Ones to Watch
A look five companies with at least one element in common: They’re healthy and primed for success, thanks to pioneering products, services, and approaches.
Plastic Fantastic
BY FRANK JOSSI
Eagan-based CARDSource has found a profitable niche in the realm of plastic card manufacturing.
Study the contents of your own wallet or purse and you’ll see plenty of evidence that loyalty, credit, and membership cards have become a big industry.
You’re hardly alone — the world is awash in plastic cards. More than 4.7 billion of them were manufactured in 2005, according to the Princeton Junction, N.J.-based International Card Manufacturers Association. And the growing number of cards is good news for Eagan-based CARDSource, which provides loyalty, private label, membership, travel tag, and organization cards for Northwest Airlines, cruise ships, big box office stores, associations, and dozens of other clients. In fact, CARDSource has been growing faster than the credit card industry itself — no small feat.
Security Matters
Tom Murphy, CARDSource’s CEO, says the company employs 75 people and grows an average of 15 percent per year, higher than the overall plastic industry’s 11 percent growth pace. Fueling the increase has been an enormous appetite on the part of companies and consumers to deploy affinity and gift membership cards to create loyalty and more importantly, push higher sales.
The plastic card industry has two major tiers. “Secure” card manufacturers work for Visa, Mastercard, and other financial transaction players, while “nonsecure” firms provide phone, gift, association, and coupon-style cards not requiring a high level of auditing or security, Murphy explains. “We play in the middle ground, where risk of failure is high and [customers are] looking for quality but don’t need the security and auditing that go along with the high security,” he explains. “We have the kind of services and competencies that a Visa/Mastercard supplier would have and the kind of a manufacturing competency that large-volume phone card, gift card players have.”
Problems occur with nonsecure plastic cards when customers of a client receive inaccurate reward cards. “Huge dollar volumes” can be lost if such miscalculations occur on a more global basis involving hundreds or thousands of clients—not to mention the loss of customer goodwill, says Murphy.
CARDSource meets the needs of clients by focusing on “relevant marketing” that uses customer buying patterns to determine future offers. It’s a step forward from personalization — the kind of direct mail that uses a client’s name on correspondence to make a “personal” offer — to a more directed pitch based on what the client has purchased in the past.
“Companies don’t want to reward you for buying a product, they want to incent you to buy more, to spend more dollars with them,” explains Murphy. “It’s not just rewards, it’s directing people. And in order to do that, you have to make offers that are relevant to them, not just personalized to them.”
The next step for CARDSource may be to help clients craft “relevant” offers, he believes. To that end, he’s been working with MTI on its Eureka! Winning Ways® program, which is designed to generate new business growth ideas, and turn the ideas into revenue streams. Eureka Ranch has been assisting CARDSource in providing more services by employing clients’ data in different ways. More new service-style offerings and data crunching capabilities should help increase sales for the company in the future, says Murphy.
Murphy bought CARDSource in 1989 from his father, Lawrence, who operated it as print brokerage connecting clients with printers. Though doing print deals was a good business, Tom figured added-value services such as printing would produce a stronger, more sustainable business. In the mid-1990s he bought printing presses and opened a plant in Bloomington, later moving to larger operations in Eagan.
Today, CARDSource has more than a dozen machines. Some simply print plastic cards, while others glue loyalty cards to preprinted letters and cards, automatically folding pieces and placing them in envelopes. It’s the work of junk mail or highly targeted commerce, depending on your opinion.
Cards may someday have silicon chips and RFID tags, says Murphy. A concentration on relevant marketing and openness to testing new technologies will be keys to future success. “I think we can grow faster than we have been,” he says. “There are still lots of opportunities.”
HVAC DIY
BY TODD NELSON
Pat O'Brien's decision not to outsource overseas has paid rich dividends for his company.
Poor service and delivery delays drove Pat O’Brien crazy. Then they drove him to action.
O’Brien initially went into business in 1994 as a manufacturer’s representative, buying and selling heating, ventilation, and air condition (HVAC) parts that other companies made. But all too often, he says, those manufacturers failed to keep their promises, faxing word of a two-week delay the day before a promised shipment was due. “You can only take so much of that,” says O’Brien. “I finally woke up one day and said, ‘I’m going to manufacture the products myself.’”
That was the easy part. The challenge was that he was looking to get into manufacturing at a time when a lot of other domestic companies were getting out or going offshore.
Thirteen years later, however, O’Brien’s company, Maple Grove-based CDI, is still around, in fine shape, and in the midst of a growth spurt. In fact, it’s a classic entrepreneurial success story.
Laying the Groundwork
After his decision to jump into manufacturing, O’Brien spent a year or so talking to mechanical contractors about their needs before settling on his front-line product: rooftop curb adapters that retrofit new HVAC units to existing curb ductwork. Using a curb adapter is an alternative to having a roofer cut away the old curb and change the ductwork, which can void roof warranties and disrupt workflow in the offices below the new HVAC installation.
The early days were a challenge. “I would go out and sell during the day and come back and build what I sold at night,” O’Brien says, adding that friends and family members sometimes pitched in. “For the first five years I really struggled to make it work. Some days I was pulling all-nighters and barely making any money. But I was young and I didn’t have any responsibilities as far as a family, so I could afford to do what I was doing.”
Persistence and a new approach helped his company grow, O’Brien adds. Typically, parts manufacturers did business with just one of the large HVAC equipment manufacturers, often working with their representatives throughout the country. O’Brien, lacking a big travel budget, instead approached representatives from all the different equipment manufacturers in a given area. When they told him no, he kept going back until they would work with him. After he made headway in the Minneapolis area in 1998, O’Brien expanded to Des Moines and Kansas City. As CDI’s reputation grew, it expanded further, gaining market share in Chicago, Milwaukee, Indianapolis, and Louisville, Ky.
A few key technology investments have helped fuel the company’s growth. O’Brien says that the firm’s Web site, www.cdicurbs.com, has played a major role. The site allows customers to go online to get quotes, place and track orders, and check order status. Employees also use the online system to pay bills, compile sales reports, and track sales. “It ended up being one of the greatest selling tools in our industry,” says O’Brien, who hired a friend he had known since high school to run the online system. “If people could build their own quotes online instead of calling me, I could do twice as many quotes. I did it solely for the purposes of saving us time and people, but it ended up being a tremendous sales tool as well.”
At the same time, the hand-operated tools that O’Brien started with have given way to computer-controlled press brakes, folding machines, and plasma cutters. “We’re now in the process of buying a machine that would almost fully automate what we do,” he says. “You go from coiled on one end to the finished product on the other. The technological changes that we’ve made have been dramatic.”
So has the company’s progress. Revenues have grown 40 percent per year each of the last five years. In April 2005, the operation moved into a new, 32,000-square-foot headquarters facility. Last summer, it opened satellite distribution sites in Los Angeles, Pittsburgh, and Jacksonville, Fla., allowing it to more efficiently move product. And the company now has 75 employees, with plans to ramp to 130 or 140 by 2010.
And as for foreign competition, O’Brien keeps a watchful eye, but he’s confident of his firm’s standing. CDI’s product is well regarded in the industry, and the new distribution centers allow the company to respond quickly to customer needs. “Our customer service and our speed, you can’t get that from a manufacturer in China,” he says.
World Class
BY DAN HEILMAN
Magnum Machining is based in tiny Deerwood (pop. 569), but its influence and operations span the globe.
If the business world is truly turning into a global marketplace, Deerwood-based Magnum Machining Inc. certainly seems to have a secure place in that realm.
Magnum has remained successful by anticipating trends and making the right moves at the right time. Using computer-aided design (CAD/CAM), the 13-year-old company specializes in CNC (Computer Numeric Controlled) component assembly manufacture for a number of different industries, including industrial, defense, medical, and automotive.
Magnum can design and manufacture custom tooling and featuring on site. Beyond manufacturing, it also has the resources to design, engineer, manufacture and assemble precision products, custom and production-machined parts, and component assemblies.
That flexibility has established it as a strong presence among Minnesota machining companies, but also as an international player. The company established a 65,000-squarefoot manufacturing facility in Torreon, Coahuila, Mexico, in 2003, giving it a global reach that promises continued growth.
“As our customers have become more global, Magnum has been able to go that same route,” says company Vice President Kevin Cook. “We’ve become more of a global supplier. I would attribute a lot of our growth to that.”
Opportunity Knocks
The company’s roots reach back to a business that founder and CEO Jerry Bowman shared with his brother, Bill Bowman. Jerry left Rochester-based Bowman Tool in 1994 to start his own firm. Magnum was originally based in Rochester as well, and after a few years in business, it opened a second, 55,000-square-foot plant in Deerwood, in Central Minnesota.
“He saw a vacancy in the industry,” Cook says of Jerry Bowman. “Bowman Tool was also doing machining of castiron products as we are, but Jerry saw an opportunity to provide machining to other areas of the cast industry.”
Once the Deerwood facility gained strength, Magnum consolidated its resources by closing its Rochester plant and concentrating its efforts in its new location in 2001. Within a few years, production had begun at Maquinaria Magnum in Mexico. Between the two plants, Magnum now employs about 140 people. “The strategy behind the Mexico facility was based on customer requests,” Cook explains. “We do a lot of work for John Deere, and when they opened up an engine factory down there, they went to many of their top suppliers and presented them with the opportunity to open a facility in Mexico and do their machining down there.”
The Mexican presence has opened up opportunities for Magnum to work with other client on an international basis. It leases manufacturing space in Shanghai on behalf of the Fisher division of Emerson Process Management, and in Saran, France, for John Deere. Magnum also uses facilities in Texas, Iowa, and Kansas on behalf of its other clients. Cook says the ability to set up shop and provide good products in any location is valuable when finding and keeping customers.
“Our customers have a lot of metrics they use to measure the effectiveness of the companies that work with them,” he says. “Those include the quality of the supplies and the timeliness and cost-effectiveness of the deliveries. We do a lot of things internally to make sure we meet our customers’ goals.”
That quality has translated directly to Magnum’s bottom line. Magnum boasted $18 million in sales in 2005, the first year that reflected production in Mexico. By the following year, revenues had risen to $22 million, followed by $25 million in 2007. The company’s goal for 2008 is $40 million in revenues.
As for future goals, Magnum would like to expand its facility in Mexico, and has added to its sales and marketing teams as a way to lay the groundwork for the acquisition of new clients and markets.
“Even though we’re doing a lot of work for different divisions of John Deere and Fisher, we’d like to diversify,” says Cook. “The precedent of recent years points toward aggressive growth. We have the technology in place to help make that happen.”
Clear Skies Ahead
BY FRANK JOSSI
Owatonna-based Viracon is weathering the ever-shifting dynamics of the construction market in fine style.
Last May, Owatonna-based Viracon got some big, if not necessarily surprising news: The architectural glass fabrication company had been selected as part of the team that will build the Freedom Tower, a 1,776-foot skyscraper planned as the first of four office buildings on the World Trade Center site.
Curtain wall contractor Benson Industries of Portland, Ore., chose Viracon to supply glass for the project, which celebrates the Declaration of Independence. “On large, complicated buildings, we have large market share—65 percent or higher,” says Viracon president Don Pyatt. “We fully expected to get the Freedom Tower job.”
He’s not bluffing. Look around the Twin Cities and you will see plenty of glass fabricated by Viracon in buildings such as the new Minneapolis Public Library, the Xcel Energy Center, the Guthrie Theater, and the glassy Reflections condominium project in Bloomington. All told, the company’s products have been installed in more than 100,000 buildings over the past 30 years— a half a billion square feet of glass in total.
Despite the decline in the condo real estate market, Viracon has been “operating essentially at capacity for the past 18 months” and there’s no indication of a letdown anytime soon, says Pyatt.
To meet the demand, the company recently opened a new $35 million fabrication plant in St. George, Utah, that will serve its customers in the west, among them the developers of the huge new CityCenter in Las Vegas. The company also has a large plant in Statesboro, Ga., a location chosen in part due to its proximity to the Port of Savannah and a plentiful labor supply.
The expansions were driven partly by the desire to be closer to booming markets and to find a more plentiful workforce than what Owatonna can provide, Pyatt concedes. The newer plants also provide a more streamlined assembly than the firm’s older Owatonna plant.
Viracon is owned by Minneapolis-based Apogee Enterprises, a publicly traded company with revenues of $778.8 million in 2007, an 11.8 percent sales growth over the prior year. Part of that increase can be attributed to improved technology, allowing for larger glass windows without great heat loss in winter and without heat-baking light in summer. As architects design with greater natural light in mind, Viracon can supply their projects windows of astonishing shapes and sizes.
It is not, however, a glass manufacturer. The company buys glass from suppliers and then adds high-performance coatings that manage light and the elements. After fabricating three pieces of glass together and applying appropriate coatings, tints, lamination, and other coverings, the company ships off the windows, which weigh between 500 lbs. and 2,000 lbs., to curtain wall contracting firms that handle the final step of installation.
When architects get creative, Viracon answers the challenge with artistic coatings such as those found in silkscreen patterns representing the seasons of Minnesota on the Minneapolis Library’s windows. “The more valued-added activities that go into a unit, the more likely it is that Viracon will be the supplier,” says Pyatt.
Despite a continually strong business, Viracon faces new competition from China. The number of Asian projects the company participates has declined as Chinese glass fabrication firms have gained market share. Those same firms have begun seeking work in the western United States, especially ones requiring many windows of the same size and shape, he says.
Still, with factories humming at full capacity, Pyatt doesn’t stay up at night worrying about competitors. Rather, he has greater concerns with attracting new and good talent to Owatonna and the other plants, not the easiest of chores in the small towns where Viracon operates. The company received a State of Minnesota Human Rights Award in October in part due to its recruitment and training of Latinos and African immigrants. “Part of what’s happened here is that we have a commitment to Owatonna that included a much more diverse workforce than we’ve had in the past,” he says. “Now we’re anxious to get our new and more diverse employees into the supervisor ranks.”
Forging a New Path
BY TODD NELSON
Effort, ingenuity, and a hands-off management approach have helped Dotson Iron Castings thrive in a challenging industry.
For a 131-year-old company, Dotson Iron Castings has a forward- looking vision: becoming the world’s most automated foundry. Such a lofty goal helps inspire the Mankato-based company and its 130 employees, CEO Dennis Dotson says, even if it might prove impossible to achieve in a literal sense. “We know we’re not the world’s most automated foundry,” he notes. “But if we were, what would we look like? How would we respond to customers? What would our lab facilities look like? It gets our people thinking out more on the edge. There’s a lot that a 131-year-old company can learn.”
In pursuing its high-minded aim, Dotson has invested heavily in new equipment — some new to North America — and developed an educated and productive workforce that works with management to shape operations. The efforts have produced bottom-line results and industry recognition.
Foundry of the Year
Dotson Iron Castings is one of 400 to 500 iron foundries still in business nationally. That’s down from 2,000 when Dotson started with the company in 1973, a drop from 6,000 operating when his father joined in 1943, and 20,000 when his grandfather arrived at Dotson in 1923. While the tonnage of metal that gets melted in this country likely has not dropped as sharply, much of the production has gone offshore, forcing U.S. firms to streamline their operations and find new innovations.
Dotson appears to have found the right formula. In addition to pouring tons of iron castings each month, the company also provides such services as machining, heat treatment, painting and coating, assembly, and inventory management. And last year, it was named Foundry of the Year by the American Foundry Society’s Modern Casting magazine. The publication cited the effort, ingenuity, and investment behind Dotson’s continuing automation push. That’s not all, however.
The company’s annual revenues have climbed steadily to the $30 million level in both 2006 and 2007, after stalling in the “rust bowl” years of the 1990s, Dotson says. And more projects have been rolling in — the high-profile award helped the company pick up 90 percent of the work from an Illinois foundry that closed earlier this year. The company gained 28 new customers in the process.
What’s more, an innovative workforce program — called $10,000 Projects — is helping those projects run smoothly.Now in its 10th year, the program keeps employees engaged by including them in purchase decisions for equipment that costs more than $10,000. The company has under taken 116 such projects and has others under consideration on a continuing basis, Dotson says.
Some of those purchases have included equipment from Sintokogio Ltd., a Japanesefirmwhich is the world’s largest foundry equipment maker. Dotson and Sintokogio have developed a tight relationship, and the Japanese manufacturer provides Dotson with the engineering expertise to help review equipment options, Dotson says, adding that his company was comfortable buying equipment from the manufacturer before anyone else in North America was using it.“We are their North American showplace, ”Dotson says.“We have opened up our plant to any other companies that want to come in and look at it.”
More than 100 competitors have visited the company to do just that; for those that can’t, Dotson will turn on Web cams to show off the equipment remotely. Dotson, in turn, gets return visiting privileges to see how other companies operate and have solved problems. The company also sends employees — from its top engineer to shop-floor workers — off to Sintokogio’s manufacturing plant to evaluate possible purchases. The company also is working with other partners to provide value-added services to its customers, including machining and painting parts, Dotson says.
Hands Off
Dotson traces the company’s growth to circumstances that converged a dozen years ago. While the company had assembled a strong management team, Dotson, who has served as CEO since 1978, was still “pretty much the prime mover of everything.” He wanted to give the managers more room to operate, and eagerly accepted an opportunity to join the board of trustees of the Minnesota State Colleges and Universities system (MnSCU) and spent two or three days a week at MnSCU meetings in St. Paul for the next six years. “It was an exciting challenge for me,” he says. “But more importantly, it was an absolutely great time for me to get away from the company. As it turns out, it was one of those brilliant moves. When you get away from talented people, great things happen.Today, even though we’re a small company, I cannot go out in the plant without seeing something I didn’t know was taking place, and that’s one of my greatest pleasures.”