Innovation pays off in a challenging market
MUSKEGON — Innovation is one way Fleet Engineers Inc. of Muskegon has stayed competitive for more than 40 years in a market as volatile as the trucking industry. That lesson is not lost on Wes Eklund.
Eklund's career in truck fleet components actually began in 1965 when he was 10 years old. That was when he started working at Fleet Engineers, owned by his father, Louis Eklund Jr.
His job was dipping parts into a five-gallon bucket of paint.
"I've been working here for my whole career," said the 53-year-old Eklund, who has been president of the company since 1990, but has worked there full time since he was 18. His education did not stop then, however. While working full time, he also attended GVSU, eventually earning a degree in business administration with a major emphasis on management and a minor in economics.
Louis Eklund Jr. started Fleet Engineers in 1963 to produce add-ons for semi-trailers and semi-tractors. A spring-loaded mud flap bracket that the company patented in the 1970s is still a major product and is known among truck fleet managers. The spring absorbs shocks that would otherwise shorten the life of the mud flap.
As the trucking industry goes, so goes the fate of Fleet Engineers, and for the last two years the going has been rough. A couple of years ago, Fleet Engineers had about 125 employees. Today it is down to about 100.
"Our industry tends to be a bit cyclical," said Eklund.
Many of the changes driving the trucking industry are the result of government regulation, he said. For example, a new federal law took effect in January 2007 that required a higher level of emission controls on semi-truck engines. The technological changes added an additional $10,000 to the cost of a semi-tractor and also reduced mileage efficiency by about one-half mile per gallon of fuel — and it also increased the cost of maintenance on those engines, according to Eklund.
The result of that Jan. 1, 2007, regulatory deadline was a decision by many owner/operators and truck fleet managers to move up their planned purchases of new trucks and trailers before 2007, which caused a bubble of business activity for Eklund and the truck manufacturers in 2006. But after the deadline, there was a dip in sales of new trucks and equipment. Because much of Fleet Engineers production goes on new trucks, that caused a dip in Eklund's business.
"Our dip was kind of prolonged by the current issues in the economy," he said. Eklund said the company suffered a 10 percent drop in 2007 and another 10 percent drop in business so far this year.
Fuel and credit are the two major financial issues in the trucking industry, and those factors are hardest on small, independent trucking companies, which make up the vast majority of the trucks on the road. It is the small trucking fleets that are least able to absorb the radical fuel cost increases.
As for the tightening credit situation that has impacted business as well as individuals, a new tractor-trailer rig costs about $120,000 — "obviously, credit plays a big role in that," said Eklund.
As a manufacturing company, there are other economic factors bedeviling Fleet Engineers. For one thing, steel prices are up worldwide: In the U.S., steel almost doubled in price from 2007 to 2008. Fleet uses a couple million pounds of steel a year, said Eklund.
When asked to predict the business situation for Fleet Engineering a year from now, Eklund said he anticipates things being flat. Most of the volatility in Fleet’s markets is among new truck dealers and trailer manufacturers, but Eklund’s company also serves the aftermarket, and that is less volatile than new truck sales.
There are also opportunities for manufacturers that are innovative, and Fleet Engineers has a long track record as an innovative company: It now holds 24 patents.
"Fleets are looking at things that are going to improve their fuel economy," said Eklund, so right now his company is developing a new product: side panels for trailers that are somewhat similar to a fender skirt. The panels improve the aerodynamics of semi-trailers and in the process improve fuel efficiency by 3 to 4 percent.
Another Fleet product is a roll-up trailer door, made of a composite material, that is lighter than a conventional door — which also shaves a little off fuel consumption. The material makes the doors last longer, too, so the combined savings of less weight and greater durability are significant over time.
"Most new ideas are not revolutionary," said Eklund. "They are evolutionary."
Earlier this year, Fleet Engineers began a push to make itself more of a lean manufacturer. In this endeavor, the company has been assisted by Curtis Walker of GDC Total Business Solutions, a consulting firm in Ypsilanti.
One principle of lean manufacturing is to find and eliminate non-value-added activity, such as reducing unnecessary movement of material. Fleet Engineers has done that in one case by moving the processes closer together in one of its key manufacturing cells. It has also reduced tool set-up time for that cell by 80 percent and improved output by 50 percent. In-process inventory has been cut by two-thirds.
Another principle of lean manufacturing is to increase employee involvement to the max.
"We're involving people at all levels of the business," said Eklund, not just the engineers and all the employees on the factory floor but also the sales staff — even the customers.
Lean manufacturing or continuous improvement usually starts with a small idea that turns into a brain-storming session, said Eklund.
A continuous improvement process has to encourage participation by the machine operators, because the people closest to the activity are in the best position to identify ways to improve the process. Since hourly employees are also the ones who will be key in implementing changes, their involvement from the start is encouraged, because then they will be more likely to buy into a proposed change.
It was hourly workers at Fleet Engineers who recently suggested a significant change. The suggestion first popped up when gasoline prices jumped up last year: Why not go to a four-day work week with 10-hour workdays, rather than the standard five days of eight hours each? That would reduce employee commuting miles each week by 20 percent.
In April, Fleet Engineers, which runs just one shift, did go to "four-tens," and the employees like it, said Eklund. It provides a three-day weekend each week, and that week-day off can be used for personal business that can't be done on Saturdays and Sundays, such as medical appointments or home repair service.
There was also an unintended consequence of going to a four-day work week — a good one, not a bad one. According to Eklund, after the four-tens work week was implemented, employee absenteeism dropped by 50 percent.
Eklund, who is chairman of the board of the Muskegon Area Chamber of Commerce, is very much in tune with Muskegon's history as a manufacturing center. Like others who grew up in Muskegon, he has seen many of the major industrial employers disappear over the years, and noted that tourism and medical services are now among the major employers.
Still, Eklund does not rule out manufacturing in Muskegon’s economy in the future.
"Manufacturing is still going to play an important role — just not as dominant as it was 50 years ago.”