Rockford, IL--How does an OEM vendor change from an entrepreneur dealing in niche products to a professional company offering systems solutions?
For an evolving case study, look at Pacific Bearing, which President Bob Schroeder and his dad started in 1982 during a very dismal metal-working recession in this manufacturing city. "They were doing stories about Rockford's 22% unemployment rate on national TV," recalls Bob. The Schroeders' machine shop business, which was tied too closely to the fortunes of Caterpillar, was barely hanging on. So the family tried a new direction: patented and proprietary products.
And they were successful, starting with a line of self-lubricating bearings, which has expanded steadily over the years to include European and Japanese metric lines. These bearings worked especially well in pumps, which established a very nice niche market for Pacific. Then came such products as linear guide rails, slides, rollers, and blocks.
As the company approached its 12th birthday, annual sales had grown to more than $10 million, and the workforce, which had consisted of three at the start, stood at more than 100.
But once again, Bob Schroeder felt his business had hit another wall. "When you get to $10 million in sales, you become an easy target for takeover," says Bob. The young engineer-entrepreneur wasn't ready to take the money and run. Yet he saw very clearly the obstacles that stood in his way.
For one thing, major distributors increasingly wanted to broaden their product lines--rather than bother with small companies with niche products.
He also knew that customers increasingly wanted to deal with companies that could provide an entire systems solution. And lastly, there was the matter of expanding overseas. Like many small, successful U.S. firms, Pacific Bearing wanted to go global.
Pacific Bearing's plan to counter these obstacles has in large part come down to Bob Schroeder's skills in personal diplomacy. As he scoured Europe for opportunities during visits to Germany's Hannover Fair and similar events, he discovered a group of European companies just like his--all in the $10 million to $20 million annual sales range and with respected technology in their home markets. Yet each lacked the muscle to attack global markets on their own.
The solution: Establish a "virtual corporation." Over the past two years, Schroeder has negotiated mutual licensing agreements with several European partner companies. Rollon (Italy) makes compact rails, belt-drive linear units, and heavy duty slides robust enough to handle 2,000-lb battery modules. In Germany, he found three companies: Nadella (linear guide rails); Winkel (heavy duty bearings and positioning systems); and Werner (linear slides and positioning systems for light industry, as well as controllers). In addition, he forged a relationship with Dr. Tillwich, a highly-respected German engineering services firm with a huge tribology data base for analyzing friction and wear in power transmission applications.
By adding the technology of these partner companies, Pacific Bearing can now offer U.S. customers affordable systems solutions in a wide range of linear motion applications. Schroeder also can count on his European partners to assist him in growing sales of the company's traditional bearing products in Europe. What's more, Pacific Bearing's alliance with these European firms has triggered a spurt of new investment by Pacific in manufacturing facilities, technical training, and computer systems.
To say that Bob Schroeder stuck his neck out is an understatement. But he also understands that such bold moves are needed. Says Schroeder: "To quote Intel's Andy Grove, only the paranoid survive."