Financial Planning Can Challenge Manufacturers

January 30, 2008
| By Pete Daly |
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HOLLAND — Last year was not an easy one for Kenowa Industries — but nothing compared to 2004, when the custom metal fabrication shop nearly went under, after 24 years in business.

"We did about $8 million worth of business and sold it for $6 million" in that "tumultuous year," said Ed Amaya, who had joined the company as production manager in January 2003.

"We were a day or two short of losing the business altogether," said Amaya. Kenowa Industries’ bank told the firm to "find somebody else" to finance it.

The bank "put some real strong holds on us throughout the process, until we finally landed Huntington Bank," said Amaya. Huntington studied the situation and told Kenowa, "We think you can turn this around," recalled Amaya.

Today Amaya is president of Kenowa Industries, which he said is healthy now, with no long-term debt. Sales average about $3.5 to $4 million a year. There are 33 employees in the main plant in Holland, plus six in Lansing at what is mainly a factory rack repair shop.

"Even though 2008 seems to be starting out a lot slower than we like, we are poised to still have a good year," he said.

Kenowa Industries is a custom designer and manufacturer of products used by other manufacturing companies, such as returnable steel containers, factory racks and other equipment for material handling and work-in-process. The company was started by Jay and Bruce DeVries, and its first product was the Northport Nailer, a very popular fishing lure. From there the company branched out into building metal equipment to order for the various manufacturing plants located nearby in West Michigan. Kenowa built and repaired a lot of racks used in the General Motors plants, for example.

The financial challenge facing a custom metal fabrication shop is that it is "very difficult to forecast (how much) we're going to sell next year. When you're custom, a lot of this is discretionary dollars," said Amaya. In other words, in a lean year, factory managers might decide they can get by another year with existing equipment.

Amaya said Kenowa always tries to put a budget together for the year ahead, but it's difficult for a custom manufacturer.

"We have customers who buy from us one time, and we might not see them again for a year," explained Amaya. "They may need 12 of this and that’s all they need — ever. Typically, when you're talking about long-running programs, you're talking automotive, and we all know how that goes.

“So we're trying to diversify ourselves, get more into the medical (device industry) and the schools and things like that, so that we don’t rely so much on the automotive side."

A review of the ups and downs of the last few years reveals Kenowa’s challenge of financial planning. While 2004 was a year of losses, business improved in 2005 and then went gangbusters in 2006, with almost $8 million in sales. Amaya had been named president of the company in February that year, but he insists he does not deserve the credit for that great year.

"I can't explain how we got that volume," he said, other than being "in the right place at the right time." He recalls there were a lot of automotive industry orders that year.

"But I can explain why we were profitable," he added. "Because we, as a company, embraced accountability and keeping measurable" goals.

The seesaw started down again in 2007, when Kenowa Industries had to struggle on sales of a little over $4 million.

"Last year, unfortunately, we had about 180 projects that were just cancelled. That was about $8 or $9 million in quoted work," said Amaya.

"What we've had to do is become smart in what we do here; watch the dollars … control what we can control. What we can't control, we can't waste time on."

Kenowa Industries measurements help pinpoint why it doesn’t get a job it quotes on, or why an order is cancelled. And it won't go after business if it doesn’t believe it has a chance at getting it or can't meet that customer's expectations.

"You just have to stop making bad decisions," said Amaya. "It's not hard: you either have cash flow or you don't." And when Kenowa sees cash flow start to shrink, he said, the company takes a look at the whole operation “to make sure we're not carrying any excess fat."

With its plans focusing on the new and growing markets in West Michigan, Kenowa can approach the future with more confidence. One of its product lines are workstations with adjustable work surfaces — long used in factories, but variations are also ideal for use in bioscience research labs and hospitals. Even the company’s old standby, factory racks, now include those designed for medical device manufacturers that make hospital beds that include metal parts hung on racks during the metal-coating process.

Last July, Amaya, 39, became an equal partner in Kenowa Industries, along with Doug and Mike DeVries. He also continues to serve as president of the company. Early in his adult life he thought he might become a minister and attended a bible college in Texas. Then he returned to his native West Michigan and ended up spending about 12 years with BLD Products in Holland, an automotive industry supplier. He rose through the ranks to a management position, and then landed a better position at Kenowa Industries.

"Although we've been around for 28 years, my philosophy is to treat it as if we are brand new again. … Getting back to the basics," said Amaya.

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