few years. Unofficially, it’s been a part of the Harris Hardwoods ethos since before the com pany began: Success begins with grit and SAWdust. “Grit,” of course, refers to the kind of tenacity required to make a startup last nearly 30 years. The “SAW” part of SAWdust stands for Service, Accountabil ity and “GritWholeheartedness.comesfromhaving watched our dads struggle and try new things over and over again until finally becoming success ful in their later years,” Mary Jo says. “And grit, for us, is the same thing. There were lots of times when we could have, and probably should have, quit. But we kept going.” The “dust” part of their mantra emerged from Dale Carnegie’s book, How to Win Friends and Influence People, which Tim read for a class. Mary Jo read it alongside him so the two could talk about what he was learning and doing at work. The book teaches, “you can’t saw saw dust.” It’s a parable of sorts that reminds us to not dwell on mistakes, the past, or things that cannot be changed. Learn from the past — the dust — to build a better future.
Like any business … Like all manufacturers, Tim and Mary Jo are hindered by the constant search for workers. They’ve got a mix of employees who have worked there almost as long as the company has existed and new hires. Sometimes getting those new hires to stay longer than a day is a challenge.
“That might have been an issue for them,” Haarstad says. Haarstad also helped them with focus, and helped them develop the phrase “long, wide, repeatable,” to crystallize the kind of business and clients they wanted to pursue. Long and wide refers to dimensions of wood Harris Hardwoods excels at producing; “repeatable” refers to customers wanting regular, consistent work from Harris Hardwoods. Hav ing regular clients removes guesswork. Haarstad advised the Harrises to focus less on “one-off” customers in favor of enduring long-term relationships.
Accordingvision.toHaarstad,
The Harrises also say offering second chances is just smart business in a brutal labor market environment.
Grygla-based Machinewell uses automation to achieve record sales with half the workforce. By Sue Bruns 26 / ENTERPRISE MINNESOTA FALL 2022 Adapting BIGSmallSUCCESSTown, Machinewell VPs: Bryan Dougherty, Tonia Haack, and Eric Dougherty
In 1979, Donnie Wikert started work ing at Machinewell part-time after school. After graduating from high school, he studied machining at Alexandria Techni cal and Community College and eventu ally returned to Machinewell, where he worked for 37 years, rising from laborer to machinist and company vice president before retiring in 2021. Wikert’s career path set a pattern that has become a factor of Machinewell’s success: Get a taste of a job in high school, leave Grygla, go to school, acquire some skills, and eventually return — in Wikert’s case — to run the company.
Ron Palm, Wikert’s co-VP, joined Ma chinewell in 1987. The two of them led the company together and became part-owners in October 1996. “We never intended for Machinewell to become this large,” Palm told the Grygla Eagle in April 2021. Palm and Wikert grew the company to a peak in 2005, when Machinewell employed 120 workers and hit its highest production up to that time. Both VPs retired in 2021 and handed the reins to today’s three VP team of Eric Dougherty, Bryan Dougherty, and Tonia Haack, who report to company presi dent Wayne Kehler. Community support Over the years, Machinewell’s campus expanded incrementally to keep up with the company’s growth. In 1989, when Machinewell employed 28 people, the company considered re-locating to Thief River Falls. But the community raised money to help finance a larger building for Machinewell to stay local. In the fall, a 50’x100’ addition made way for future expansion. A second addition — 140’x40’ — came shortly after for storage. The support of townspeople and farmers to keep the company in town further solidified Ma chinewell’s connection to the community. In 1995, some of Machinewell’s work was done in Oklee — located 43 miles southwest of Grygla. Within a few more years, two additional build ings were purchased, and the main building was again expanded. The Oklee facility closed in 2009, and all production is now done in Machinewell’s 30,000 square feet of workspace in Grygla, including work for a variety of northwestcorner manufacturers like Erskine Attachments, Central Boiler, TRF Forsbergs, and Northern Crankshaft.
Leadership Machinewell’s new leadership team has made good strides in just over a year of their stepping up to the plate. The three vice presidents have a combined total of 53 years with the company.
I
FALL 2022 ENTERPRISE MINNESOTA / 27 f you’ve driven or ridden a snow mobile or ATV, if you’ve taken your kids to a playground, even if you’ve eaten fried food at a restaurant, there’s a chance you’ve benefited from something machined at Ma chinewell, Inc., in Grygla, Minn. Machinewell, a job shop in the northwest corner of Minnesota, has evolved from a one-man repair shop for agricultural equipment to a company with a strong reputation for producing quality parts for about 80 customers across the U.S. The company specializes in machining, welding, and fabrication of a variety of components, includ ing fixtures, jigs, and various special ized parts. Machinewell produces and ships some 20,000 parts per week that end up in everything from recreational vehicles and restaurant equipment, agricultural and govern ment vehicles, to playground equip ment and fire hydrants. The company has built a solid reputation on its problem-solving, craftsmanship, and attention to detail. Machinewell’s research and development department also creates and tests prototypes and designs spe cialized machines, tools, and parts. From repair shop to production facility Machinewell was started as a repair shop in 1976 by Terry Wells. Wells had attended Central Lakes College in Staples and repaired agricultural and other machinery. He managed the shop by himself at first and eventually added a secretary. The business was bought out by Ken Kreuter, a friend of Wells, who founded the Kreuter Manufacturing Com pany, now KMC, based in Indiana. After the buyout, the shop expanded and started taking on projects for Marvin Windows. Machinewell grew as other cli ents were added — Polaris, Arctic Cat, and General Dynamics (government contracts) among them.
Eric Dougherty, VP of sales/ R&D, and his brother Bryan Dougherty, VP of sales/engineering, both followed similar pathways as Wikert’s. Eric grew up in Grygla and worked at Machinewell parttime while in high school, went to Central Lakes College in Staples for machining, worked at another company for two years, returned to Machinewell, and has been with the company for 23 years. He worked with set-ups in production, gained R&D experi ence, built fixtures, and advanced to a lead position before moving into the VP role.
Bryan Dougherty also went to Staples for machining and then worked with precision CNC turning in a low-production machine shop in Monticello for 4-5 years. “Big city life was not for me,” Bryan says, so he moved back to Grygla and ran the mill
Polaris is still a top five client, with Machinewell producing chassis components, such as weldments and numerous machined components and doing some R&D for them.
There are always jobs for students while they’re still in high school.
“It helps to have mechanical skills, some job experience, or an as sembly line background,” Eric says. An employee must be 18 to operate most of the machinery, but jobs in assembly, shipping, painting, or gen eral clean-up are always available for 16 year olds and up.
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While overtime used to be a big thing, workers now enjoy their three-day week ends while robots keep producing.
ing CNC department at Machinewell. He took over the in-house tooling department, filled in with engineering, and handed over the CNC milling. When Palm and Wikert retired, Bryan moved into the VP role and promoted other people into engineering projects, which he continues to oversee.
Tonia Haack grew up in Morris, Minn., earned a finance degree at St. Cloud State University and “married into the area.” She and her husband returned to Grygla in 2009, and she started with Machinewell in 2010, working with accounting and payroll and then customer service. The company has grown enough for her role as VP of finance to warrant an accounting assistant.
Early on, with the help of Minnesota Job Skills Partnership (MJSP) grants, Ma chinewell invested in training and educat ing workers. For the past several years, with the help of Dual Training & Automa tion Training grants through the State of Minnesota, the company has paid a major ity of the tuition (75%) for students pursu ing certifications and Associate of Applied Science (AAS) degrees in machining and related manufacturing fields, paired with a two-year commitment to Machinewell after training. Machinewell also helps facilitate campus tours that area high school kids are interested in. Central Lakes College in Staples, North Dakota State College of Science in Wahpeton, and Alexandria Tech nical & Community College have been key partners over the past several years.
“Most who come, stay,” Bryan says. “We recruit mainly from the area because there is a connection to northern Minnesota or to the Grygla community.” Most employees live in or near the area or commute from within a 40- to 45-mile radius. Currently, three employees have been with Ma chinewell for over 10 years; three more for at least 15 years; and 11 employees have been with the company for 20 years or more. There are always jobs for students while they’re still in high school.
Challenges After production peaked in 2005, output remained steady, and, with an “essential” designation, continued and actually rose through the pandemic — by 15% in 2020 and another 15% in 2021. The company’s current production of 20,000 parts per week surpassed its 2005 peak, with a staff of about half of what it was 17 years ago. Today Machinewell runs two shifts per day, and their 65 employees work 10-hour shifts, Monday through Thursday. “There’s no real slow time,” says Eric. “No layoffs in the winter; two shifts, year-round.”
Machinewell’s Swiss-style CNC turning centers have the capability of loading a 12’ raw stock bar into a bar feeder, which in turn feeds the CNC. These machines utilize a second spindle that allows it to transfer the part internally and eject the finished part out the front of the second spindle into a parts catcher or out the back side of the second spindle into a bin.
“Kids today like computers,” Bryan says. Today’s skilled workers need to be able to run smart, and the need for welltrained workers and robots will grow as new clients come aboard and production grows. In addition to Polaris, other top clients include Landscape Structures, which makes playground equipment, Life Fitness (fitness equipment), EPI Performance Parts, GBoost Technology, Alinabal, Dee Elec tronics, Bedford Industries, Aftermarket Power Sports, Erlanson Performance, and Restaurant Technologies (RTI). Parts from Machinewell are made for and shipped to companies all across the U.S., some of which market their products internationally.
Automation Automated machines do most of the repetitive tasks that don’t interest to day’s young people, Bryan says, but learning to operate computerized machines is attractive to young workers.
Machinewell uses automation to improve productivity, but keenly values its skilled workers. In Grygla, a town of under 200 people with a land area of just 0.57 sq. miles within its formal city boundaries, Machinewell recruits locally and “grows its own” workers. With about 12 high school graduates per year in Grygla, recruiting starts there. Students are invited in to find out about the possibilities at Machinewell: Op portunities range from CNC programmers to laborers, welders to assembly line workers, and fork-lift drivers to office staff. Ma chinewell also presents at other area schools, goes to job fairs, and recruits at colleges. Investing in training and education
“We have a good crew,” Eric says of the company’s employees. This summer, two high school students are following the paths of some of their key Machinewell predecessors: Working after school and/ or during the summers at Machinewell while pursuing certifications or degrees that will prepare them for highly skilled jobs. Both have already earned a year’s worth of credits at Staples.
“We just stepped into the field [of Swiss machines],” Bryan says. “We put in one machine the first of the year and the second one just recently. They run, lights out, all weekend long, with no operators — all contained in one piece of equipment.”
With 46 years of experience, a reputation for high quality work, and better-thanaverage turn-around times on projects, Machinewell’s machine shops, welding shop, and R&D department continue to develop, design, test, and produce pieces for an ever-growing variety of clients with
Bryan concurs: “Sometimes something so small can change things for the better.” “We’re ISO-driven now,” Eric adds. “There were some ideas we had before, but now it’s okay [to implement changes].” He says there has been “good buy-in” from the workers, too. The team completed an internal assess ment this summer. “We’re moving along fast,” Tonia says. Keith Gadacz, a business growth con sultant with Enterprise Minnesota, has been working with the team and is impressed by the progress they’ve made toward certifica tion. “It’s going well, and they’re doing a good job,” Gadacz says, and believes the work will be completed by October.
Eric, Bryan and Tonia also credit their community. “We feel a great deal of responsibility to the community,” Eric says, as a primary employer in the area. The VPs have not forgotten the community buy-in and fundraising that kept Machinewell in Grygla several years ago; nor has the community forgotten the importance of Machinewell — not just in employment at the plant, but for other small businesses in the area, too. The Grain Bin restaurant just a block or so from the company’s machine shops serves a lot of meals to Machinewell workers on their dinner breaks.
And the sense of community that raises new workers, the efforts and support of Machinewell to educate them, and the small-town, northern Minnesota lifestyle that brings them back to the area help Grygla proudly (if not tongue-in-cheek) proclaim their city to be “The Biggest Town of Its Size.”
Gadacz credits the three VPs: “The lead ership team’s strength will be one of the primary foundations of their business.”
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The company was functioning well under Wikert and Palm, but Eric says the new leadership team has moved forward with a few things the previous team had held off on.
Local trucking company, Saurdiff & Sons, also benefits as one of Machinewell’s means of shipping products. Shipping in a remote part of the state poses challenges, but FedEx, UPS, and Miracle Express make daily stops at Machinewell to get products out to customers as fast as possible. The future looks promising. “The com pany is very strong — probably the strong est it’s ever been,” says Bryan. “Machinery is in good shape and has been updated.”
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“We had a good base,” Tonia says, of the organizational structure, “but the ISO process has helped us to fine-tune things.”
uniqueMachinewellneeds. has managed to meet the challenges created by their continued growth with no signs of slowing down. In the early spring of this year, the company started working toward ISO certification, which will open up even more possibilities for big agriculture companies like Case and John Deere, which require ISO certification in order to quote prices.
“We feel a great deal of responsibility to the community,” says Eric Dougherty, VP of sales/R&D.
nterprise Minnesota president and CEO Bob Kill interviews supply chain author ity Willy Shih, the Robert and Jane Cizik Professor of Management Practice in Business Administration at Harvard Business School. Shih discusses the roots of the current crisis, why it differs from past supply shortages, and how manufacturers can manage their relationships with suppliers now and in the future. He also discusses one possible supply hic cup on the horizon and offers his best advice for manufacturers who want to protect themselves from coming shocks.
Enterprise Minnesota’s Bob Kill interviews
Q&A
Willy Shih, Harvard’s supply chain guru, about how manufacturers can protect themselves from future shocks.
EIT’S IT’SPARTNERSHIPSABOUTABOUT
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What have we learned about supply chain disruptions since the pandemic? We’ve built much more extended supply chains, and they have much less margin for error than people generally realized. Therefore, we have suffered on the resilience side. I know there’s a lot of criticism of supply chains, but all things considered, people in this country by and large have not starved through out the pandemic. We may not have gotten the choices we wanted, and of tentimes we had to wait, but by and
FALL 2022 ENTERPRISE MINNESOTA / 31 large, supply chains function. At the same time, we learned about the geographic extent of supply chains. There was a much greater dependency on distant sourc es and much less slack capacity in the system. I don’t think people really appreciated the implications of that un til their backs were up against the wall. All of this has been driven by manufac turers being more price competitive and cost competitive, but that has led us into the situation that we’re in now.
There are a lot of hawks who want to disentangle with China, but we are much more entangled than we’d like to be.
Were we headed for some disruptions before the pandemic and this just really made them more visible? We’ve had disruptions repeat edly over the last couple of decades. There was the Tōhoku earthquake and tsunami in east Japan in March 2011, for example, which disrupted a lot of automotive supply chains. Especially because it took out production of a significant percentage of the world’s automotive microcontrollers. It also took out a supplier of a paint component used to make black paint sparkly, which made it hard for people to paint cars black. Then the flooding in Thailand that year disrupted the supply for hard disc drives. So, we’ve had those disruptions before. What we haven’t had is the breadth and scale of this disruption. It affected so many suppliers in so many different areas. Because of that, it became visible in just about everything. You had trouble getting a freezer. You had trouble getting a car. You had trouble getting the flavor of soft drink that you wanted. I think it was the scale that really called everybody’s attention to the core questions, but those have been under there all along. When you think about the pan demic, and now about Ukraine and higher energy costs, where do you see this going? Think about energy prices, which underpin agriculture. Or the disruption of fertilizer, for example. Those are really broadbased disruptions. I’ve been very skeptical about people who have said this is transitory inflation. Now people are taking that back. I would remind everybody that many people — and especially a lot of young people — have always lived in a world where we had a pretty benign trading environment. From the late 1980s until about 2016, we had a pretty stable geopolitical environment. We had occasional energy shocks, but those all reverted back to some sense of stability. We had this dra matic expansion of the tradeable sector during that time. Since the late 1990s and early 2000s, we’ve had a huge migration of manufacturing to China, which was one of the reasons for low inflation. We kept costs down by offshoring a lot of production to China. Now the question is, what does it look like go ing forward? What are your thoughts on the possibility of moving the production of goods closer to the consumer? First, let’s talk about the whole re-shoring concept. People say that two decades ago all of this stuff was made in the U.S. — so, let’s bring it back. The big challenge to that is when we off-shored production from the U.S. to a low-cost country like China, you would pick up the equipment, the processes, the know-how, and build a factory in China. You would hire people, set up the supply chain, set up the logistics. All those things cost money. And the cost was paid for in the savings in product cost. Economically it was very straight forward.
This idea of process innovation is really important. At the end of World War II, U.S. steel manufacturers were the king of the hill because the Europeans and the Japanese were all in ruins. It also meant that when the Europeans and the Japanese started rebuilding, they were the first to use many advanced methods.
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After 9/11 kind of induced a recession, a lot of American manufacturers made their numbers by offshoring their produc tion to China. That was really the starting gun on that big wave. It works when you’re going from a high-cost country to a low-cost country. But when you’re go ing from a low-cost country to a high-cost country, you don’t have those economics behind you. So, is it at all practical to build a supply chain using almost exclusively American companies and suppliers? It’s much harder than anybody is admitting right now. There are a lot of hawks who want to disentangle with China, but we are much more entangled than we’d like to be. We’re dependent on China, and China is dependent on the U.S. Much more than they would like to be as well. That will be a source of a lot of stress in the years ahead. Go look in a Walmart, or a Home Depot, or a Target and see how many products come from China. And we don’t have the manu facturing capacity or the capabilities to make a lot of those things. We gave them up, like textile dyeing, or textile manufacturing. And it’s not all in China anymore, either, because it’s moved on to Bangladesh and other countries in southMeaning,Asia. if you want to do that — build supply chains using almost exclusively American companies — you have to either accept the higher cost and charge more for your product, or you have to find a way to overcome that labor cost differential with productiv ity. Usually that means automation, or it might mean process reengineering, or adopting a new process technology. But it isn’t free. That’s something I think a lot of people miss on this argument. Automation can really be a wide range of things; it’s not just robots. What are your thoughts on that? I think it includes the application of digital technology. So, for example, one area that I’m very keen on is manufactur ing of castings. The traditional sandcast ing model is actually very amenable to using binder jet printing for the sand tools used to make more complex tools and more sophisticated castings. Another example would be continuous flow manufacturing for fine chemicals or pharmaceuticals, where I think there is a revolution happening.
American steelmakers had their open-hearth furnaces. They were fully depreciated, and they were paid for. They were always fearful of having excess capacity because excess capacity is death in that business. So, rather than invest in new technology and equipment, they just stuck with the old, even though the new technology produced better-quality product at lower cost. We see over and over again where incumbents stick too long with the exist ing technology. I tell people technologi cal change is an opportunity to unseat theTheseincumbents.technology transitions are actually opportunities. That’s when you give new entrants an opportunity. That’s why I say you’ve got to look for those transitions. When it comes to fixing the supply chain, why doesn’t it work to address the major bottlenecks of the supply chain — for example, opening ports 24 hours a day? A lot of people try to treat the symp toms. They see a bottleneck in the port and think we need a bigger port, or we need the port to open 24 hours a day. Well, it turns out the real bottleneck was not the port. The real bottleneck was that the warehouses and distribution centers they were going to were full. They didn’t have anywhere to empty out the containers. Then the contain ers would stay, and they would have to stay on the truck chassis. And then there wouldn’t be enough truck chassis to go back and pick up more containers. So, one of the challenges in general is that people who work on supply chains often just see their piece. If you look at the whole system, you know where the bottlenecks are in the whole system, and you might get a different view. What portion of this is tied to the labor shortage? We’re definitely seeing that the labor shortage is pervasive at multiple levels. But you also see us moving toward new distribution models. Amazon has recently admitted that maybe they were expanding a little too fast — but they hired an enormous number of people. Walmart hired an enormous number of people. If all those hirings stick, that adds to the competition for labor. So certainly, demand for labor has gone up. The other thing that a lot of people don’t really focus on is labor productiv ity. I’m not trying to be critical here, but you have truckers waiting to pick up their boxes. And they have federal limits on how many hours they can drive per day. Having them wait is very wasteful. They don’t like it either because they get paid by the load, not by the hour. There are a lot of those types of inef ficiencies, and congestion has just made everything worse. I don’t think it’s one problem anywhere, but certainly labor shortages have not made things better. There isn’t a manufacturer or a com pany I know who isn’t struggling to hire people right now. Should even small- and medium-sized companies think about having a dedi cated supply chain executive? With many of the things that hap pened, you would’ve had an advantage or a head start on the problem by having somebody watch what was happening close to the ground. Companies that did Willy Shih is a professor of management practice in business administration at Harvard, where he teaches in the MBA and Executive Education Programs. He specializes in manufacturing and product development.
It also depends on what you mean by a “strategic partnership” with your sup plier. This is not just a way to secure more supply now, especially if you just plan to go back to the way things were once shortages ease up. It’s a longterm, cultural change. A more strategic supplier relationship means shar ing more information on your actual volume requirements, and sharing your product roadmap so they can get better visibility as well. That means letting the supplier know more about your true needs over a longer time horizon — out several quarters, for example — and doing more collaborative planning.
The only question is when people have excess inventory — and this inevitably happens — whether they will have a long memory or a short memory and go back to the way things were. How much can small- and mediumsized OEM suppliers push for a less transactional partnership with their customers? It depends on if the OEM thinks they have alternatives. If you have unique capabilities, and your customer needs you, then this is a time when you have more leverage. If your capabilities are less differentiated and the customer can pit you against somebody else, then this is a very bad time. For example, back in April, GM had record earnings. Meanwhile, some of their suppliers were going out of business. When a sup plier had their resin cost go up 80%, and wanted to pass some through, GM said no, you have a fixed price contract. My critique of that situation is if you’re the OEM and you don’t recognize that your supplier is being driven to the wall, the next time you need them, they won’t be around. I think that’s a bad practice.
I always point to Toyota here because Toyota continues to act differently from a lot of other automotive OEMs. One supplier told me that Toyota under stands what it costs to make something right. They allow that supplier to make a profit. The supplier gives a quote on something and Toyota will either accept it, or they won’t. But they won’t go through this dance that they have to do with the Big Three in Detroit, where the procurement people are rewarded on how much cost they can get out of the suppliers. Short-term, that supplier may not make as much money, but it’s a much more stable business. At the same time, if you are a sup plier to an OEM and you have a dif ferentiated product, you might be in a good position to reap some short-term profits. But then if you press really hard, you’re just giving them an incen
Too much business now is based on a transactional model where there are short “frozen zones” and customers can cancel things in close without signifi cant penalties, as opposed to letting suppliers know a little further out. Being more strategic is always good.
We see over and over again where incumbents stick too long with the existing technology. I tell people technological change is an opportunity to unseat the incumbents.
FALL 2022 ENTERPRISE MINNESOTA / 33 well early on are the ones who had their ear to the ground on these things.
If you rely on a third-party logistics supplier to provide all of that — and many small companies have no choice but to do that because it’s beyond their capabilities — you are several layers away from what’s going on. You get aggregated with everybody else. I think it’s advantageous to have that expertise and pay closer attention to the logistics side of the supply chain. It gives me bet ter visibility on what’s going on. Also, it buys some time and better ability to anticipate what’s coming at me.
With so much uncertainty, particular ly with prices, should manufacturers try to renegotiate their contracts with suppliers or customers so they have more flexibility? I hear that people are changing their contracting practices. In other words, we saw a lot of the automakers say they were going to have more strategic relationships with their suppliers. Well, historically they’ve had very transac tional relationships with their suppliers, including being able to cancel within very short order windows. Turns out, that did not serve anybody well. To the extent that they can become more strategic with their suppliers, I think that’s helpful.
It’s funny: The domestic content on some Toyota vehicles made in the U.S. is higher than a lot of vehicles from the Big Three in Detroit. But they ana lyze those things, and they work with suppliers so that they can deliver those capabilities and be competitive on cost.
Do you see more companies trying that? Yes. The Toyota plant in George town, Ky., is very proud of the number of suppliers they have that are not that far away — in other parts of Kentucky, southern Ohio or southeastern Indiana.
It’s as if a lot of American companies adopted part of the Toyota production system, but they didn’t adopt some of those more cultural aspects around part nership. It’s sort of like, I’m going to run a lean, just-in-time production system, but it’s harder when I don’t have the level of trust with my suppliers. How important is it for CEOs and other executives to play a role in build ing and maintaining relationships with suppliers? It’s always useful to view your suppli ers as strategic partners. If you count on them to provide key materials and subas semblies, you can help them by under standing their problems, challenges and opportunities. Sometimes the help is just giving them more flexibility. Sometimes the help might be working together on a lot of these problems. Again, Toyota sets the standard here, because they go out and help suppliers get better. They realize those suppliers not only serve them but their customers as well. We saw during the pandemic how it serves them well to invest in good suppliers. They fared better than many other companies because they took a strategic approach to all these things.
How can manufacturers cultivate those partnerships? In a race to the bottom on costs, many big OEMs have pushed a lot of this offshore, especially for castings. I have a John Deere tractor, and a lot of the parts come from China. Then China goes through a COVID lockdown and you can’t get those parts. The problem, from the standpoint of a manufacturer like that, is that they have moved the high-volume stuffButoffshore.moving the high-volume stuff offshore gave those same manufacturers the kind of cashflow they needed to mod ernize. So, the offshore guys tend to have better tools and newer tools, and now you have the poor stepchild at home who doesn’t have the latest tools. If you think that the local partner is important in the long-term, then maybe you need to invest a little bit more in their health by giving them the kind of work that will allow them to sustain investment right now. Manufacturers will think they can’t compete on cost this way, but then the next time you have this supply chain snafu you can’t get parts from halfway around the world. If you want these local guys to be around, you’ve got to do busi ness with them. If you don’t give them business, don’t expect them to survive. Do you need the scale of a Toyota to actually establish these kinds of sup plier relationships? It’s possible, but it takes staying power.
tive to find a replacement. Toyota has built networks of suppli ers, trying to keep them closer. In some cases, they are actually higher-cost suppliers. They also work with them on process, innovation and continuous improvement.
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It turns out the real bottleneck was not the port. The real bottleneck was that the warehouses and distribution centers they were going to were full. They didn’t have anywhere to empty out the containers.
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One of the challenges in general is people who work on supply chains often just see their piece. If you look at the whole system, you know where the bottlenecks are in the whole system, and you might get a different view.
Do you see how reducing the carbon footprint could drive a more regional supply chain? Yes. Very few people in the U.S. have paid any attention to the IMO 2023 regu lations. That’s the International Maritime Organization. Starting in 2023, every ship engaged in trade — and remember, 90% of global trade moves on the water — will be subject to IMO regulations. They will have to develop a carbon intensity indicator for each ship. And then from 2023 to 2030 they will have to show annual improvement. That means that global shipping is not going to be the same starting next year. They’ll either have to install scrubbers or they’ll have to go to something like bioethanol or LNG. I think the reason no body knows about it is because there are no major U.S. container shipping lines. There are no U.S. people who laid on the tracks to stop that.
Especially if people around you need to be convinced. It’s about partnership. I think in the Midwest — and I grew up in the Midwest — people are histori cally better at working with each other. That’s what it’s about. It’s about working together to solve problems.
Does the overall focus on reducing waste and a carbon footprint represent an opportunity for manufacturers?
I think it will, because more and more companies are focusing on scope one, scope two, and eventually scope three emissions. For small and medium enterprises it is a chance to innovate in technology, both in terms of carbon foot print and productivity. That’s really your chance to capture some of this business, in productivity in particular. People are looking for closer-to-home solutions. In castings, for example, you can use newer technology, be closer to the market, be quicker, and do more complex parts. It’s going to be a challenging market, though, because your customer has to see the value in that too. If you had one piece of advice for small- and medium-sized manufactur ers, based on what’s happened in the world, what would that be? I’d be looking at how to upgrade my skills. I think it’s essential for smaller manufacturers right now to look at newer technologies, especially digital skills, computer modeling, simulation, things like that. If you want to move into new areas, you have to learn. The number one thing is to focus on upgrading your skills.
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Precaution What you don’t know can hurt you. By Robb Murray 36 / ENTERPRISE MINNESOTA FALL 2022 Cyber
“I couldn’t be a bigger advocate for cyber insurance. They came in and took care of everything.”
t started — like so many stories with disastrous endings — with a suspi cious email. A well-meaning loan officer at a bank checked his inbox and found an unread message. The return address seemed okay — it apparently came from some one else at the bank. Looks legit. Click! Only it wasn’t legit. Scott Singer of CyberNINES says this was “a social engineering situation,” meaning the bank employee was fooled by a convincing email address, some smartly crafted words of persuasion, and a sense of wanting to comply with the emailer’s wishes.
Laura Ekholm, executive vice president of L&M Radiator in Hibbing, says her company has been hit hard by cyberat tacks. Luckily they had insurance. Two of the three attacks resulted in losses totaling nearly a half million dollars. An employee received an email from what appeared to be a shipping company L&M works with regularly. And that email came with an attachment, and the wording seemed authentic. The employee clicked on the attachment, which unleashed a ransomware virus into the company’s com puter system. “We have good security systems in place and backups off site,” Ekholm says. “We thought we were doing everything right. We did everything right. But it doesn’t matter.”
The email prompted the employee to contact customers and get them to change critical banking information, the kind of information that could nudge open a virtual door just wide enough to let a cybercrook waltz right in.
If you think this happened a decade ago when people weren’t yet savvy to the danger of cyberattacks, think again: This happened just a few months ago.
THAT’S SO RANSOM
L&M took measures to shut down their system, but by then the damage had been done. The cybercriminals held their data for ransom, demanding $350,000 for its safe return. Without the ransom, all of L&M’s employee and vendor data would be released “to the dark web.”
Between threats of cyberattacks and the security demands of getting defense department contracts, the message is clear: Manufacturers can no longer afford to ignore cybersecurity. You either play ball or go home.
For manufacturers, the virtual world can bring both efficiency to workflow and havoc to work product or finances. And it’s not just criminals in the virtual world that manufacturers need to worry about. Any manufacturer doing busi ness with Department of Defense prime contractors has known for years they’ll soon need to demonstrate compliance with federal cyber safety standards. And for years, the date by which they must be in compliance has been a moving target. But now the date has been set: October 2023. Any manufacturer working as a subcon tractor for the Department of Defense by then must have a demonstrated security plan in place. If they don’t, they’re out. And that fact certainly will put some small manufacturers out of business.
Ekholm and others at L&M thought for a moment. What data could they possibly have that would be damaging to people or vendors? They determined the data wouldn’t be that damaging. But they also determined it wasn’t their decision to make, and that they needed to take measures to prevent the information’s dissemination.Theinsurance company paid the ran som. And when they looked at the data, they realized they were right; there wasn’t much sensitive information involved.
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Because of this email — and untold financial losses — the bank enlisted the help of Singer’s firm to conduct workshops and training sessions to educate employees about phishing and ransomware.
I
If you’re still uncertain about steps to take to avoid being a victim, here are a few simple ones. Be wary of emails asking you to take action Refrain from clicking anything in any email when you’re unsure of its origins. Hover over links to inspect or verify URLs You’d be surprised how many times a link in an email can look legit but actually be nefarious. Just because it says www. wellsfargo.com doesn’t mean the link will take you to the banking giant’s website. Tricksters can make the URL say anything they want. Go directly to the source If you’re unsure, open a fresh browser page and go to the company’s site on your own, without clicking the emailed link. Never pay the ransom It only encourages cybercriminals, and you’re never guaranteed to get an encryp tion code or to get your data back.
THE CHINA PROBLEM
John Norris doesn’t mince words when talking about the cyber threat potential from foreign countries.
In infancy, cybercrooks were very often known as “script kiddies,” or low-skilled individuals who preyed upon victims by using prepared scripts. Today, things have gotten more sophisticated.
“I couldn’t be a bigger advocate for cy ber insurance,” Ekholm says. “They came in and took care of everything.” A year before that, L&M dealt with a similar situation. Instead of a ransomware case, it was a clever scheme to convince a well-intentioned employee to send $100,000 to a bank in Hong Kong. “They were pretending to be one of our vendors. The tone of mail made it seem like everything was legitimate” Ekholm recalls. “It seemed real, but none of it was.” The scammer convinced an employee to do the wire transfer. And they’d have gotten away with it if it hadn’t been for an observant CFO, who called a very confused vendor to find out why bank information was abruptly changed.
“Now there’s a need to start thinking about what are called advanced persistent threats,” Burns says. “These are statefunded actors, extremely skilled, wellcoordinated. They treat their cybercrime operations like a business themselves. You can have a lot of protections in place, and one of those entities can still harm your organization. So, I think about the ability to respond and recover. I’ve made a big push as of late to help people put together incident response plans, and then also dive further into their backups as well as busi ness continuity disaster recovery.”
One of Burns’ top tips is a simple one: Have a good backup plan.
Burns says any manufacturer that sees a cyberattack as an existential threat should consider immutable storage, which means a backup that is unhackable.“Itmeans having your actual data separated so that, if there is a compro mise of your system, they can’t touch your backups,” he says.
Still, they notified the FBI. And were thankful they’d invested in cybersecurity insurance.
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“She’s like, ‘What the heck, Tom? What’s this huge wire about? You have to give us a heads up on these things.’ And he said, ‘What are you talking about? I have no idea.’” They called U.S. Bank and convinced them to freeze the wire transfer. They also took the matter to court. In the end, they got their $100,000 back. Attacks such as these have caused L&M to take cybersecurity very seri ously.
The flaws in the self-attesting system led the Department of Defense to create the
“China’s stealing our data,” says Norris, owner of Atscott Manufactur ing and Tower Solutions. “And they’ll get bits and pieces of whatever they can. They’re quite good at it, and they’ve been working at it for a while. I think the United States is behind schedule in pulling this stuff together and in securing and locking downThisdata.”iswhy the Department of Defense has moved gradually in the last decade to, as Norris says, lock down data. Standards for cybersecurity for several years have been governed by the National Institute of Standards and Technology via its Defense Federal Acquisition Regulation Supplement, better known as DFARS. In that system, companies that worked with any defense contractors were required to self-attest that they’d met all the DFARS requirements — the self-attesting required no proof or third-party review, leaving open the possibility that some manufactur ers haven’t exactly met the spirit of the DFARS requirements (and that some may have done so knowingly, which is illegal).
Grant Burns, owner of the cybersecurity firm Bound Planet, says both the reach of the cybercrime world and expertise of its practitioners has evolved in a way that mir rors any successful business.
Two years ago, focus groups in Enterprise Minnesota’s State of Manu facturing® survey revealed that a startling number of manufacturers have fallen prey to cyberattacks. In almost every focus group, someone told a story of getting hit with ransomware attacks, including one company owner who said, “The week we went into lockdown for the coronavirus, we got hacked. It was ransomware. It cost about half a million bucks to get up on the other side of that. Thank goodness it didn’t cost us. I guess we had insurance for a big chunk of it. But it was an absolute nightmare.”
“Scrutinize your backup configuration, make sure it contains everything that’s critical to your business,” Burns says. “If a bad actor compromises your system, are they able to com promise your backups as well? If the answer is ‘yes,’ then you basically have no backup.”
“It was an eye opener,” Ekholm says. “We had done training and were doing things to make people aware. But the frustrating part was clicking on an attach ment in an email that you normally would click because you get emails from them all the time. How do you help that? So, we continue doing training on looking at the IP address and taking a closer look to make sure everything looks right.”
It’s not just criminals in the virtual world that manufacturers need to worry about.
Cybersecurity Maturity Model Certification (CMMC). This system is built on third-par ty verification of compliance, eliminating the possibility that a company isn’t being honest with its self-attesting (and thus po tentially leaving the Department of Defense vulnerable to cyberattacks).
“We second guess that all the time at this point,” Hall says, “but I would say yes. We don’t have a choice. We’re going to have to keep this roadmap going.”
“My hope is that maybe it’ll throw more government contractors our way because they’ll find it harder and harder to find small businesses that are compliant,” Hall says. “That’s the big picture for me. Last word I got is that, of 80,000 companies in the U.S., only 25,000 are registered at this point. And probably only a fraction of that 25% are as far as we are.”
Of the 80,000 companies that should have self-attested scores on file with the DoD, only a quarter have done so. Of the 25% that have, only some have taken steps to get into compliance in accordance with CMMC requirements — which includes a third-party certified cybersecurity specialist signing off. Such stringent requirements will likely result in the loss of small busi nesses in the DoD supply chain.
It’s one thing to demand that every manufacturer raise the security level of their tech to DoD standards. It’s quite another to pay for it.
If, on the other hand, you’re a large manufacturer and need to completely lock down every piece of your tech…
Minnesota Tool & Die Works has been working with Burns at Bound Planet. They’re in the process of implementing a comprehensive plan to upgrade their tech and bring them into CMMC compliance. Boogren says they are working on more than 100 of the CMMC’s requirements, and that it will take them two years to com pleteBoogreneverything.sayshe’s been monitoring the government oversight on cybersecurity, noting there wasn’t much enforcement over the past few years. But now that cy berattacks are becoming more common, he understands why the October 2023 date will most likely be adhered to, and that’s why they opted to move forward with a plan that will set them back about $40,000.Eventually, the 2023 date is going to arrive. The odds of manufacturers not get ting compliant in time are high. What will happen then? Will the DoD make accommodations for manufacturers that haven’t made it to full compliance? Or will they shut down the defense industrial base because of cybersecurity requirements? “They’ll have to pick their poison,” one industry expert says. “Do we want guns and missiles and airplanes, or do we want everybody to be compliant?”
The CMMC has been a hot topic among manufacturers. Not only will it force them to undergo a costly overhaul of their tech, but the date by which such an overhaul must be done keeps moving back. But now it seems the date, at least for now, has been set. In late June, representatives from the Department of Defense hosted a webinar titled, “Countdown to CMMC Compliance.”
The price tag is enough to make com panies ask tough questions, such as: Is it worth it?
“That’s where that can start to add up,” Burns says. For companies that haven’t begun the process of upgrading, figures like $40,000, $60,000 or $100,000 may result in sticker shock.Things may get ugly as the October 2023 deadline approaches. As it currently stands under the NIST self-attesting requirements, most com panies aren’t even posting their selfattested scores to the DoD’s website.
Tony Boogren, a project manager at Minnesota Tool & Die Works, says that by the time they fully upgrade their system to be CMMC compliant, they’ll have spent aboutThe$40,000.finalcost of a tech upgrade that can bring a manufacturer into compliance is affected greatly by how much of your tech is actually necessary for the work being done for the DoD contractor.
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“If you can make that a smaller area of your business — like it only lives on a certain application or lives on our software as a service platform or maybe a couple of computers — your scope is smaller and therefore the things you have to do are minimized. That’s where that dollar range comes in.”
Manufacturers can no longer afford to ignore cybersecurity. You either play ball or go home.
Working with General Dynamics, the nation’s fifth largest defense contractor, not only gave Tower Solutions a substantial boost in business but it also gave Norris a comprehensive glimpse into the evolv ing world of working with Department of Defense contractors, including the compli cated landscape of the CMMC.
Among the submitted questions: Given the fact that there are program CMMC details that are still in flux, should companies wait for the program to become finalized before moving forward with compliance measures?TheDoD’s response: “No, it’s not prudent to wait. NIST 800-171 has been in effect for a long time, and it’s better to be able to accurately report where your company is in terms of compli ance with it. Full adoption of NIST 800-171 should have begun long ago.” Norris is very well-versed in the world of Department of Defense con tracts. Several years ago, Tower Solu tions secured a $14.75 million contract with General Dynamics for 50 so-called “roll up” towers. The towers, installed along the U.S.-Mexico border, can be af fixed with surveillance cameras.
“It’s not something where you can snap your fingers and it’s done in a short amount of time,” says Norris. “If you haven’t gotten started, and if you want to do work with the federal government, you better get yourself pulled in. And they better do it sooner than later because it’s not an easy process. It doesn’t take a rocket scientist to know that China is creeping up on us. And they’ll do whatever they can to get our technology.”
Dave Hall at 3-D CNC, a Hutchinsonbased precision machining company, says the cost to get compliant is going to run about $60,000.
D Final Word
Developing and promoting talented employees helps workers and companies alike.
Manufacturers who learn how to identify and cultivate the talent already under their roof give themselves a tremendous advantage.
Lynn Shelton is vice president of marketing and organizational development.
espite uncertainty in many aspects of the economy — inflation, GDP growth, supply chains and energy costs, for example — one constant remains: Good employees are invaluable. And they aren’t just critical for the work they do now. They also constitute a vital pipeline for their employers, providing a reliable source of talent for increasingly high-skilled positions and top leadership posts within a company.
Michele’s belief — that when employees can see a path for growth within a com pany, they are likely to stay longer and work more productively — is a simple but critical insight for those concerned about the worker shortage. This vision of future opportunity is particularly important to share with those just entering the workforce because surveys show that younger work ers place great value on career growth and personalRecentfulfillment.datashows an increasing number of high school graduates forgoing immedi ate enrollment in college — with an overall decline since 2010 seeing a more dramatic drop in the last two years. That means there’s a promising pool of future employ ees and leaders ready to join Minnesota’s vibrant manufacturing sector.
Upward Mobility
Manufacturers who learn how to iden tify and cultivate the talent already under their roof give themselves a tremendous advantage by advancing employees with a fundamental understanding of their business and operations. At the same time, tapping existing talent builds employee loyalty and engagement, a critical component in the type of positive work environment all companies aim to create. That employee engagement piece comes up again and again. A Gallup Workplace Survey shows that just 36% of employees say they are engaged in their work. But those who are engaged are priceless. En gaged employees are more productive, will ing to recommend their employer to others, and satisfied with their personal lives. Com panies in the top 25% of engaged employ ees report 64% fewer safety incidents and 41% fewer quality defects, with 81% less absenteeism. These same companies report 23% greater Minnesotaprofitability.manufacturers have expressed concern for years about the worker shortage, and our most recent State of Manufacturing® survey showed that concern is as great as ever. Workforce is sues topped the list as the key contributor to capacity challenges facing respondents. Those surveyed also said they want their companies to be known for offering a great work environment, including the opportunity for career growth. Combine the desire to attract and retain top talent with the value of having broadly experienced employees take on greater roles, and it makes sense that companies want to identify and promote talented workers. While some of that employee growth happens organically, with work ers taking on additional responsibility and acquiring new skills over time, all companies can benefit from an employee development strategy.
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Recently, Michele Neale, one of Enterprise Minnesota’s top talent and leadership experts, presented “Developing Your Leaders from Within,” a workshop focused on the importance of leadership development at all levels. The program gave participants six steps for improving employee retention rates and offered plan ning insight for when highly experienced employees move on or retire.
Recent issues of this magazine have profiled countless companies with talented leaders who began their tenures at entrylevel positions and worked up. Take, for example, Micah Eveland, the CEO of Scamp Trailers in Backus, Minn. Eveland started his time at Scamp fielding phone calls as a customer service representative. He then worked as a warranty manager, in purchasing, and then as a plant manager before becoming CEO. At All-American Engineering & Manufacturing in White Bear Lake, Manny Efiong serves as president and Matt Braund as vice president. In 2017 the pair pur chased the company, which offers contract machining and manufacturing, after years of working there; Efiong started as a machine operator, and Braund was originally hired as a milling machinist lead. Their understand ing of the demands of the manufacturing floor helps them monitor industry trends with respect to employee needs, resulting in a low-turnover workforce that delivers customized products quickly and reliably.
www.EnterpriseMinnesota.org Join us for the 14th annual State of Manufacturing® survey release event. Open to all manufacturers and supporters of manufacturing. Register on our website. November 15, 2022 Minneapolis Marriott Northwest Each year, our national pollster interviews 500-plus manufacturing executives across the state to get their insights on key business opportunities and challenges including growth, workforce, supply chain, economic confidence, and more. This event is an outstanding opportunity for networking, refreshments, and industry insights. 2022 Platinum Sponsors ARCHITECTS ENGINEERS
Granite Partners is a private investment and holding company founded in 2002 in St. Cloud, Minnesota, with a mission to grow companies and create value for all stakeholders. As trusted partners, innovative leaders, and responsible stewards, we are committed to 100-year sustainability, and we aspire to world-class wellbeing for all people in and around the Granite community.
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