American Anomaly
In a market where nearly all manufacturing has been shipped overseas, flexible printed circuit manufacturer All Flex Inc. is seeing sales skyrocket.
All Flex Inc. President Greg Closser
While America's printed circuit industry has been ravaged by cheap-labor Asian competition, and all of manufacturing had to contend with three recession wracked years, Northfield-based All Flex has posted two record sales years in the past three - and its president thinks the
company might just double its $19 million sales over the next five.
To understand why, you need to dig no deeper than a quick transaction that recently took place between All Flex president Greg Closser and an engineer at Sandia National Laboratories, the major research laboratories behind the non-nuclear components of America's nuclear
weapons, based in Albuquerque. Sandia needed a flexible circuit prototype, just 10 parts.
"No problem," Closser said. The engineer sent the necessary files by noon the next day. Closser delivered a quote by 2 p.m. and the engineer sent a purchase order by the end of the day. Within 10 days, All Flex delivered the product.
The simplicity and small quantities of this transaction belie the fact that it - and hundreds like it every year - represents the very essence of All Flex's value proposition.
All Flex manufactures flexible printed circuits, the kind seen in almost any electronic device. But the value of its niche can be seen in three components. First, it focuses on industrial applications, primarily in the medical device or military aerospace industries. Asian
companies have swallowed up 85 percent of what was once a mighty American industry that provided flex circuits for consumer electronics, phones, and computers - large, high run productions that can exploit the economies of cheap labor. All Flex doesn't even bother competing.
Instead, it sticks to low-volume, highly customized projects.
Second, many of its customers disdain off-shore suppliers in the face of genuine worries about protecting their intellectual property. For its defense-related customers, these concerns are multiplied.
And third, All Flex offers hands-on design and engineering support for both prototypes and manufacturing that gives them entre to the much-desired collaborators in the supply chain. "Our customers are not really sophisticated users of flex," Closser says. "They are
looking for expertise."
"It is an extraordinary collaborative process," says Art Monaghan, a partner at Granite Equity Partners, the investment firm that recently purchased All Flex. "And that collaboration creates value, both in terms of being recognized as a leader who has competency, but it
also further develops those relationships through the whole process of developing the product. Once [All Flex] gets a customer, it generally has that customer for life."
All Flex manufactured 460 new flex parts in 2010, according to Closser. Of that number, he says, about half are "one-and-dones," one-time builds that are usually engineering samples or prototypes. The margins are good enough that All Flex makes money on even the smallest
orders, but its leaders keep their eyes on the five to seven projects each year that become big money.
Two years ago, for example, a company called All Flex to see if it could provide a design solution to a recurring problem with a China-based flex manufacturer. It did. And after being introduced to the customer's customer, ended up with a $3 million customer.
"You never know which one is going to take off," Closser says.
And when All Flex does secure a customer, that customer tends to stick around. "Once you are sourced on a business, it is yours to lose," Closser says.
"Once you are tooled on a program, you really have to screw up to lose it. If they don't have any problems - or if they do, and you solve it in a rapid and efficient way - then . . . you have a customer for life."
Market niche from the beginning
Anne Lundstrom founded All Flex in 1991. A Maine native and New Hampshire College graduate, she initially worked for Nashua Flex Circuits, and then moved to Minnesota when the company was sold to Sheldahl. For a year, she sold flex circuits for a small prototype shop in
Rochester. But when that company went bankrupt, she went out on her own.
Despite an economic recession, she and a partner tapped their savings, secured a startup loan from the Southeast Minnesota Initiative Fund, and set All Flex afloat.
From the beginning, Lundstrom focused on low volume, simple circuits - single and double-sided - for companies that would not be attracted to the major players. "Everyone was into consumer computers and phones," she says. Her vision was to serve industrial customers who
needed low volume prototype engineering and companies that were too small for the Asian market.
She initially occupied one of three bays in a 9,000- square-foot building that All Flex still calls its headquarters. "As we kept growing, we kept acquiring more space. The second bay, we took over, then the third. He was a good landlord, built on as we needed."
Lundstrom says industrial customers sometimes asked for unusual things, often in lower quantities. Most of them were not regular flex circuit users. "A lot of times they'd come to us and say, this is my first flex circuit. I really, really need help. We were able to give
them that upfront design and engineering help that a circuit would work for them," she says.
The early years, she says, were "very lean and mean." Lundstrom initially did all the accounting, marketing and sales herself. "I looked at the P&L every day," she says. "We were careful not to take on too much expense, because that is what usually kills a small
company."
A novel journey
Like any good novel, Lundstrom's entrepreneurial saga is marked by a series of plot-point moments, in which unforeseen circumstances or opportunities come together to change the direction of the story, sometimes in surprising ways.
Plot Point #1 evolved in 1998. Added Value Technology, a Bloomington-based production facility that applied gold plating and solder to finish All Flex products, decided to go out of business. While it accounts for only 2 percent of the process, the finish work was too
expensive and specialized to bring in house. The nearest facilities that could do the work were in either California or elsewhere on the West Coast.
Lundstrom decided to keep the Bloomington facility going by buying it herself.
What's more, the facility has enabled All Flex to expand in Bloomington. Today about half of All Flex's 120 employees work in Bloomington. All Flex manufactures all panel processing in Northfield and all finishing is done in Bloomington, with a vehicle transporting parts back
and forth about four times each day.
Plot Point #2 emerged in 2005 when Greg Closser stopped in at All Flex to see if Lundstrom might have a 55 gallon plastic barrel he could use for an excavation project. Lundstrom knew Closser from his 24-year career at once mighty Sheldahl, Northfield's other, much larger flex
circuit manufacturer. Closser joined Sheldahl in 1978 as a quality engineer and had helped to guide the company's impressive rise in the industry. At its peak in the mid-'90s, Sheldahl had employed 1,200 people and enjoyed annual revenues north of $120 million. But after a series of
business setbacks, the company floundered badly. It filed for Chapter 11 bankruptcy in May 2002, and months later sold to private investors, who downsized management. Closser, at the time vice president of the company's circuit business, was not in their plans.
He founded another company, doing excavating work.
But as they traded small talk, Lundstrom was not thinking about 55 gallon plastic barrels. She was thinking about serendipity. At that very moment she was in the process of trying to recruit a new a sales manager - and she knew the next generation of managers at All Flex would
have to bring even greater market experience and customer savvy to All Flex in order for it to grow.
She knew immediately that Closser was the right person. "He understood manufacturing is customer savvy, and very employee oriented," she says. Lundstrom got Closser's barrel, but when he arrived home, he received something far better. Lundstrom phoned that night and offered
him the job.
"Sometimes is really is as simple as finding the right person at the right time," Lundstrom remembers.
Not long thereafter, she met Kai Warnock, who had been a plant manager at Innovex. She knew immediately she had her operations guy.
The strong managerial upgrades showed immediate results. In two years their combined expertise led to a 40 percent increase in sales and that pace promised to continue.
Closser and his colleagues built on Lundstrom's customer-centered focus, but built in better manufacturing efficiencies.
"Cycle times were atrocious," Warnock remembers. "It was very unscientific. We tried to establish predictability in the process."
As a result, the company shortened quote times to 24 hours. Products would be launched within two weeks.
Which introduced Lundstrom to Plot Point #3. During the company's annual planning meeting in 2006, which was facilitated by a consultant, company leaders attacked the obvious questions: How are we going to grow? What do we have to do to get there? How will we find experienced,
qualified people?
Lundstrom walked away from that meeting with an epiphany: in all likelihood, she was no longer the right person to lead the company. "I was an entrepreneur. I'm not a high-level manager," she says now. "I came out of that meeting thinking, I don't think I want to do that.
I'm in my 50s. I don't want to have to get an MBA. I don't want to do too much strategic planning. I want to start things."
So Lundstrom started looking for a buyer. "I wasn't worried that someone would buy us and move away. The strength of the company was the factory and what we did. I wanted someone who would value the employees, had a progressive outlook, who understood that you had to market,
and sell, and you had to service the customer."
She found those characteristics in Tonka Bay Equity Partners, which purchased the company in 2007 and kept the management team in place, elevating Closser to CEO. "They valued who was there. They wanted to own it, let the people run [it], and they were quite open that they
would sell it when they had a chance."
A new regime
In December, Tonka Bay Equity Partners' chance arrived, and they sold the company to St. Cloud-based Granite Equity Partners.
Granite Equity had a small stake alongside Tonka Bay in the 2007 investment, and now feels that All Flex resides in their sweet spot of investments.
"All Flex is really good at the complex inter-connect of electronics. They help to create these flexible circuits that allow complex electronics to be able to communicate back and forth. The world is becoming more and more digital and flexible electronics will be a big part
of that," Monaghan says.
"We really like where they've come from 2007 to today," he adds. "They have great exposure in the health care and medical device area, as well aerospace and military - and they are really able to focus on getting customers who value what they're good at."
The next significant part of the company's strategy, Monaghan says, will be to help identify the company's next generation of managers, as each of the current staff is 50 or older.
"It's both a risk and an opportunity for the company," Monaghan says. "The key leaders of the company today - the executive team -aren't going to be working for the next 20 years. So we're working through with each of their timelines to make sure that we have their
replacements. Succession planning is a big part of keeping this company on the successful track that it's on."
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