Small business rebounds dramatically by capturing niche in industry

by Nicole Duarte

published by the Daily Herald February 22, 2006

In the economic lull of early 2001, Des Plaines metal manufacturer Acme Industries Inc. struggled with plummeting sales along with much of the American manufacturing industry.

Fortunately, company President Warren Young had done his homework. When he purchased Acme at the peak of the manufacturing cycle in 1998, he brought in a team of industry consultants to overhaul the company, starting with its business plan. Young sought out strategic partnerships with other manufacturing houses, took on clients from resilient economic sectors and narrowed production around Acme's specialty: computer numerical control manufacturing, a process used to cut and refine parts for heavy duty vehicles and machinery.

These moves paid off, if slowly. Acme reported $23 million in sales in 2005, topping its 1990s high, one year after returning to the black. Earlier this month the company opened an additional 35,000 square feet of manufacturing and warehouse space and installed $3 million of new equipment.

In 1998 annual sales were slightly less than $20 million, said Peter Brunk, vice president of sales, but "we were very susceptible to downturn. We had two big customers in 1998?and that turned out to be a bad thing."

In 2001, sales nose-dived to $8 million, 40 percent what they had been when the company was at its most precarious. Since then, Acme has rebounded dramatically. Sales reached $10 million in 2003 and $16 million in 2004. Acme is expecting sales to continue their upward trend, projecting $27 million in revenue for 2006.

"We had hit bottom." Brunk said, describing late 2001, after two sluggish quarters in the national economy. However, the company began recovering almost immediately, thanks to the business strategies Young had started putting in place in 1998.

Brunk, who joined the company in 2003, said the consultants helped diagnose Acme's competitive weaknesses.

"We decided we were a low- to medium-volume manufacturer of medium to large parts. We didn't try to be all things to all people," said Brunk.

By focusing on smaller-volume orders of complex parts, Acme captured a niche in manufacturing that was less susceptible to direct offshore competition. It has also nurtured mutually dependent partnerships with other manufacturing houses. To lower costs, the company sought raw materials in China and farmed out some of its lower-complexity production to shops in the Czech Republic.

Acme presently has more than 20 clients, including Caterpillar Inc. and Komatsu America Corp., for whom it manufactures parts such as transmission and axle housings. Brunk said the company targeted clients whose industries could weather economic flux, such as aerospace, mining and military truck construction.

"It takes lot of machining to get a part from A to B and we're happy to be in there anywhere," said Brunk.

Additionally, Acme employs aggressive sales agents that scour the country for manufacturers like Komatsu that are looking to outsource a significant volume of parts production.

Gerald Wren, of Komatsu America Corp., the second-largest supplier of construction equipment in North America, said Acme was a major machining supplier for some of Komatsu's front and rear suspensions. Wren is the engineering, machine and tool manager at Komatsu's Peoria operation, which manufactures dump trucks.

Wren added that Komatsu has been "ramping up" its partnership with Acme for at least the last three years. Currently Acme is negotiating to graduate from a Komatsu subcontractor to a "tier one" supplier, meaning Acme would secure the material from which it manufactures parts.

To support Acme's expansion, the company recently bought five new machines, which, Brunk said, "will give us the capacity we need to sustain our growth."

New machines need skilled machinists, and Acme employs a full non-union crew on two 10-hour shifts daily. The company doubled its head count from 50 employees in 2003 to 100 last year. And Acme is still actively recruiting and advertising to fill openings. It plans to add 25 more machinists in 2006 and 10 more in 2007.

"At 4.9 percent unemployment, it's a little harder to find the kind of people you want to find," said Brunk. With fewer Americans entering the trades, Acme finds the majority of its workforce in Chicago's Polish immigrant community.

"It's the Polish immigrants who have these skills," said Brunk, citing Poland's history as a large manufacturing center.

Acme's help-wanted sign is a welcome sight in America's fourth-largest manufacturing state. Gregg Durham, communications director for the Illinois Manufacturers Association, said while the number of manufacturing plants has hovered steadily around 20,000, Illinois has lost approximately 50,000 manufacturing jobs since 2001.

The number is rebounding slightly, Durham added, but workers today are not getting the health benefits and pension security enjoyed by workers in the past.