Week of May 5, 2009
Snapshot from the Field
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Vacuuming Against the Grain
by JACK LYNE, Site Selection
Executive Editor of Interactive Publishing
At first glance, Tacony Corp.'s US$4-million, 35-job expansion in St. James, Mo., might look unremarkable. Might look like the kind of solid but decidedly modest growth that barely stirs up a ripple in the business news pool.
But hold on a second. Tacony's expansion merits a long second look. Consider these striking specifics:
So, what the hey is happening here?
Tacony's strategy stands on several legs, with manufacturing quality being one of the strongest, says Tacony Senior Vice President of Floor Care John Kaido.
"The biggest reason was quality," Kaido tells The SiteNet Dispatch in explaining the company's atypical inflow of jobs. "It has been difficult, if not impossible, to maintain a level of quality in China that is acceptable to us and to our dealers.
"We have been unsuccessful in getting the overseas manufacturers to care as much about quality as we do and our dealers do," Kaido continues from Tacony's headquarters in Fenton, Mo. "The uprights that we make here in Missouri at the St. James plant have achieved quality standards far beyond what we've been able to achieve with the canisters overseas."
Overseas, though, is exactly where many manufacturers have flown, drawn by the siren song of labor costs far, far lower than in the United States. Tacony likewise found that it could cut its labor outlay by using contract manufacturers in China and South Korea to make the company's Simplicity and Riccar canister vacuums. At the same time, though, Tacony discovered a major drawback in manufacturing in Asia: Back-end expenses were devouring much of the savings gained in the front end of the process.
"We've been inspecting all our imported canister vacuum cleaners in our U.S. factory due to concerns about canister quality," Kaido says "That extensive inspection process is costly for us so much so, that it might not cost any more to just make them here and do it right the first time."
From a proportional perspective, Tacony's expansion will send quite a ripple coursing through the St. James plant. The 35 new jobs will jack up the size of the facility's work force by a substantial 30 percent. And the addition of 104,000 sq. ft. (9,360 sq. m.) of new floor space has doubled the plant's footprint.
Not Relying on 'Pocketbook Patriotism'
Right about here, however, we should slap a cautionary note onto this story. A note like the teeny-tiny type at the bottom of those inescapable ads that feature blaring headlines like "Brunhelga lost 48 pounds in two weeks, and she ate whatever she wanted!"
A note, then, like this:
Tacony's experience not typical. Individual companies' results may vary a lot.
No, this kind of relocation isn't going to work for everyone. In particular, it likely wouldn't work at all for companies that are making products sold at big-box retailers like Wal-Mart, Target, Kmart and Sears. Tacony's business model is just too dissimilar, Kaido explains.
"The reason that we're still able to manufacture vacuum cleaners in the U.S. is mostly because of the way that we go to market," he says. "We are not sold in big-box stores where the lowest price is king. We are exclusively sold through independent specialty retailers, where performance, quality and ease of use for the customer are more important than price. Our dealers also prefer to sell products that are made in the USA, and that's one more thing that makes us unique in the market."
But the company isn't depending on what Tacony Director of Marketing Joy Petty calls "the wave of pocketbook patriotism sweeping across the nation at the moment."
"We aren't relying on the 'Buy American' slogan as the top reason someone should buy one of our vacuums," Petty explains. "Other vacuum manufacturers are forced to design a vacuum that meets a price point demanded by a mass merchant or have a low enough product cost that a national advertising campaign can be funded. We have the good fortune of making vacuums that people will rave to their friends about."
But those independent retailers are the critical link in people getting Tacony's vacuums in their hands. Accordingly, meeting the needs of that retailing network was another central factor in Tacony's moving the Asia-based jobs to Missouri.
The Power in Proximity
Most of those retail shops, for example, are small mom-and-pop operations, says Kaido. Consequently, they're careful to tamp down costs by keeping inventories at levels that are very low or non-existent.
"Our response to our dealers for canister vacuums will be much faster than if we were committed far in advance to large production runs and container shipments of product from overseas," Kaido asserts. "When our dealers want a quantity of a specific model, they expect us to have it in stock."
The St. James plant is already geared up to accommodate demand surges.
"Our U.S. factory uses a 'Demand Flow' manufacturing process," says Kaido. "We keep a large supply of raw materials and components and make smaller production runs of the specific products that our dealers are buying. That process makes our U.S. plant very agile in responding to changing dealer demand."
Tacony anticipates that it will add another competitive edge by repositioning canister manufacturing near the core design team. Tacony's design group is based at the St. Louis-metro headquarters in Fenton. Only 81 miles (130 kilometers) to the southwest lies St. James, a small town of about 3,700 people.
"We think that we'll gain a tremendous competitive advantage in designing products near where they will be manufactured and used," says Kaido.
Part of that advantage lies in the fact that U.S. homes are different from the homes found in much of the rest of the world. Americans, for example, live in spaces that are larger and have more wall-to-wall carpeting. Accordingly, vacuum cleaner design is one job in which it's actually productive to bring at least part of your home life to work.
"The design team is living in homes similar to those of the consumers who will use the product," says Kaido. "U.S. homes are very different from the rest of the world in terms of size and flooring types. So we use our first-hand knowledge of American homes in designing all of our vacuums that are sold in the U.S."
In many ways, Tacony's relocation of jobs from Asia brings the company full circle in its history in vacuum manufacturing.
Bringin' It All Back Home Again
The company first sprang to life in St. Louis in 1946. That was the year that a young Nick Tacony, fresh out of serving in the U.S. Navy in World War II, started repairing sewing machines in the basement of his house. With only $1,000 in savings, Tacony went for broke. He invested all of the money in used sewing machines, motors and parts. Against sizeable odds, young Nick built a company that became a major player in the sewing industry. And he did all that with minimal advertising a practice that continues to this day.
Tacony Corp. was still centered on the sewing business in 1984 when Nick Tacony passed away, succeeded as CEO by his son, Ken Tacony. Under Ken Taconyís leadership, the privately held company began to diversify with vacuum cleaners a key element in that expansion.
By 1987, the Missouri company had made two major moves: It bought vacuum cleaner manufacturer Riccar America Company and also created the Simplicity line. Initially, however, Tacony relied on imported vacuums from Taiwan.
But that scenario began to shift radically in 1997, when Ken Tacony decided to open the St. James plant, which started operations with a total staff of five. Even then, Tacony Corp. slightly hedged its bet, partnering in the U.S. plant with Taiwan's Zeng Hsing Industrial Co. Only two years later, though, the American company bought out its Taiwanese partnerís share. By then, Tacony was convinced that it could go it alone in manufacturing vacuums in the U.S. In contrast, other vacuum companies have sent their manufacturing operations off in the opposite direction.
"The list of vacuum companies that began production here and moved to Mexico or overseas is very long," Kaido notes. "That list includes Hoover, Eureka, Dirt Devil, Bissell and others."
For a while, Tacony was also on that list in the manufacturing of its Simplicity and Riccar canisters. Now, though, those jobs are coming back to where Tacony first started making vacuums in America.
"The hiring process for the new jobs will start later this month," says Kaido. "We will add approximately 25 jobs in this first phase, and another 10 by the end of the year, when production is at full scale and one other product is moved from China. About 20 of the 35 jobs that we are importing will come from China, and about 15 will come from Korea."
Part of the new space that the company has built out is housing newly installed plastic injection molding equipment. In addition, Tacony is also using some of the new square footage for additional space for production and for distribution and warehousing.
And there's also the possibility of more new jobs coming to the St. James plant. Tacony is hoping that its unconventional relocation will spur an upsurge in demand.
"As a result of this move," says Kaido, "we hope that the sales volume of our canisters will increase, which will result in additional jobs in the near future."