Business consultants are fond of noting that the Chinese character for “crisis” combines two other characters, those for “danger” and “opportunity.”
Jeff Rich’s strategy for confronting a widely anticipated national recession appears to be a real-life test case of the consultants’ interpretation.
“We may not win,” says Rich, president of Midlake Products & Manufacturing in Louisville. “But at least we’ve got the bat in our hands.”
Fresh from a bruising buyout of his family-owned hinge and custom metal-working operation — an experience he and his family resolutely refuse to discuss — and heavily invested in new technologies he hopes will double the size of his company in three years, Rich now faces a business environment turned suddenly and inexplicably hostile, and completely outside his control. He sounds eager for the challenge.
Prospective customers “are responding differently this year than they did a year ago,” says Rich, 31. “When you call them, they’re now actually taking your phone call, instead of just putting you in voice mail. If you’ve got something they want to hear, they’ll actually listen to you.”
It wasn’t always this way. Midlake soldiered for more than a decade as a manufacturer of commodity hinges to build a clientele.
“It was a battle of pennies” to win new customers, Rich says.
Employment was a family affair, involving siblings and both parents. Decision-making was shared with his older brother and partner, Kevin. Administration relied heavily upon the experiences of his father, Virgil.
“I couldn’t run the company the way I wanted,” Rich says.
Now, Rich’s hand is firmly on the helm. Dad retired. Kevin Rich left the company after the buyout was completed late last year. Jeff Rich hired fresh senior management. New equipment is coming online to help Midlake carve a niche beyond the commodity manufacturing business. And customers who wouldn’t give Midlake a second look are now buying its specialty products and services.
“I know we’re not going to get everything we go after,” Rich says. “I just want the opportunity.”
All in the family
Jeff Rich was barely out of high school in Chicago, where his father had transferred to take a position at another hinge company, when his brother, Kevin, asked him to join his new business back in Ohio.
“I didn’t care what we were going to be doing,” Rich recalls, “as long as I could get back home.”
It was 1986. The brothers were buying hinge, made in long loops, cutting it down to size, and selling it to small Northeast Ohio fabricators and welding shops. All their energy went into the product.
“We were really just responding to inquiries and not taking into account anything related to running a business,” Rich says. “We just wanted to make product.”
That couldn’t last. So the brothers approached their father, an experienced hand in the hinge business, and recruited him to handle the accounting, insurance, banking, sales and marketing duties necessary to put Midlake on its feet.
“He took a huge risk, at his age, to leave what he was doing — the security of his job — and come back and basically start with this fledgling company all over again,” Rich says of his father.
Dad’s help proved invaluable. Besides assuming or directing many of the administrative tasks, Rich says his father’s reputation brought customers straight to Midlake’s door. Some, like the woman who had hinge supplier problems, were won over by the elder Rich’s salesmanship.
“Had she met with just myself and my brother, I don’t know that the outcome would have been the same,” Rich says. “We have an awful lot of business that’s still with us today because of the groundwork he laid.”
Yet Virgil Rich did little hand-holding, his son says.
“My dad was very good at letting us take our lumps and learning from that,” Rich recalls. “He would know how to handle a particular customer or how to handle a particular employee. … I’m sure we could have avoided a lot of problems had he actually just stepped in and done what he knew was right.
“But at the same time, he knew that he was giving us real life experience. That’s how we learned.”
Business at Midlake continued that way for nearly a decade. Dad balanced the books; Kevin and Jeff cut, sorted and shipped hinges for a gradually growing, but stubbornly single product clientele. Yet even modest growth demands changes.
Jeff Rich remembers his move to Midlake’s front office as “natural.”
“There was really no discussion about it,” he says. “Kevin is the mechanically-oriented one; he likes to work around equipment and build things. I like to come up with ideas that sell.”
One day, father Virgil needed help in the office, and Jeff stepped forward.
Virgil Rich retired from Midlake in 1996. The company was healthy, with about 30 employees, but still stuck supplying commodity parts that buyers could find elsewhere.
Rich credits his brother with breaking Midlake out of its commodity manufacturing status, starting in the late 1990s. Before, Midlake bought finished continuous hinge from Chicago-area suppliers and resold it. However, lead times, freight and other costs reduced the company’s margins and thwarted its competitive ambitions.
“Kevin was very instrumental in developing this technology that allowed us to manufacture continuous hinge from coil material,” Rich says.
After what he describes as a “huge investment,” Midlake stopped buying from Chicago suppliers and started making its own lines of custom hinges.
Next, it invested in a computer-controlled 3,000-watt oxygen laser. The precision cutting system allows intricately programmed instructions to be accurately executed without the customary (and expensive) intervention of human labor to switch tools and manipulate components. The machine is particularly well-suited to small-batch jobs that might otherwise leave the area for completion, Rich says.
“It’s certainly opened us up to more markets, new markets, and to customers that don’t require hinges, companies in our backyard that in the past possibly wouldn’t have looked at us because we’re a hinge manufacturer, [who are] now looking at us because we have this laser technology,” Rich says.
Midlake’s capital investments position it to diversify and simultaneously create a niche among Northeast Ohio manufacturers.
“If we were just the same old hinge company going into a recession, things would be tough, we’d have to do some damage control,” Rich says. “But now, with this new technology, these new capabilities, we’re not just limited to hinges. We can manufacture anything. Which makes us more viable to our customers.”
Meet the new boss
While Midlake’s new manufacturing capabilities expand its product and service offerings, it’s the company’s new senior managers Rich counts on for the company’s future.
“What I was looking for was someone from the outside who was not going to care necessarily about the personal issues of the buyout,” Rich says.
In the past six months, he’s hired a new production manager, a controller and a sales manager. Expertise in the field was desirable for these managers, Rich says, but teamwork and compatibility with his management style were also important qualifications.
Richard Mayle is Midlake’s new production manager.
“Jeff made it very clear that he didn’t necessarily need someone who knew the hinge business,” says Mayle, in whom Rich invested full responsibilities for production. “He wanted more someone in line with his philosophies, someone who left their ego at the door and was very team-oriented.”
Rich’s trust was tested not long ago when his new production manager decided a shipment didn’t meet rigorous new quality standards. Mayle had been charged with securing ISO 9002 certification for Midlake, but says production floor employees doubted the company’s commitment when profits were threatened.
“As a manager, it’s tough to see those kind of dollars go down the tube,” Mayle recalls. “But it earned the respect of the guys for sticking to the plan.”
And he says Rich didn’t bat an eye.
The buyout tumult and the new managers put some production floor employees on edge, notes salesperson Danny Stangelo, a 13-year company veteran.
“A lot of people just weren’t sure what direction we were going,” says Stangelo, who started in shipping and receiving before moving to sales seven years ago.
Yet as new managers establish open-door policies, and Midlake veterans see the promise of the new laser technology, Stangelo says most workers’ attitudes are changing.
“I think they’re getting better. … They know the change is here,” Stangelo says. “I tell them, ‘Make the best of it. Just come in and do your job to the best of your ability, and everything will work out fine.'”
Ready or not
Rich knows rough seas are ahead.
“We’re certainly seeing a lot of local companies that are laying off right now,” he says. “The economy is definitely the topic of the year.”
But with powerful new equipment and his hand-picked management team, he figures Midlake is as ready as it’s going to be.
“We needed to be more diversified,” Rich says. “One thing our customers are constantly talking about is vendor reduction. We want to make sure we’re very difficult for them to walk away from. If they’re into us for different types of products other than hinges, that makes us a very viable supplier.”
Rich sounds excited (though also a bit apprehensive) about testing his company against a recession.
“We actually in a weird way were kind of hoping this would happen,” he says. “When everybody’s fat and happy, nobody’s interested in looking at new companies. They’re buying from the same people they’ve always bought from, and they’re going continue to buy from them. Purchasing agents, I think, become kind of lazy, and they’re not willing to look, even though you have something you can offer them.
“When things become slow, like they have, people really start looking at every penny. These people are forced to really look at their suppliers, and if they are doing a good job for them. … [The economic slowdown has] given us an opportunity to get the attention of some purchasing agents, some engineers. If we can show them cost savings, they’re now ready to listen.”
“I don’t know if it’s a gamble or not,” Rich says of his strategy for Midlake. “Either way, it’s going to slow down. But I’d rather be slow and offer all the capabilities and products that we offer than to be slow and have nothing to offer at all.” How to reach: Midlake Products & Manufacturing, (330) 875-4202
William Hoffman is a free-lance writer for SBN Magazine.