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Minding Your Business
Small Manufacturers Find Bright Spots in Tough Economy
Despite economy, small firms staying nimble, responsive to gain customers, expand businesses
By Ann Meyer
Special to the Chicago Tribune
September 15, 2008
Cari Murray and Doug Kremer have heard it time and again: “Manufacturing is dead in this country. Aren’t you freaking out?”
It’s just the opposite. Murray, who owns sheet-metal fabricator Mellish & Murray, and her husband, Kremer, who co-owns components-maker LaVezzi Precision with cousin Albert LaVezzi, are seeing growing demand for their manufacturing services despite the down economy.
“Our business is thriving,” Murray said. “We’re able to make it happen because we’re nimble, conscientious about labor and have invested a tremendous amount in capital equipment.”
The Chicago area generates two-thirds of the state’s $72 billion in manufacturing output and supports nearly 1 million manufacturing jobs, with more on the way, said Pam McDonough, chief executive and president of the Alliance for Illinois Manufacturing.
While a sluggish economy and high energy prices are conspiring to constrain growth in a number of industries, many of Chicago’s small and midsize family-owned manufacturers are in an expansion mode that’s counterintuitive.
“Trends aren’t tracking what presumptions are,” McDonough said.
The combination of a weak U.S. dollar, sinking labor costs and the steep cost of fuel are tilting the equation in favor of local manufacturers. When quality issues about overseas production are factored in, companies like Mellish & Murray and LaVezzi Precision are well-positioned for growth.
Glendale Heights-based LaVezzi Precision, which is celebrating its 100th anniversary this year, for decades produced components for the motion picture industry. When that industry was threatened by the growth of home videos, the company began moving into the medical-parts market, producing bone screws, dental implants and ventricular-assist devices.
It was a smart move. Sales have been climbing for the past five years, to about $12 million annually, up from $5 million in 2002. The company spent $1.9 million on new equipment in the past year and is on track to spend another $1 million in the year ahead, Kremer said.
Investments paying off
Meantime, Chicago-based Mellish & Murray also has invested more than $1 million in new technology and equipment to boost productivity. It brought in a team from the University of Illinois at Chicago’s Industrial Assessment Center to look at the plant’s energy usage and make recommendations for increased efficiency. By installing new lighting and locking in a two-year contract for electricity with a new provider, Mellish & Murray cut its electricity costs by about 30 percent.
This summer, LaVezzi spent $60,000 on new lighting and replaced air compressors at a cost of $72,000. The improvements should save $30,000 a year.
“New technology and productivity continue to make big cost reductions,” said Ralph Keller, president of the Alliance for Manufacturing Excellence. “That’s why the small manufacturers are doing well. They’re close to the customer. They’re nimble and flexible, and they can configure things to order for customers, where the manufacturers overseas are not.”
With the growth has come new jobs. Mellish & Murray has increased its head count by 10 percent in the past few years, to about 50, even while adding new equipment that reduces the amount of labor required, Murray said.
The company’s growth stems from diversification into new, value-added products and services. The 114-year-old sheet-metal fabricator offers full-product manufacturing of metal cabinetry for schools, hospitals and other institutions, from fabrication to painting, assembly and drop-shipping, Murray said.
“We’re a one-stop shop,” she said.
The company is competing head-on with contract manufacturers in China. But without long-distance shipping, Mellish & Murray can offer a shorter cycle time, and customers can carry less inventory.
“We’ve had a tremendous amount of bidding activity for people who might have gone overseas and are re-evaluating that,” Murray said.
The company began diversifying in 1985, when W.W. Grainger decided to manufacture its own products, pulling its account from Mellish & Murray. Besides scouting for new metal-fabrication customers, Mellish & Murray purchased a manufacturer of strobe lights and launched a new division, Aeroflash Signal. It makes the lighting for general aviation aircraft and school buses.
Diversifying business
About the same time, Murray’s husband was diversifying his family-owned business. Recognizing that the motion picture industry was going through major changes, LaVezzi Precision began targeting medical-equipment customers looking for quality components close to home. After a few lean years, sales picked up, generated by repeat business as well as increased marketing and word of mouth.
LaVezzi’s workforce totals 75, up from 50 five years ago, and it is recruiting for five machinists, Kremer said.
Ideally, the company looks for workers with a minimum of five years experience, but increasingly it has been supplementing less experience with training, Kremer said. It also has an employee-referral program, offering workers $1,000 if they bring in a qualified employee for a highly skilled job.
Wages are competitive, with machinists’ jobs typically paying $70,000 to $100,000, Kremer said. Yet the candidate pool is slim because of a misperception that manufacturing is dead.
“We want to expand our customer base but we are pretty much at maximum capacity,” he said. “We can’t grow without good help.”
Copyright © 2008, Chicago Tribune
