WHAT’S TO COME
QR Codes of Conduct | Class Acts Revisited | Sales the Scandinavian Way
Details may be murky, but a buzz is growing about companies moving some of their manufacturing production back home from overseas. We’ve been hearing for a decade that Northeast Ohio has to compete with China. Now, China and the rest of the world are eyeing us. Manufacturers in Ohio and nationwide are moving some of their production back from overseas, a trend known as “reshoring,” after discovering that offshoring can include unexpected costs. Mary Kaye Denning, president of the Cleveland-based Manufactur6
INSIDE BUSINESS | MAY/JUNE 2011
ing Mart, says she knows of six Northeast Ohio companies that have reshored some of their operations for various reasons: better engineering know-how in Ohio, rising shipping costs, shorter delivery times and the hassle of managing operations thousands of miles away. “I think there’s a patriotic motivation in play,” she adds: “OK, we’ve been there, done that; let’s go in a new direction.”
A March report from Accenture found that 61 percent of global manufacturing executives surveyed say they need to consider major changes to their plant and supply network. Although labor cost remains the most important factor in selecting manufacturing and supply locations, proximity to customers is a close second. More than a third say they need to better align their network with their customers’ locations. This March, the Fund for Our Economic Future awarded a $25,000 grant to Polymer Ohio to study reshoring. Wayne Earley, Polymer Ohio’s CEO, says his organization applied for the grant after hearing from companies that wanted help relocating back to the state. Still, some local companies that are reshoring may not be willing to talk about it publicly for fear of giving away a competitive advantage, trade secrets or intellectual property. U.S. Sen. Sherrod Brown organized a conference call in April to discuss reshoring. “Fuel costs are part of it,” Brown says. “The cost of raw materials is evening out.” Tougher enforcement of trade rules may also discourage offshoring by reducing unfair trade advantages in certain industries, Brown argues. Susan Helper, chair of the economics department at Case Western Reserve University’s Weatherhead School of Management, says economists don’t have enough solid data to measure the growth of reshoring. But she hears about it as she’s conducting a study of the automotive supply chain for the U.S. Department of Labor. “There’s still offshoring going on, still companies finding opportunities abroad,” Helper says. “But some companies are finding that the idea that we can’t possibly manufacture here competitively is wrong.”— Erick Trickey
IB: Why are some manufacturers bringing production back home? SH: There was all this movement to China, a rush to China, after it joined the World Trade Organization in 2001. It’s a huge market with cheap labor, so people saw it as a panacea. Given most of the accounting systems manufacturers have, Q&A it looked great, but the only thing that they can track well is direct labor. ... I think some of them found that there are a lot of hidden costs in doing business in China. IB: What are some of those costs? SH: Top managers are spending a lot of time creating a supply chain rather than developing new products or solving the problem in the U.S. You can miss the market window. The debugging and ramp-up has taken longer, doing it thousands of miles away and with a language barrier. Sometimes it only takes one bad outcome to have a problem. If the shipment is late, it upsets Walmart or General Motors or whoever your customer is. IB: So it’s harder to do business in China than manufacturers think? SH: Yes. Labor costs go down, but travel costs and product development costs go up. The lost revenue is harder to track. Second, some costs just aren’t monetized, like how CEOs spend their time. Some of it is lost intellectual property: You give your suppliers a design, and then the supplier figures out how to make it themselves and sell it themselves, sometimes modified, sometimes not. The third reason is variability and risk. The supply chain is long. It’s hard to recover if you have problems. IB: Are companies discovering it’s easier to manufacture in the U.S.? SH: If they do training and an integrated series of changes, they can move to ... agile production, where you deliver quickly to a variety of markets. It’s not just training of workers, it’s also IT investment in a website that works, [where customers can order] products or parts. That leads directly to the scheduling of the factory and workers who can operate multiple machines. But any one of the investments isn’t enough. Improving the factory schedule doesn’t work unless the workers are trained. DARREN GYGI
Yearbook Confidential Graduation season is a time of celebration, reflection and darn good advice. But how many of us really listened to that commencement speaker? Exactly. So we caught up with a few Northeast Ohio executives for some high school lessons.
Collection Auto Group’s reinvented Saab-Spyker dealership holds sales lessons for any business.
“Just try to know more than anybody else in your position,” says Donald Washkewicz, president, chairman and CEO of Parker-Hannifin. “If you do that, you’re going to get the recognition and move on.” — John Hitch
Squiggle Me This How to solve the riddle of the QR code
Christine Amer Mayer
CEO, US Endoscopy
Chief operating officer and legal counsel, GAR Foundation
CEO, Trumbull Memorial Hospital
President, chairman & CEO, Parker-Hannifin
Shaker Heights High School
Our Lady of the Elms High School
Brooklyn [N.Y.] Preparatory High School
Garfield Heights High School,
CLASS OF ’85
CLASS OF ’89
CLASS OF ’72
CLASS OF ’68
FAVORITE CLASS: History. “I had a
natural interest and a great professor who drew upon his own experiences from World War II.”
FAVORITE CLASS: English. “The
professor, Mrs. Sawan, frequently quoted Shakespeare, saying, ‘Brevity is the soul of wit.’ She’d return papers and tell us, ‘Make it crisper; make it shorter. Get to the point more quickly.’ ” THE BUSINESS LESSON: “As people
have limited time, you have to make your point quickly.” FAVORITE TEACHER: Mrs. Sawan. HIGH SCHOOL JOB: Working in his
surgeon father’s office
I REMEMBER MY HIGH SCHOOL FOR:
The diversity. “It’s ingrained in me that you need to be open-minded and there are different ways for people to show good judgment.” EXTRACURRICULAR ACTIVITIES:
Football, soccer and track BEST MOMENT ON THE FIELD:
A Hail Mary kick with a few seconds left to beat Lakewood in soccer LESSON FROM THE FIELD:
“It’s not that one last kick. It’s all the work that went into it.”
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“She always set the bar high and got us to clear it every time, and that’s applicable to business.” FIRST JOB: A women’s shoe boutique.
“I learned … the customer is always right. If you come at things with that mentality, you can usually find a solution that works for everybody.”
I REMEMBER MY HIGH SCHOOL FOR:
Its emphasis on social justice and business. “It also showed us how to make our way in the world and share our gifts with others.”
FAVORITE CLASS: English. “I came
from a science-based family. ... English gave me the opportunity to explore another side of life.” THE BUSINESS LESSON: Have a broad
perspective. “I read as much as I can get my hands on. In my field, it’s an advantage to know what’s going on in the airline or nuclear power industry because some of those strategies also apply to health care.” MY FAVORITE TEACHER: My English
teacher, Charlie Winans. “He could make the words of Wordsworth and [Percy] Shelley fly off the page.” LESSON FROM THE FIELD: “Being
able to communicate in a team is what matters. The lone wolf days are over.” FAVORITE HANGOUT:
The gym. “I’m 55, and I still swim a mile four times a week. Being involved in athletics has helped me stay healthy. It’s also a great stress reliever.”
FAVORITE TEACHER: Freshman
English teacher, Mr. Blue. “He was so good at diagramming sentences and breaking things down in a way you could understand.” THE BUSINESS LESSON:
How to write things properly
When customers walk into Saab of North Olmsted, they find themselves standing on a black entrance mat, built into the floor, that leads them right to a reception desk and a smiling face. Most dealerships place the reception desk far from the main entrance, usually toward the back, in hopes of drawing customers’ attention to the showroom’s shiny cars. But Saab of North Olmsted’s new $3.5 million location isn’t like most dealerships. It’s the first exclusive Saab facility to open in the United States since Spyker acquired Saab in February 2010.
“We could have saved money by putting [our receptionist] back in the cashier area,” says Bernie Moreno, president of Collection Auto Group. “But now, when the door opens, it’s impossible for her not to look up, and the customer sees someone immediately.” Moreno says the dealership was built to create the sort of memorable experience that’s essential to establishing long-term relationships with customers. Car dealers are hardly the only ones who can learn from that sales philosophy. — Chris Sweeney
HIGH SCHOOL RIDE: A 1964
Chevy Impala that he shared with his sister. “Back then if a fender wasn’t flopping or if you didn’t have a big rust hole in the door, you haven’t lived. My car had rust holes everywhere.” FAVORITE MEMORY: The people. “The
camaraderie of meeting new people and getting to know them.”
AT THE LAST REUNION: Being the head of a $10 billion company really wasn’t a big topic of discussion. “I don’t have a big ego to stroke. I have my job; my friends have theirs. We just all had a good time and reminisced.”
MAKE A STATEMENT
The dealership’s building is nicknamed “The Iceblock,” because the square-patterned windows and silver facade resemble large blocks of ice. The look is Scandinavian — simple and striking. But it can also be plain and cold. So Moreno warmed up the place by alternating white floor tiles with coppercolored red oak. Wherever there is a place for a customer to sit, the tile floor changes to either wood or carpet, creating clearly defined spaces. “We want to have both the facility and the sales process mesh together,” Moreno says. “We want people to feel at home.” COURTESY OF SAAB OF NORTH OLMSTED
At Moreno’s Saab dealership, the car featured in the latest advertisement stands prominently to the left of the reception desk. For May, it’s the new Saab 9-4X, a sporty crossover SUV. “If they’re looking for a car that’s advertised,” Moreno says, “they need to see that it’s available immediately.” Other dealerships try to hide their advertised car because its discounted price generates the least profit. But openness is a must for getting past a one-time transaction, Moreno argues. “The Internet makes so much information available,” Moreno says. “If a business isn’t heading toward transparency, they will fail dramatically.”
CREATE AN EASY SALES PROCESS
The four selling booths are intimate, with semicircular desks and a backdrop that creates some privacy without closing the customer in. Moreno wants customers to feel relaxed, as if they are being consulted with, not spoken to. “Rather than sell them a car, we’re going to assist them in buying a car,” Moreno says. It’s impossible to completely remove the negotiation process from car-buying, Moreno says, but his goal is to minimize it and take the customer step by step through how they arrive at the final price. “Our goal is to sell people cars for a long period of time,” Moreno says.
Michael Balas’s wife arrived home from the grocery with a pack of romaine lettuce in transparent wrapping. Printed on the package was a QR code, those squiggle-filled squares you’ve seen popping up just about everywhere that route your smartphone to online information or promotions. At least, they’re supposed to. Balas, a QR code expert and CEO of Vitreo QR, tried to scan the lettuce code, but it didn’t work. So he tried again with another reader. Same thing, over and over. “Are you inclined to try again?” Balas asks. "Probably not.” So here are some tips for QR success. — Jennifer Keirn
There are many free QR code generator sites and dozens of reader apps across the major smartphone platforms. “Every one of them behaves differently,” Balas says. “Do everything you can to make sure it’s readable by the largest number of devices.” So use code-generating software that adheres to the ISO standard.
PRINT IT RIGHT. The source of the romaine snafu was a lack of white space, or “quiet zone” around the code. Good code-generating software will dictate proper placement, how much quiet zone is required and how large it must be to be viable. ENSURE SECURITY. Beware open-source URL shorteners used to route QR readers to your page. The created links are outside of your control. “A QR code for Frito-Lay should point to the potato chip website, not a porn website,” he says. ENABLE ANALYTICS. QR codes are incredibly powerful for tracking your customers’ behavior, from how often a code was scanned to where they were located when scanned. “You can expect a success rate over 95 percent if you do it right,” he says. IBMAG.COM
Recycle of Life By doing good and wasting less, Ohio’s oldest business is continuing to grow. The Taylor Cos., founded in 1816, is Ohio’s oldest business, but it’s modern when it comes to sustainability. “You think about people, planet, prosperity,” says Jeff Baldassari, president and CEO of the Bedford-based furniture company. “It puts money on your bottom line by doing the right thing.” Taylor’s Bedford factory, built in 2006
The Paull Group of desks and case goods and the Aurora swivel chair are the company’s best-selling pieces of furniture.
The Taylor Cos. uses local wood almost exclusively. Much of it comes from lumber mills in or near Holmes County.
Taylor generates about 30 tons of sawdust a year.
Leather scraps make up 3 tons of Taylor’s waste annually.
“Of all the categories of stuff, the leather scraps [were] the most challenging,” explains Baldassari. To find a solution, he contacted Roger Wall, president of Spinneybeck, the world’s largest supplier of quality upholstery leather. Wall’s company sent its leather scraps to Ferreri M, a Montreal-based leather-goods company. Taylor now does the same, and Ferreri M turns the scraps into purses and wallets.
Light @ TED This year’s TEDxCLE event, full of local “ideas worth sharing,” included several light-bulb moments, dramatic reveals that illuminated a message. — ET INSIDE BUSINESS | MAY/JUNE 2011
The company uses domestic leather from Conneaut and Northern Italian hides imported and tanned by Spinneybeck in Buffalo, N.Y.
on a remediated brownfield, diverts 90 percent of waste into recycled and upcycled products or composting. The company was named 2011 Green Plus Sustainable Enterprise of the Year by the Institute for Sustainable Development in North Carolina. Here’s how the process works. — Shannon Bowens
At 15 tons a year, lumber scraps are Taylor’s second-largest category of waste.
Some lumber scraps are given to A Piece of Cleveland, which uses the wood to create tables, chopping blocks and planters. Customers will even see the Taylor name on the “rebirth certificate” that comes with their product.
Lumber scraps are also given to people to use as fuel in clean-burning wood boilers. “In the wintertime, some of the employees take it for firewood,” Baldassari says.
THE MOMENT: Greenhouse Tavern chef Jonathon Sawyer poured 20 pounds of popcorn on the floor to represent the herbicides, pesticides and hormones a family of four eats in one year in a conventional, commercial diet. THE MESSAGE: Diners and chefs should embrace the farm-to-plate movement. THE MOMENT: Cleveland Museum of Art director David Franklin showed a slide of The Stargazer, the
Two local farms haul away the sawdust for use as horse bedding. Horse owner Therese Chapman connected with Taylor through a customer at her flower shop and loves using the sawdust: “It’s absorbent, and it picks up everything that needs to be picked up,” Chapman says. “It’s better than straw.”
museum’s 5,000-year-old Turkish figurine — then produced the artwork itself from his pocket. THE MESSAGE: The actual object still beats the virtual one. THE MOMENT: Chris Clark, of Sunflower Solutions, lit a single lamp and illuminated the darkened theater. THE MESSAGE: Even a little electricity is powerful — as it is for the African villages using Sunflower’s solar arrays. CHAIR AND DESK: TAYLOR CO.