Tuesday, May 26, 2015

Would You Be Interested In Divesting -- If We Were Interested In Acquiring?

Electro Technik Industries (ETI) has expanded via company acquisitions six times in the past five years. Those who have worked with us, we believe, would explain that our acquisition processes have been fair, professional, and even understanding.

The expertise of our 12 subsidiary companies is in the design and manufacture of passive electronic components: microwave and RF, magnetics (transformers, inductors, toroids, etc.) capacitors, filters, and resistors. Custom products requiring design and production engineering proficiency, including products for commercial/industrial as well as mil/aero and space applications are our specialty, generally speaking.

We have discovered several companies whose wherewithal for growth has peaked but whose potential for growth has not -- given the right combination of enabling factors. Conversely, certain companies like this have discovered us. In either case, we're happy to explore possibilities.

Companies with annual sales of $750,000 to $3.5 million or product lines with annual sales of $250,000 to $750,000 tend to be our best candidates for acquisition -- again, primarily passive electronic components.

All matters are treated with highest discretion; correspondences are strictly confidential; non-disclosure agreements willingly provided.

Acquisitions@electrotechnik.com goes directly to ETI's company president only.

We're interested.

Monday, May 18, 2015

Where’s Herbie? Who’s Herbie!

Our friend Herbie is like Waldo, except we find him in peeking out of ETI’s organizational chart rather than camouflaged in a complex collage. Although Herbie started out as a fictional Boy Scout in The Goal: A Process of Ongoing Improvement by Eliyahu M. Goldratt and Jeff Cox, Herbie plays hide and seek with us here at ETI almost full time.

In the Boy Scout example, Herbie is the slowest boy on the hike, the one who’s is slowing the whole group down. Put him last, and everyone needs to pause periodically to wait for him while he brings up the rear in his own sweet time. Left unattended, Herbie can get distracted and go even slower. Put Herbie in the middle and he splits the group; those behind are sore at him, those ahead think half the pack is slow, not just Herbie. Cajoling, discord, complaining, bickering.

Mr. Goldratt’s solution is to put Herbie in front, where everyone else is affected equally. And, although everyone started out carrying their own equal loads, taking a few things out of Herbie’s backpack and redistributing among the faster walkers clearly sets up an improved situation that can benefit everyone. Herbie, carrying less and happy to be the center of attention as the leader walks faster, as does everyone.

In the linear example, Herbie’s an impediment, causing not quite an obstruction. In ETI’s case, Herbie is the bottleneck, causing not quite a pileup -- maybe even just a little backup -- but slowing everything behind him in an assembly process, receiving/shipping, purchasing, winding, potting/curing, QC testing -- it doesn’t matter where. The end result is delay -- and cost.

We can’t always reorder where Herbie works in our processes. A big step is to find him, focus on his issues, and see if the load might be redistributed or improved somehow. Piling things in front of Herbie makes matters worse (more materials and inventory clogged in the system). Clearing the way afterwards leaves a vacuum of underutilization and wasted cost.

So we find Herbie, improve as much as we can, and balance the process with Herbie’s limitations in mind. 

But Herbie keeps moving around. Sometimes he jumps over to sales and marketing; sometimes finance/accounting; sometimes we literally need to track him down by the traces, clues, or trail he leaves.

And, most important, we need to prevent causing changes that cause several little Herbies pop up elsewhere -- and here’s where overview, averages, and statical data helps. But data in light of what? 

Mr. Goldratt makes that point quite clear -- the goal -- which is “making money.”  Is the slower but balanced system costing us more than spending capital to improve a problem? Is saving money here or there acceptable in light of the costs caused elsewhere? 

Finding Herbie and determining what to do about him makes many an ETI meeting heated and fun.

Thursday, May 14, 2015

Muscling Up In Costa Rica

As Electro Technik Industries grows, so, too, does its need for production engineering and administrative support.

Our near-offshore plant in Costa Rica has been manufacturing resistors and magnetics products (transformers, toroids, inductors) over 30 years.

With ETI’s purchase of Inductive Technologies, Inc. (I-Tech) in 2010, we acquired a neighboring facility in Costa Rica with manufacturing space, equipment, and skilled workers. Its hundreds of catalogued products provide an excellent selection tool for our customers, who may need exactly what’s depicted (an I-Tech standard product), or something quite similar but with certain custom modifications (a Hytronics custom engineered product).

For the custom products, most of the design engineering and prototyping has taken place in Clearwater, Florida, where top-level engineering could interact with purchasing and other administrative functions to basically “package” selected projects suitable for manufacture in Costa Rica.

With more and more work being produced in Costa Rica, it became more imperative to have the expertise down there to support it.  Ten years ago a key Tepro manufacturing manager moved down to help ensure a good production process.  After that our head of purchasing came down there to help streamline that function.  Now, the head of magnetics engineering for Hytronics, Winatic, and I-Tech has made the move as well.

To say Costa Rica has some talented individuals is an understatement.  They had an exceptionally superior team before these 3 individuals moved down, now they are really bulking up.

The Costa Rican facility is already one of ETI’s largest with 25,000 square feet and an ISO 9001 registration to boot.  Now, with all this talent located on site, we’re sure that problem-solving will simplify, operations will improve, economies will be discovered that we can act upon, and average turnaround times will be cut by 20% (that’s their marching orders).

Wednesday, May 13, 2015

Res-Net and Nova Microwave at IMS2015 in Phoenix, Booth 3341.

Be sure to visit ETI companies Res-Net Microwave and Nova Microwave at Booth 3341 at the International Microwave Symposium, May 17-22 , Phoenix, Arizona. Come and learn about our latest high power resistive and ferrite products. 

See you there!

Monday, May 4, 2015

Minimum Wage and Manufacturing

The owner of a Chicago based manufacturer recently said, "Before, I couldn't compete with Mexico and China. Soon I won't be able to compete with Ohio."  Then he sold his +50-year-old company.  Those manufacturing jobs moved out of the area with the new owner.

While (as of May, 2015) efforts to increase the minimum wage in Chicago have not been successful, the threat and worry of a minimum-wage increase was enough to send this particular proprietor into retirement and perhaps many others especially in the regions instituting their own minimum wages.

The theory sounds noble, at first.  Charge the employers more for their labor and they can pass those costs onto the consumer.  That might work in the retail and services industries where a given customer would not drive to another state to purchase a hamburger, but how about in a business to business environment where a purchasing manager has a choice between a potentiometer built in Chicago versus one made in Tennessee, or offshore. 

It also does not take into account that the consumer, in the services example, who has to pay more for his burger, might be a minimum-wage earner himself.  Now his costs have just increased negating some of the benefits he received in those mandated increased wages.

So what about the minimum wage in Chicago?  Should manufacturing be exempted from the city's minimum wage increase, so that manufacturers could not just compete regionally, but nationally and internationally as well?  Should the minimum wage be a province exclusive to the federal government?  Or is the minimum wage just a relic of our past that does not benefit those at the lower wage levels as many economists are now purporting?

There is definitely not an easy solution for this heated debate and we are, admittedly, a little biased.  However, for us it is Economics 101, the manufacturing industry creates wealth and the service industry transfers it.

Comments welcome.