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Back from the brink

Manufacturing:
Back from the brink

One supposedly cannot teach an old dog new tricks. But getting a more than 100-year-old manufacturing firm to roll over and do something besides play dead was precisely the challenge third-generation factory owner Kent Fellows faced a while back.
Three years ago, while most of the manufacturing sector was booming, the M.D. Knowlton Co. in Victor–primarily a maker of industrial lifts–was looking at sinking sales, a receding customer base and an arguably glum future.
Fellows had to consider the possibility that the firm his great-grandfather had founded in 1898 might not survive much into its second century. Its main product, he thought, was outmoded, and the money simply was not there to bring the 19th century manufacturing enterprise into the new millennium.
As it turned out, neither money nor technology would be the company’s salvation. It financed a new lease on life using only existing cash flow, a few simple changes in methodology and some modest equipment purchases.
But more central to M.D. Knowlton’s turnaround, says consultant James Benz , president of Pittsford-based Enterprise Solutions Inc., were more focused efforts to sell itself, to communicate with customers and to improve internal communication.
M.D. Knowlton is typical of several older manufacturers built on an inventor’s entrepreneurial bent that are facing the same dilemmas as markets and technology change. And the steps the company took to turn itself around are based on basic business principles that can be applied across industries.
M.D. Knowlton is “not out of the woods yet,” Fellows concedes. Still, the company now knows where it is going and, he believes, is looking at a bright future.
The changes that took it from a tailspin to a growth mode were more a matter of attitude and learning to ask the right questions than technology, Benz says. Essentially, Fellows was only guessing at the reasons for the firm’s sales slump. Happily, his best guess was entirely off base.
“We thought the product was outmoded,” Fellows says of the assumptions. “But it turns out people loved it. They just thought we’d gone out of business.”
To be sure, there were savings to be wrung from increased efficiency. Over the past three years, the firm has taken steps such as putting in cells, improving work flow and cutting inventory.
But Benz says more waste traced to lack of communication among staff than to poor factory organization or outmoded machinery.
Though the company was tiny, Fellows says, “people weren’t talking to each other.”
The firm has fewer than 50 employees, but it had been acting like a vertically organized corporate giant, with communication between sales and engineering, for example, only going through structured channels, he says. This often meant that costs of promised specifications or performance parameters were not adequately accounted for.
At the same time, Benz says, management was not communicating with front-line staff. So while workers had some vague unease and suffered from poor morale as M.D. Knowlton’s fortunes declined, they had virtually no understanding of how challenged it was in the marketplace.
As long as the company was doing well, such problems went unnoticed. But when it hit a few bumps, their effect was magnified.
As it turned out, fixes were relatively simple. And, notes Benz, once the firm’s real problems were clearly delineated, Fellows and his second-in-command–John Sheldon, vice president of finance–were extremely quick to respond.
M.D. Knowlton’s problems in the mid-1990s mostly stemmed from a near fatal mistake it made in 1991–taking a contract to supply specialized lifts to the U.S. Postal Service, an order that Fellows at the time thought would catapult the firm to a higher level.
Instead, Fellows found himself in a nightmarish chain of misunderstandings that ended with the company losing money and, only by the grace of an arbitrator’s ruling, managing not to get stuck with a judgment for non-performance.
The postal contract happened to coincide with a business-cycle slowdown, which further weakened the already hurting company. Where up to 1991 it had employed 65 workers laboring on two shifts, it cut back to half the work force and went to a single shift.
Fellows himself accepts some of the blame for the postal fiasco. He was not used to dealing with government contracts, and probably should have hired an expert to help steer the firm through the process. But also hindering the firm’s ability to perform was the Postal Service’s decision to use the product in ways other than those laid out in the original specs.
On a deeper level, he says, M.D. Knowlton’s difficulties were a legacy of the 19th century organizational style inherited from founder Michael Dean Knowlton, and passed on mostly unexamined through three generations.
On the other hand, its strength–a level of craftsmanship that had one customer calling the firm’s lifts “bulletproof and unbreakable”–also was the legacy of Knowlton’s can-do inventiveness and old-fashioned work ethic.
An inventor and entrepreneur who designed and patented a number of machines for turning out rigid paper boxes and a “frictionless” ball bearing, Knowlton first went into business in Chicago. After being one of the first to rebuild in the wake of Chicago’s Great Fire, he moved the business to Rochester in the 1890s and incorporated as M.D. Knowlton in 1900.
The company today consists of three divisions–M.D. Knowlton itself, which still supplies box-making equipment and machines that fashion spiral cardboard tubes such as the cores for paper-towel rolls; the Auburn Ball Bearing division; and the Langley Division, which makes industrial lifts.
Fellows’ great-grandfather started the bearing business first with his own patented bearings and added to it with the purchase and move to Rochester of the Auburn Bearing Co. in 1901. Knowlton passed the business on to his son, Fellows’ grandfather. Col. Frederick Knowlton in turn passed it on to his daughters, Fellows’ mother and aunt, who hired an outside manager to run the business. The firm moved to Victor in 1969, when it bought the Langley lift company.
The lift business today accounts for roughly 70 percent of M.D. Knowlton’s sales. Auburn Ball Bearing, selling mostly to distributors who supply replacement parts for OEM equipment, brings in some 20 percent of the company’s business. The original box-making-equipment business, Fellows says, is steadily waning as rigid paper boxes see less and less use.
Fellows worked for the family firm off and on, but was well into adulthood when he took over as president in 1980. Until the postal-contract debacle, he saw little reason to change much in the modest but long-established M.D. Knowlton operation. In the ill-fated contract’s aftermath, he saw plenty of reason to change, but was unsure of how to go about it.
Benz was the second consultant Fellows called in. The first, he says, “did not work out.”
When he arrived on the scene, Benz says, he found a demoralized work force and a company that, in the wake of a major defeat, had rightly decided to cut expenses, but had gone about it wrong. The company cut its advertising and marketing budget.
Because the firm rarely sells directly to OEMs, but instead sells to dealers–who in turn sell to end users–this seemed like a logical course. M.D. Knowlton’s own sales personnel are “technical,” he says. They do not push products to dealers or end users, but work with dealers to identify the right product for a job and see that machines supplied fit specs.
Cutting marketing, however, was exactly the wrong move, Benz says. Dealers had no incentive to push M.D. Knowlton’s lifts, and end users thought the company had dropped off the face of the earth.
The firm at this point was financially challenged and could ill afford an expensive advertising and marketing push. Even trips to call directly on dealers and OEMs were too pricey. So Benz put together a telephone survey to find out what customers actually thought.
The results were dramatic, he says.
Fellows thought he was looking at expensive redesign or product development, but the customers said they loved the machines. Most said they would buy another Langley lift in a minute. The only thing stopping them, Benz says, was the mistaken impression that the hoary M.D. Knowlton had faded from the scene.
At the same time, Fellows and Sheldon frankly laid out the firm’s straits at companywide meetings and explained to workers how it had gotten into them.
Also discussed were ways in which engineering, sales and management could work more cooperatively to share information, so that design problems could be headed off earlier and extra costs incorporated into quotes instead of added post-delivery, at M.D. Knowlton’s expense.
Once orders started to pick up, Fellows and Sheldon started making strategic sales calls to key dealers, and did serious soul-searching to winnow their dealer lists to only the most productive. They also brought in new engineering talent, invested in new training for workers and selectively invested in new equipment.
Today, they are still somewhat cautious as to M.D. Knowlton’s prospects. Still, they are brimming with plans. The firm recently finished testing a newly designed lift that Fellows and Sheldon believe will help boost sales. The pair also are laying plans to boost bearing sales by breaking into the OEM market.
Three years ago, Fellows says, they would not have considered such ventures, even if they had had the money to mount them. With no meaningful customer input, they had little idea what the market wanted.
Now, he says, “I believe we have the foundation to build on. We’re not complacent any more. I think we’ll get back to two shifts, maybe even three.”

6/11/99

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