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How Tessy Plastics in Elbridge, NY, fought its way back from the loss of its major customer
Elbridge, NY -- Tessy Plastics Corp. President Roland Beck had every reason to be feeling good that morning in June 2001 as he drove to work. Business had been good for Tessy, an Elbridge company founded by Beck’s father and two partners 28 years earlier.
Tessy was making the plastic ink cartridges for Xerox printers. Lots of them. But about two miles before reaching Tessy’s plant on Route 5, Beck heard a news report on his car radio that ruined his day and nearly his family’s company: Xerox was pulling the plug on its entire line of inkjet printers, a business it had entered just one year earlier.
Sales to Xerox accounted for 40 percent of Tessy’s revenues. Nearly half of Tessy’s 795 employees in Elbridge produced ink cartridges for Xerox. Just a year earlier, Tessy opened plants in Ireland and China to help fill orders for Xerox ink cartridges in Europe and Asia.
Beck managed to keep his car on the road, but he wasn’t sure he could keep his family’s company in business. “It was just like, wow,” Beck recalled. “You wonder if you’ll survive it, actually.”
When he got to work, he went to his second-floor office and, with help from a soon-to-be-revamped management team, began to plan Tessy’s road to recovery.
Nine years later, Tessy, with a new focus on automation and the medical equipment market, has become one of Onondaga County’s fastest-growing companies. It has hired 200 people in the past 12 months and can’t seem to expand its factory fast enough.
The company is finishing its fifth expansion in Elbridge, an $11 million, 90,000-square-foot manufacturing building. It is close to completing the purchase of a vacant 270,000-square-foot building in Van Buren formerly owned by the now-defunct Syroco Inc., for use as a warehouse and distribution center.
Altogether, the expansions represent a $60 million investment by Tessy in Onondaga County since the dark days of 2001. In one of the nation’s deepest recessions in decades, when manufacturing employment in Central New York reaches a new low practically every month, sales at Tessy have been growing rapidly — 12 to 15 percent a year, according to Beck.
Tessy’s sales reached $160 million in 2009, $100 million more than in 2002. And they show no signs of slowing. Sales grew 30 percent in the first six months of this year, compared with the same period last year. The family owned company does not disclose profits.
“We went through a period when we lost a lot of money over a few months,” said Beck. “It’s sobering. It’s scary, and then you go, oh wait, I’m not losing it. We’re going to make some changes. We’re going to survive this. And we turned it around.”
How the Company Survived
In 2001, it was hard for Beck to have imagined the company’s current success.
Three months after the Xerox bombshell, terrorists flew hijacked planes into the World Trade Center, the Pentagon and a field in Pennsylvania, killing nearly 3,000 people and helping to send the U.S. economy into a tailspin, further dampening sales at Tessy. With the loss of Xerox and a slowdown in sales to other customers over the next few months, Tessy lost half its revenues.
Though a vice president at the time, Beck had always worked on the factory floor at Tessy and never had much desire to manage the company. But his father was ready to turn over the reins. “It was terrible,” said Henry Beck, who lives in Skaneateles and still pops in several times a year to visit employees with his wife, Helga. “I couldn’t sleep.”
“It became my baby overnight,” his son said. “All of a sudden, you’ve got to sink or swim. I was thinking, how much money do we have left and can we turn this around before we run out?”
The first order of business was the most painful. Tessy laid off half its work force — 395 of its 795 employees. It closed its 1-year-old factory in Ireland, laying off the 60 employees there. The cuts began within days of the Xerox announcement. A hundred went out that first week, the rest in waves over the next four months.
“It was awful,” said Beck. “A lot of people were your friends. Everybody has mouths to feed and everybody has feelings, and when you can’t keep them on anymore, even though they understand that you lost half the work, you feel awful.”
Next, production workers were organized into work teams, or “cells,” with each responsible for the operation and profitability of one or a few manufacturing lines. “What’s the saying, ‘You can be good at a lot of things but great at a few?’” Beck said. “The cells became very good at making those parts, and customers like it because they get to know the people making their products.”
Tessy jettisoned its “just in time” approach to manufacturing, a strategy, increasingly popular with manufacturers, whereby a company makes only enough products to fill a customer’s immediate needs. It’s a policy that lowers warehousing costs, but in Tessy’s case it also caused frequent starts and stops of its production line, said Stuart Smurthwaite, vice president of operations.
“We were spending a lot of resources on a hundred tool changes, sometimes, in a day,” he said. Now, Tessy does longer production runs and warehouses products until its customers need them.
Relying on automation
Tessy also invested heavily in automation to reduce costs. It has 20 technicians whose job is to design, build and troubleshoot robotic machines that not only make plastic parts, but also in some cases assemble them into finished products.
One such machine assembles the five parts of an Old Spice underarm deodorant container in the blink of an eye, pumping out four fully assembled and labeled containers every second for Procter & Gamble, one of the biggest consumer products makers in the world. “Before that, we were very labor intensive,” Beck said. “It was all hand assembly, but you can’t compete with the Mexicans and Chinese that way.”
Tessy makes 100 percent of standard-size containers for Old Spice deodorant. No matter where you live, if you use Old Spice deodorant, chances are the container was made in Elbridge.
Ever use a Hefty OneZip food storage bag? Tessy makes the little plastic sliders at the top that zips them shut.
Automation is something workers often view as a threat to their jobs. But process technician Rich Smith said that’s not how he viewed it at Tessy. “Without automation, some of these customers might not be here,” said Smith, who was working on the Xerox account when it disappeared. “If you can’t make the part cheap enough, they’re going to take it to some place that can.”
Unlike most manufacturers, Tessy has no product of its own. It custom-makes plastic parts for other people’s products. So it cannot just boost its marketing to sell more product. But what it could do is be picky about whom it makes parts for.
Beck said he recognized, during his years working the production floor, that it was costing the company more to make products for some customers than it was getting in return. That was especially true for small customers, for whom manufacturing runs were too small to overcome production startup costs. But it was also true for automobile companies, who have a habit of demanding price cuts year after year. Beck went through a list of the company’s customers, and dropped 19 of 38.
Finding a focus
Then Tessy looked for customers large enough to be worth the company’s time and that still wanted their products made in the United States. A logical choice was the medical equipment industry, which needs plastic parts for many medical devices and demands that they be engineered to strict tolerances in exceptionally clean manufacturing environments.
Skaneateles-based Welch Allyn Inc., a maker of diagnostic medical devices, had been a customer of Tessy’s since Beck’s father founded the company with partners Al Bauerschmidt and Dieter Frick in 1973. (Henry Beck bought Bauerschmidt’s and Frick’s ownership shares in 1978.)
But medical equipment makers accounted for only 20 percent of Tessy’s business in 2001. So the company went after more, including Johnson & Johnson, one of the world’s biggest makers of medical devices. Among the products it now makes for Johnson & Johnson are parts for tubes that are inserted into the body during medical procedures and cartridges that hold surgical staples. Medical equipment now accounts for 55 percent of Tessy’s sales.
“They’re very good at making devices in high volume and high quality,” said Eric Allyn, a member of the board of directors at Welch Allyn, which buys from Tessy disposable plastic parts of various medical devices, including otoscopes, which doctors use to look into patients’ ears.
Tessy now employs five more people in Elbridge than it did before the layoffs — 800. It also employs 200 in Lynchburg, Va., at a plant it opened in 1997 and 300 at its plant in Shanghai, China, which makes parts for medical devices and batteries for the Asian market. Beck estimates the company makes 20 million individual plastic parts a day at its plants, which run 24 hours a day.
His biggest problem is learning the names of all the new employees. He walks the production floor daily, chatting with employees. He does not look much different from them because he’s usually dressed in blue jeans and an open-collar shirt. Beck even makes a point to keep track of their birthdays. The company gives employees a greeting card and a $20 check on their birthdays.
“He works all the shifts,” said Cathy Weller, a production line leader who has worked at Tessy since 1988. “He’s always asking you how you’re doing. His dad did it, too.”
Tessy Plastics Corporation has been selected as a winner of the 2012 Manufacturing Leadership 100 Award in the Innovative Enterprise category.
Tessy Plastics signed the Climate Declaration to show not only our support on the initiative but also do our part on reducing our carbon footprint and supporting climate and clean energy policies at the national, state and local level.