February 19, 2007
Time and money | Want to buy an out-of-state manufacturing company and move it to Maine? Take one Portland firm's advice: It'll take longer than you think, and it'll cost more than you think.
By Joseph R. Thompson
Two years ago, when Nick Nikazmerad, owner and president of Eastman Industries in Portland, bought Ingersoll Equipment Co., a garden-tractor maker in Wisconsin, it was easy for him to imagine the benefits of the acquisition: more manufacturing jobs for Maine, more products for customers, more sustained growth for his company.
Eastman Industries made hover mowers, grass cutters that float on a layer of air. The company had enjoyed consistent domestic and foreign growth in recent years, and Nikazmerad wanted to buy Ingersoll to expand his product line to satisfy his growing base of customers. When the Ingersoll sale was finalized in April, 2005 ˆ Nikazmerad bought the company from a German maker of plumbing tools for an undisclosed price ˆ it all seemed to make perfect sense.
That is, until he began to wonder how he was actually going to physically combine the two companies.
Nikazmerad faced two big challenges: Moving the contents ˆ nuts and bolts, sheet metal, computers, tractor engines, and much more ˆ of Ingersoll's 100,000-square-foot production facility in Winneconne, Wisc., to Maine; and finding a new space in Portland that could accommodate all of the Ingersoll stuff along with Eastman's existing production facilities.
Nikazmerad, experienced manager that he was, did the prudent thing: he found himself some good help. Since 2005, Eastman Industries had been working with Maine Manufacturing Extension Partnership (MEP), a non-profit network that helps manufacturers with an array of issues, to figure out how he could move Ingersoll to Maine. The task fell to his MEP project manager, Larry Robinson, a 20-year manufacturing-process veteran. In August 2005, Robinson spent a week in Wisconsin, surveying the Ingersoll facility, sizing up the inventory, and talking to employees. "My initial reaction [when Eastman purchased Ingersoll] was that it was a very complementary product line for Eastman," said Robinson. "Then when I went out to Ingersoll, my second reaction was 'Oh my God, what did you get yourself into?'"
The Ingersoll plant was filled with parts for discontinued product lines, dribs and drabs from 44 years' worth of inventory. The equipment in some areas of the plant was 20 years old; according to Robinson, manufacturing equipment generally has a 10-year life span. "When I walked into that facility, it was like walking into a facility from the 1980s," said Robinson. "We had a lot of work ahead of ourselves."
And not just work, but expense. While he wouldn't say exactly how much the move cost, Nikazmerad conservatively estimated the shipping costs alone ˆ almost 50 tractor-trailer loads ˆ at around $200,000. And while Eastman Industries is better prepared to compete with larger companies following the absorption of Ingersoll, the move did teach Nikazmerad some lessons. "It takes more time than you think," he said, "and it's more expensive than you think."
Space race
Nikazmerad, 61, didn't come to Maine to become a lawn-equipment baron and oversee complicated moves of companies located halfway across the country. He retired to his farm in Lovell, in the hills north of Fryeburg, in 1997 after running a Connecticut company that supplied nuclear fuel to reactors, and teaching at the University of Connecticut. Then he saw a hover mower in action, and his curiosity was piqued.
Unlike a conventional lawn mower, a hover mower's impellor creates a cushion of air strong enough to float the machine above the grass at a uniform height, regardless of the slope. Nikazmerad thought he saw untapped market potential ˆ such as golf courses, high-end landscapers and other grass aficionados who didn't want to leave tire marks in the grass ˆ in the gizmo, and bought the troubled Grass Craft company, a hover mower maker in Portland, in 1998. (He declined to give a purchase price.) "I couldn't just lie around the farm and do nothing," said Nikazmerad. He renamed the company Eastman ˆ after his farm, the Eastman Mill Stock Farm ˆ and began pursuing the high-end accounts he believed couldn't live without fleets of hover mowers.
Over the next year Nikazmerad oversaw the design of a new product line of Eastman Industries HoverMowers, while aggressively seeking new commercial accounts, both domestic and foreign. He went on trade missions to the United Kingdom, Ireland, Italy, Germany and France to drum up business. In 2004, when Eastman's foreign sales reached 25 percent of total sales, he was chosen by the Maine International Trade Center as "International Innovator of the Year." Today the company sells three models of its HoverMower, five varieties of its conventional-style commercial lawn mower and has accounts in 32 countries. "Just in the past month we've had orders from India, China, France, Holland, Belgium and the UK," said Nikazmerad. "And those are just the ones I can think of off the top of my head."
Expanding the Eastman product line was the next logical step, and purchasing Ingersoll and its line of garden tractors and riding mowers seemed to Nikazmerad a great way to do it. Before he could physically merge the two companies, however, Nikazmerad needed a place to put them; his 7,000-square-foot facility in Portland wasn't nearly large enough to accommodate the merged companies. While the MEP's Robinson helped outline what Nikazmerad would need in a plant, Jack Lufkin, then Portland's Economic Development division director, identified several potential sites in the city where Eastman could relocate. Lufkin also helped Eastman secure a $3.25 million industrial revenue bond to pay for the building and renovations.
In January 2006, Nikazmerad opted for 15 acres off Riverside Street, at the city's western edge, that included a 40,000-square-foot manufacturing facility previously used by Jøtul stoves. The Riverside location wasn't situated in a Pine Tree Zone ˆ areas around the state where incoming businesses get breaks on state taxes, and can qualify for reimbursement of employee withholding taxes ˆ but it provided a variety of terrain for product testing, as well as an additional 24,000-square-foot building, which is currently being rented out.
The pressure on Nikazmerad to move the Ingersoll inventory made the Riverside Street location even more attractive, said Lufkin. "The issue was timing, and we had a ready-made building here," said Lufkin, adding that the site offered a good investment for Nikazmerad. "It's no secret that City of Portland property is and remains a very good investment," said Lufkin. "Not to say that other cities aren't."
Nikazmerad said it took four months to refurbish and renovate the facility, including two weeks of high-pressure hosing to clear away the layers of stove black left on the concrete floors, residue from Jøtul's manufacturing process. New infrastructure for Eastman's processes had to be installed, including HVAC and electrical and air lines. Updating the building cost around $250,000.
Moving units
While Nikazmerad got the new facility put together, he and Robinson were figuring out how to get Ingersoll to Maine. Delicate manufacturing equipment such as CNC machines, along with current tractor parts and the assembly processes, had to be transported halfway across the country. "We had stuff everywhere," said Nikazmerad of the Ingersoll plant. "We decided to clean house." Even though a monthly rental arrangement was worked out to keep Ingersoll production continuing in Wisconsin, Nikazmerad set a goal to move the company to Maine by the end of 2005. That proved overly optimistic. "We just didn't have the manpower," said Nikazmerad. But when new owners took over the Ingersoll building in 2006 and raised the rents, Nikazmerad pushed to make it out by June.
Nikazmerad and Robinson decided to scrap nearly $600,000 worth of old Ingersoll inventory, mostly tractor parts and accessories, dating back to 1963. "As the timeline got really compressed," said Robinson, "I'm sure some stuff got scrapped that shouldn't have." But even after such a rigorous pruning, it still took almost 50 tractor-trailer truckloads to bring everything to Maine, at a cost of $3,000 to $4,000 per load. "The biggest challenge," said Robinson, "was trying to absorb it all at the Portland end."
Every other day through July and August, another truckload of inventory would arrive at the new facility, and every item had to be inventoried. Meanwhile, Robinson was consulting the notes he made at Ingersoll, and tapping the expertise of a few top-level Ingersoll employees, to redesign Eastman's assembly line so that it could accommodate everything from HoverMowers to riding mowers. Nikazmerad said it took them until early September to get the factory put together, due to the flood of Ingersoll inventory. "We're still working to iron things out," said Nikazmerad, adding that he staggered the move to allow the Ingersoll tractor assembly line to make tractors in Wisconsin right up until the end of June; following the move, it was up and producing in Maine by September. (The HoverMower and Eastman Commercial lines continued to operate uninterrupted throughout the move.)
Overall, production at Eastman Industries ˆ which now includes the HoverMower, Eastman Commercial mowers and Ingersoll tractors nameplates ˆ is far below capacity. While he declined to give specifics, citing concerns about his competitors getting wind of his company's size, Nikazmerad said HoverMower and Eastman Commercial mowers production is in the thousands of units annually, with the goal of several thousand over the next two years. Nikazmerad said the goal for the Ingersoll tractor line is 1,000-2,000 units annually within the next year or two, but he declined to give current production numbers.
When Ingersoll was sold, the company's employees chose not to relocate to Maine due to the high cost of housing. This forced Nikazmerad to start hiring for the Ingersoll division from scratch. But rather than being a hindrance, he said, this helped avoid a potential culture clash between the divisions and allowed for cross training. "We want guys who are interchangeable," said Nikazmerad. Eastman Industries now employs 15; as the plant nears full capacity over the course of the year, Nikazmerad says the workforce could grow to 30 or more.
That's still a comparatively small number for what the company is turning out, and it's part of the "lean manufacturing" model Nikazmerad has built his company around. Getting the stove black off the floor was just the first step; cleanliness is just one of many factors that can affect the efficiency of the assembly line. So is basic organization of the space; when a person on the assembly line needs a tool or part, it should be within easy reach, maximizing efficiency and minimizing the number of unnecessary trips across the floor.
Lean manufacturing is a major part of the MEP program training. Robinson said lean manufacturing began in the 1990s as a reaction to outsourcing. On the macro level, lean manufacturing focuses on knowing how much capacity a facility will use over a year, and determining an efficient flow of materials. "The general rule is not having any backtracking," said Robinson. "You try to set up a U-shaped production cell or a linear flow."
At Eastman, the lean-manufacturing philosophy is on display from the moment parts are delivered to the point when finished tractors and hover mowers sit on shelves near the loading docks, awaiting shipment. By trimming excess time and costs off the process, Nikazmerad is able to efficiently switch from one product line to another. The money he saves, he said, allows him to compete with foreign suppliers. Even the fork-lift, a refurbished narrow lift, was chosen for its efficiency, almost doubling the amount of usable space for overhead storage. "When Jøtul was here they had about 50 shelving units," said Nikazmerad. "We have space for about 98."
The shelving units detail serves as a parable for Eastman's expansion, too; somehow, by buying Ingersoll, Eastman became leaner and meaner. The process was more involved than he could have ever expected, Nikazmerad said ˆ more than anyone had expected, really ˆ but by purchasing Ingersoll and relocating it to Maine, he's made his company more competitive in the global market. "We're a much smaller company becoming capable of supplying a more diverse product line," said Nikazmerad.
Eastman Industries made hover mowers, grass cutters that float on a layer of air. The company had enjoyed consistent domestic and foreign growth in recent years, and Nikazmerad wanted to buy Ingersoll to expand his product line to satisfy his growing base of customers. When the Ingersoll sale was finalized in April, 2005 ˆ Nikazmerad bought the company from a German maker of plumbing tools for an undisclosed price ˆ it all seemed to make perfect sense.
That is, until he began to wonder how he was actually going to physically combine the two companies.
Nikazmerad faced two big challenges: Moving the contents ˆ nuts and bolts, sheet metal, computers, tractor engines, and much more ˆ of Ingersoll's 100,000-square-foot production facility in Winneconne, Wisc., to Maine; and finding a new space in Portland that could accommodate all of the Ingersoll stuff along with Eastman's existing production facilities.
Nikazmerad, experienced manager that he was, did the prudent thing: he found himself some good help. Since 2005, Eastman Industries had been working with Maine Manufacturing Extension Partnership (MEP), a non-profit network that helps manufacturers with an array of issues, to figure out how he could move Ingersoll to Maine. The task fell to his MEP project manager, Larry Robinson, a 20-year manufacturing-process veteran. In August 2005, Robinson spent a week in Wisconsin, surveying the Ingersoll facility, sizing up the inventory, and talking to employees. "My initial reaction [when Eastman purchased Ingersoll] was that it was a very complementary product line for Eastman," said Robinson. "Then when I went out to Ingersoll, my second reaction was 'Oh my God, what did you get yourself into?'"
The Ingersoll plant was filled with parts for discontinued product lines, dribs and drabs from 44 years' worth of inventory. The equipment in some areas of the plant was 20 years old; according to Robinson, manufacturing equipment generally has a 10-year life span. "When I walked into that facility, it was like walking into a facility from the 1980s," said Robinson. "We had a lot of work ahead of ourselves."
And not just work, but expense. While he wouldn't say exactly how much the move cost, Nikazmerad conservatively estimated the shipping costs alone ˆ almost 50 tractor-trailer loads ˆ at around $200,000. And while Eastman Industries is better prepared to compete with larger companies following the absorption of Ingersoll, the move did teach Nikazmerad some lessons. "It takes more time than you think," he said, "and it's more expensive than you think."
Space race
Nikazmerad, 61, didn't come to Maine to become a lawn-equipment baron and oversee complicated moves of companies located halfway across the country. He retired to his farm in Lovell, in the hills north of Fryeburg, in 1997 after running a Connecticut company that supplied nuclear fuel to reactors, and teaching at the University of Connecticut. Then he saw a hover mower in action, and his curiosity was piqued.
Unlike a conventional lawn mower, a hover mower's impellor creates a cushion of air strong enough to float the machine above the grass at a uniform height, regardless of the slope. Nikazmerad thought he saw untapped market potential ˆ such as golf courses, high-end landscapers and other grass aficionados who didn't want to leave tire marks in the grass ˆ in the gizmo, and bought the troubled Grass Craft company, a hover mower maker in Portland, in 1998. (He declined to give a purchase price.) "I couldn't just lie around the farm and do nothing," said Nikazmerad. He renamed the company Eastman ˆ after his farm, the Eastman Mill Stock Farm ˆ and began pursuing the high-end accounts he believed couldn't live without fleets of hover mowers.
Over the next year Nikazmerad oversaw the design of a new product line of Eastman Industries HoverMowers, while aggressively seeking new commercial accounts, both domestic and foreign. He went on trade missions to the United Kingdom, Ireland, Italy, Germany and France to drum up business. In 2004, when Eastman's foreign sales reached 25 percent of total sales, he was chosen by the Maine International Trade Center as "International Innovator of the Year." Today the company sells three models of its HoverMower, five varieties of its conventional-style commercial lawn mower and has accounts in 32 countries. "Just in the past month we've had orders from India, China, France, Holland, Belgium and the UK," said Nikazmerad. "And those are just the ones I can think of off the top of my head."
Expanding the Eastman product line was the next logical step, and purchasing Ingersoll and its line of garden tractors and riding mowers seemed to Nikazmerad a great way to do it. Before he could physically merge the two companies, however, Nikazmerad needed a place to put them; his 7,000-square-foot facility in Portland wasn't nearly large enough to accommodate the merged companies. While the MEP's Robinson helped outline what Nikazmerad would need in a plant, Jack Lufkin, then Portland's Economic Development division director, identified several potential sites in the city where Eastman could relocate. Lufkin also helped Eastman secure a $3.25 million industrial revenue bond to pay for the building and renovations.
In January 2006, Nikazmerad opted for 15 acres off Riverside Street, at the city's western edge, that included a 40,000-square-foot manufacturing facility previously used by Jøtul stoves. The Riverside location wasn't situated in a Pine Tree Zone ˆ areas around the state where incoming businesses get breaks on state taxes, and can qualify for reimbursement of employee withholding taxes ˆ but it provided a variety of terrain for product testing, as well as an additional 24,000-square-foot building, which is currently being rented out.
The pressure on Nikazmerad to move the Ingersoll inventory made the Riverside Street location even more attractive, said Lufkin. "The issue was timing, and we had a ready-made building here," said Lufkin, adding that the site offered a good investment for Nikazmerad. "It's no secret that City of Portland property is and remains a very good investment," said Lufkin. "Not to say that other cities aren't."
Nikazmerad said it took four months to refurbish and renovate the facility, including two weeks of high-pressure hosing to clear away the layers of stove black left on the concrete floors, residue from Jøtul's manufacturing process. New infrastructure for Eastman's processes had to be installed, including HVAC and electrical and air lines. Updating the building cost around $250,000.
Moving units
While Nikazmerad got the new facility put together, he and Robinson were figuring out how to get Ingersoll to Maine. Delicate manufacturing equipment such as CNC machines, along with current tractor parts and the assembly processes, had to be transported halfway across the country. "We had stuff everywhere," said Nikazmerad of the Ingersoll plant. "We decided to clean house." Even though a monthly rental arrangement was worked out to keep Ingersoll production continuing in Wisconsin, Nikazmerad set a goal to move the company to Maine by the end of 2005. That proved overly optimistic. "We just didn't have the manpower," said Nikazmerad. But when new owners took over the Ingersoll building in 2006 and raised the rents, Nikazmerad pushed to make it out by June.
Nikazmerad and Robinson decided to scrap nearly $600,000 worth of old Ingersoll inventory, mostly tractor parts and accessories, dating back to 1963. "As the timeline got really compressed," said Robinson, "I'm sure some stuff got scrapped that shouldn't have." But even after such a rigorous pruning, it still took almost 50 tractor-trailer truckloads to bring everything to Maine, at a cost of $3,000 to $4,000 per load. "The biggest challenge," said Robinson, "was trying to absorb it all at the Portland end."
Every other day through July and August, another truckload of inventory would arrive at the new facility, and every item had to be inventoried. Meanwhile, Robinson was consulting the notes he made at Ingersoll, and tapping the expertise of a few top-level Ingersoll employees, to redesign Eastman's assembly line so that it could accommodate everything from HoverMowers to riding mowers. Nikazmerad said it took them until early September to get the factory put together, due to the flood of Ingersoll inventory. "We're still working to iron things out," said Nikazmerad, adding that he staggered the move to allow the Ingersoll tractor assembly line to make tractors in Wisconsin right up until the end of June; following the move, it was up and producing in Maine by September. (The HoverMower and Eastman Commercial lines continued to operate uninterrupted throughout the move.)
Overall, production at Eastman Industries ˆ which now includes the HoverMower, Eastman Commercial mowers and Ingersoll tractors nameplates ˆ is far below capacity. While he declined to give specifics, citing concerns about his competitors getting wind of his company's size, Nikazmerad said HoverMower and Eastman Commercial mowers production is in the thousands of units annually, with the goal of several thousand over the next two years. Nikazmerad said the goal for the Ingersoll tractor line is 1,000-2,000 units annually within the next year or two, but he declined to give current production numbers.
When Ingersoll was sold, the company's employees chose not to relocate to Maine due to the high cost of housing. This forced Nikazmerad to start hiring for the Ingersoll division from scratch. But rather than being a hindrance, he said, this helped avoid a potential culture clash between the divisions and allowed for cross training. "We want guys who are interchangeable," said Nikazmerad. Eastman Industries now employs 15; as the plant nears full capacity over the course of the year, Nikazmerad says the workforce could grow to 30 or more.
That's still a comparatively small number for what the company is turning out, and it's part of the "lean manufacturing" model Nikazmerad has built his company around. Getting the stove black off the floor was just the first step; cleanliness is just one of many factors that can affect the efficiency of the assembly line. So is basic organization of the space; when a person on the assembly line needs a tool or part, it should be within easy reach, maximizing efficiency and minimizing the number of unnecessary trips across the floor.
Lean manufacturing is a major part of the MEP program training. Robinson said lean manufacturing began in the 1990s as a reaction to outsourcing. On the macro level, lean manufacturing focuses on knowing how much capacity a facility will use over a year, and determining an efficient flow of materials. "The general rule is not having any backtracking," said Robinson. "You try to set up a U-shaped production cell or a linear flow."
At Eastman, the lean-manufacturing philosophy is on display from the moment parts are delivered to the point when finished tractors and hover mowers sit on shelves near the loading docks, awaiting shipment. By trimming excess time and costs off the process, Nikazmerad is able to efficiently switch from one product line to another. The money he saves, he said, allows him to compete with foreign suppliers. Even the fork-lift, a refurbished narrow lift, was chosen for its efficiency, almost doubling the amount of usable space for overhead storage. "When Jøtul was here they had about 50 shelving units," said Nikazmerad. "We have space for about 98."
The shelving units detail serves as a parable for Eastman's expansion, too; somehow, by buying Ingersoll, Eastman became leaner and meaner. The process was more involved than he could have ever expected, Nikazmerad said ˆ more than anyone had expected, really ˆ but by purchasing Ingersoll and relocating it to Maine, he's made his company more competitive in the global market. "We're a much smaller company becoming capable of supplying a more diverse product line," said Nikazmerad.
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