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Tecma Talks with Portage Electric Products president, Brandon Wehl

Tecma Talks with Portage Electric Products president, Brandon Wehl

Tecma Talks with Brandon Wehl, president of the North Canton, Ohio-based Portage Electric Products about his company's experience manufacturing in Mexico under the Tecma Group of Companies' Mexico Shelter Manufacturing Partnership IMSMP).

Tecma Talks with Brandon Wehl, president of the North Canton, Ohio-based Portage Electric Products about his company’s experience manufacturing in Mexico under the Tecma Group of Companies’ Mexico Shelter Manufacturing Partnership IMSMP).

Tecma Group of Companies:

Hello and welcome to another installation of Tecma Talk podcasts that are continuing and are based upon issues that have to do with manufacturing in Mexico, and related subject matter. Today we are fortunate to have Brandon Wehl with us. He is the president of a company that is based in North Canton, Ohio. It’s called Portage Electric Products. Welcome Brandon. How are you doing today?

Brandon Wehl:

Fine. Thank you. Glad to be here.

Tecma Group of Companies:

Branon, can you tell us a bit about your company, Portage Electric Products, it’s known as PEPI, just a bit of background?

Brandon Wehl:

Sure. Well, the company turned fifty years old in February of this year, so we have a little bit of a history. It’s a family run business. I’m currently the third generation leader of the company, and we started back in 1963 manufacturing thermal control devices. Basically, they are little electro-mechanical devices that sense temperature and/or increases in current that flows through a bi-metallic element that reacts with the changes in the current and/or the temperature to open and close an electrical circuit.

That’s kind of a mouthful, but basically it’s a temperature sensor that has the bi-metallic element that provides a mechanical movement to open and close a set of electrica contacts. Thermal control devices are found in many different products. They touch our everyday lives, and they kind of work behind the scenes so people really dont know that they’re in there, but, for instance, in heating pads our devices are going to control the temperature. They control the temperature in hair setters and curling irons, as wel. Then there are other applcations types where our devices act like a high limit safety such as an electric motor, let’s say, in a device like a window fan. The electric motors rely on a certain amount of air coming off of the fan blade to keep the motor cool. There are some instances in which air flow is restricted, the motor is going to heat up and our device actually will open the circuit to prevent the motor from overheating. That is kind of the basics of what we manufacture. We manufacture all different types, and, as I said, we’ve been doing it for fifty years.

The Tecma Group of Companies:

I guess that it would be safe to say that, without those devices, that you just mentioned life would be a lot less convenient?

Brandon Wehl:

Pretty much. They are literally everywhere. There are so many thermal control devices in the world. In florescent lighting they’re used in the transformers to prevent an overheat situation. In recess lighting thermal controls are used to provide safety, in case somebody puts too large a wattage of bulb in the cannister. If we look to some of the modern conveniences that we have in automobiles today, the electric seat heaters and the heated side view mirrors. All of those items have thermal protection in them. All those little motors that activate those things, and the heaters that provide comfort, have thermal controls in them. They work behind the scenes. They make our lives better, hopefully.

The Tecma Group of Companies:

Thank you for making them. Looking at your company further, you are in a lot of locations. I think that, if I recall what is on your website acccurately, Portage Electric Products has a presence in ten different companies, including manufacturing operations in Mexico. Today we’ll focus on Mexico. First of all what precipitated your decision to investigate, and eventually set up manufactuirng operations in Mexico?

Brandon Wehl:

One of the things that differntiates us from our competition is that we like to provide our customers with what we consider to be an “out of the box” solution. We will go the extra mile to cutomize our devices to exacting customer specifications, and that deals with the temperature of the device, the operating range and other things like adding an insulating sleeve or adding in lead wires and terminals, so that our customers can connect our devices into their applications. Most of our major competitors, I have always used the example that they follow the Henry Ford principle of automation where they first started making the Model T’s and Henry Ford was quoted as saying, “Our customers can have anything that they want, as long as it’s black.” We differentiate ourselves by trying to provide whatever the customer wants to satisfy their needs. When they get our products, and take the box over to the assembly line to open it up, they can just install it in whatever application they have. All of that extra work that we do, we always considered it as being value-added operations. We were adding value for the customer, plus we were making additonal profit performing those operations ourselves rather than letting our customers do that. Over time, with the manufacturing costs increasing in the United States, we maintained our manufacturing presence with manufacturing the actual thermal controls by incorporating a lot of automation into our products, but the unique value added operations for specific customers represented difficult operatons to automate. We relied a lot on old fashioned hand labor to perform those operations. Over time, because of increased labor costs, because of increased benefit costs, we found ourselves pretty much not makng much profit on those operations. We were just finding ourselves in the situation that we were just providing customer service, rather than adding to our profitability. Over time, we decided that we really needed to find a better way of providing these operations to our customers. We started looking for an area from which we could provide these manufacturing operations on a more cost-effective basis for our customers. Manufacturing in Mexico was a good opportunity for us.

The Tecma Group of Companies:

How long has Portage Electric Products had Mexico operation for your manufacturing?

Brandon Wehl:

We actually did the evaluation in 2002, and we came up with a business plan to start manufacturing in Mexico in 2003. By September of 2003, we had the first operation established there. It’s been ten years.

The Tecma Group of Companies:

Having had ten years of a track record of manufacturing in Mexico, and, in particular, in Ciudad Juarez, how has having production capacity on the U.S.- Mexico border helped your company to achieve what it is that you set out to achieve, i.e., providing superior customer service and, in the process, making a profit. Have you been successful in that endeavor?

Brandon Wehl:

I feel that we have been very successful in that, number one, we achieved our initial goal of reducing our cost of manufacturing, which enabled us to continue to provide value added services to our customers. Over the course of time, we saw the benefit of performing more of our, I’ll say our “up front” manufacturing operations rather than our “back end” manufacturing operations, in Mexico. Some of the operations that we did historically, we were able to automote. Other operations we couldn’t do on a cost-effective basis, so we were still doing some of those by hand. Additionally, one of the things that needs to be considered is that automation gives you such an increase in your production capability that you need to have the demand from your customers to be able to justify the automation. For some of our models for which we had high demand, automation was, pretty much, a no brainer. The ROI that we could get in return for automating the process was maybe five or six months. Some of our other models that we manufactured, we just didn’t have enough volume to fully automate the process, but the demand required that, with those models, we had to produce on a more cost-effective basis. From the end of 2006, until the end of about a 2006 timee frame, we just focused on doing the “back end,” or value-added, operations like attaching lead wires and insulating sleeves, to actually performing more of the complete manufacturing processes in Mexico. Over time we have been able to document annual manufacturing cost savings of about two million dollars a year. That is quite a significant amount of savings for a year period.

The Tecma Group of Companies:

In terms of quality and productivity of the workforce in Ciudad Juarez, how does this stack up agains the other ten locations in which you have a manufacturing presence?

Brandon Wehl:

We’ve been very pleased. From the beginning, we have been very intimately involved in the Mexico manufacturing operations, as well as with the people. Any time that you have people involved in your processes, you need to have them well-trained and able to understand what operations you are performing, so that they understand the significance of what they are doing. In our line of work, sometimes our devices are really the only thing that stands between an application functioning properly, or something that we don’t want to happen, like an application catching on fire and doing damage to the surrounding environment. It is important that the Portage Electric Products  Mexican workers understand how important their individual jobs are. We have been pretty involved in the process of making sure that our quality control people are very good, and that the actual factory manager that we have is top caliber. Those people weren’t hard to find. A lot of the people that are working with us on our project now have been with us since the beginning. Most of the core management that we have assembled have between eight to ten years with the manufacturing project in Mexico. As we continued to expand our Mexico manufacturing operations that meant that we required workers with a higher skill set. Now we have transitioned from just doing labor intensive operations to doing more semi-automated to automated operations there. We are relying on people with electrical skills, mechanical skills, pneumatic skills and repair skills to maintain the equipment. We have been very pleased with the availabilty of labor in Ciudad Juarez with those types of skill sets. We’re currently in an expansion mode again, and, if we were not confident that we could set up and maintain our operation in Mexico, we would not be expanding right now.

Tecma Group of Companies:

If you want to do manufacturing in Mexico, and have control over your operatio, as opposed to a subcontract manfacturing situation, there are essentially two ways to do it: You can go through the whole process of actually incorporating in Mexico in order to set up a wholly-owned subsidiary, or or you can use the Mexico shelter business model that enables a company to control all of its manufacturing functions while partnering with what is known as a Mexican shelter service provider. The shelter service provider does all of those things that are non-core to manufacturing. This would include performing the G&A functions of the operation, as well as providing the industrial real-estate in which to operate in. When you went through the decision-making process, what led you to follow the path of working under the Tecma Group shelter program, rather than persuing the alternative?

Brandon Wehl:

It was a lot easier to establish manufacturing operations in Mexico when you didn’t have to reinvent the wheel. When you are able to take advantage of people and an organization that is able to provide all the associated functions that are required from the administrative side, that is one less thing that you have to do on your own. You did manufacture that we have a manufacturing presence in many countries around the world, but, from a headcount standpoint, we’re not a large organization. A lot of people here wear many different hats and perform many different duties. Even with the global manufacturing presence that we have, I like to say that we have a big footprint, but we don’t leave a deep impression. Anything that would enable us to expand our manufacturing capabilities without actually requiring us to bring on more people, and add to the overhead costs seemed, for us, a pretty easy decision to make.

Tecma Group of Commpanies:

Wth respect to that, you have given us the pros of manufacturing in Mexico under the shelter business model. Are there anythings that you would consider to be down sides?

Brandon Wehl:

Portage Electric Products really encountered too many negative aspects of manufaturing in Mexico under the shelter business model other. With a Mexico manufacturing facility, however, you need better coordination between your sales people and your customer, and the manufacturing oerations. When we were doing all the manufacturing here in Ohio, it was so easy for us to say, “I just got this phone call from a customer and they’re in trouble.” We could walk out in the manufacturing area, see the exact status of their order and physically lay eyes on it. You could expedite things pretty easily when you had full control of your maanufacturing operations. It’s not just with the Mexico shelter operation. It just has to do with any time that you are manufacturing at multiple locations, it’s a little bit harder to react as quickly to your customers when you are coordinating manufacturing operations that rely on one facility doing one operation and another facility doing another operation like we do. We’ve kind of had to adjust to the way that we respond to our customers. The only downside that I can really point out is that there is an associated cost involved with transporting goods back and forth across the border. Therefore, you want to limit border crossngs to a minimum. We do a shipment a week. We bring materials in and out. In some cases, we have some expedited orders that we are dealing with and we’ll make two. That’s the one thing that we had to learn and coordinate with our customers. Things are going to ship by a certain day, whereas, if we were doing something internally in-house, like we did fifteen years ago, we might be able to ship any day of the week as soon as the order was complete. For us, that has really been the only negative aspect of manufacturing in Mexico that we have dealt with.

 Tecma Group of Companies:

That’s good to know as far as limiting the shipments back and forth across the border as a cost saver. Last question: For those that are now in the same position in terms of investigating manufacturing in Mexico that you were prior to 2003, do you have any “if I knew then what I know now” advice for someone that might be going through the process today?

Brandon Wehl:

What has been interesting for Portage Electric Product is that, even before we established manufacturing operations in Mexico, we had many of our customers who had historically manufactured all of their products in the United States go down to Mexico to attempt to take advantage of lower cost labor. They always seemed to run into, some were successful and some people ran into a lot of problems, but in doing the investigation and evaluation of people that were not successful we found out that maybe they did not have a good factory manager, or they did not employ the best quality control people, or they didn’t monitor their production as carefully as they should have. We used that as a valuable lesson to know that, granted it is going to be less expensive to perform some manufacturing operations in Mexico than in the United States, you are still going to need quality people in key positions to make sure that the train is on track. If I had any advice for anyone, if they are investigating manufacturing in Mexico, is that some positions sometimes pay almost an equivalent amount for what you would pay in the United States for the upper management people that you would employ. In the end, it all balances out. We have, overall, probably about an eight times savings on labor and overhead than in Mexico compared to what we have in the United States. One of the things necessary for your success is to remember that you can’t skimp on certain areas of your manufacturing. You have to have good quality people, which we have found to be readily available in Ciudad Juarez.

Tecma Group of Commpanies:

There is one other final question that i would like to pose to you, if I may? You have had ten years of Mexico manufacturing experience in Cidad Juarez, in particular. Over the last several years, narcotics trade related violence has toned down to fairly reasonable levels, but this is always a question with people these days. What has been your experience?

Brandon Wehl:

We’ve had good experience. We really haven’t had any problems whatsoever. There was a time, when the violence was at its peak, that we were a little bit leery of sending some of our personnel from our headquarters here in Ohio to Mexico, because we like to send people on a somewhat regular basis to go in and deal with the people that are running our operations there to provide them with assistance. As a testament to the quality of the people that we have in our Mexican manufacturing operation, when the violence was at its peak there we did not have anyone from our facility in Ohio vist for almost two years. I think that is a pretty strong statement of how good the operation that we have established there is. That operation did not skip a beat, even without our on-site assistance. We did a lot of things via email and Skype, and other technologies that are available. As I said, we are in an expansion mode now, and our people do not have any qualms about going to Ciudad Juarez. I was personally there in October, and I have never felt unsafe. Obviously, anywhere you go in the world, you have to be aware of your surroundings, but if you just use your head and not be in the places that you shouldn’t be in the first place, you’re not going to have any problems.

Tecma Group of Companies:

That’s a pretty applicable bit of advice for anybody anywhere.

Brandon Wehl:

You can find trouble anywhere in the world.

Tecma Group of Companies:

Exactly. Is there anything that you would like to add. I have found this to be an interesting conversation, and hope that those that are listening find it to be the same. Is there anything that you would like to add as a final bit of commentary on this subject?

Brandon Wehl:

It has been a very good experience for Portage Electric Products. I think that what we have learned in orderr to really satisfy the needs of our customers is that you require some kind of presence in the geographical area at which your customers are located. That’s why, in addition to manufacturing in Mexio, we have operations in Europe. That is why we have several operations overseas to take care of those customers that are actually physically located in those areas. It’s really been a good experience for us to have this manufacturing presence in North America to meet the needs of our customers here. I have been very satisfied with how the operations have evolved and how we’ve evolved. Our first step producing outside of Ohio was in Mexico. We gained a lot of valuable experience through the establishment of a second manufacturing location in North America. We were able to take that and to transfer it to our other facilities outside of the United States. Anything that we have learned has been applicable to our continued success in our global expansion. Mexico is still kind of in your backyard. It is not like you have to travel half way around the world to address any issues. We are still in relatively the same time zone. It has been a good progression for us to expand our knowledge base as to what is required to go elsewhere in establishing manufacturing operations. If people are considering a move from a current location, it’s an easy transition for people to make.

Tecma Group of Companies:

Bradon, often when folks listen to these discussions, we get feedback and they have questions on the topic that we have has been discussed. Would you be adverse to providing your contact information in case somebody has a question on anything that you said, or, given the fact that they know now what you sell, they may want to inquire to become a customer of yours?

Brandon Wehl:

We can provide my email address. My email address is the best way to get a hold of me. It’s bwehl@pepiusa.com

Photo Credit: Instant Vantage

 

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