Supplier Readjusts to Austerity, Finds a Wealth of New Business

When the aerospace industry started downsizing a couple of years ago in anticipation of major cuts in U.S. defense spending, a worried Jim Espinosa and his managers began brainstorming about how best to deal with a shrinking market.

Banking on the notion that cost-conscious corporate managers would be looking for ways to slash overhead, Espinosa came up with a program that has made his Orange Coast Electrical Co. a major supplier of electrical products to some of Southern California’s biggest aerospace and industrial companies.

By guaranteeing next-day delivery to its customers, the Santa Ana firm has saved companies millions of dollars in warehouse and related inventory costs.

Eric Solander, a General Dynamics Corp. spokesman in Pomona, said the defense contractor’s Southland divisions have saved at least $1.5 million in inventory, storage and personnel costs since they tapped Orange Coast Electrical as their sole supplier of electrical products--light bulbs, wires, transformers and circuit breakers--18 months ago. The General Dynamics units previously bought from six suppliers.

Espinosa, a native of Mexico who is the sole owner of the company, apparently recognized a trend that some of his rivals did not.

“Espinosa’s company came at a time when many defense and non-defense companies are reducing their (number of) suppliers to cut costs and strengthening relations with their electrical hardware suppliers to make sure they get quality work,” said Albert Dawson, manager of programs for small and minority-owned businesses at Ford Aerospace Corp. in Newport Beach.

Orange Coast Electrical’s goal is to become the largest supplier of electrical hardware for the aerospace industry in Southern California, Espinosa said. It has contracts with 13 of Hughes Aircraft’s 15 divisions, and its other customers include McDonnell Douglas and Rockwell International in Southern California.

Wary of becoming too dependent on defense contractors, however, the company has begun diversifying into industrial maintenance services. It recently signed an agreement to provide maintenance services for the corporate headquarters of Toyota Motor Sales Inc. in Torrance.

“I decided the time was ripe to diversify,” said Espinosa, whom the U.S. Small Business Administration recently named the Small-Business Person of the Year for Orange, Riverside and San Bernardino counties.

“I realized early on that my company would need a steady flow of big contracts to grow, and that, unless we acted early, our business could suffer from a shrinking pool of contracts,” he said.

Espinosa’s son Steve, manager of the company, said it maintains large inventories of electrical products in its Santa Ana warehouses to ensure that customers’ requests can be filled quickly.

Jim Espinosa says two factors are largely responsible for the company’s success: its ability to compete in a price-sensitive market; and its status as a minority-owned small business, which gives it a leg up on the competition for business with companies that have government contracts. The federal government requires any company that does business with the government to purchase 5% of its products and services from minority-owned businesses.

The company has capitalized on those factors to win contracts from companies such as Xerox, Pacific Bell and Southern California Edison, Jim Espinosa said. “Once we get an opportunity to bid for the business, we have to be competitive in our service,” he said.

“All we needed was the chance to meet the right people in those big companies because we know we can bid competitively for contracts fair and square,” said Espinosa, who worked as a furniture store truck driver before starting his own company in 1980.

The company also recently won an $8-million contract to supply electrical materials for construction at the Los Angeles Convention Center, which is being expanded.

Orange Coast Electrical employs 32 people. It posted sales of $10 million for 1989 and predicts sales of about $12.5 million this year, which would place it among the nation’s top 200 Latino-owned businesses, according to Hispanic Business magazine.

“We’re not getting any favoritism other than the fact that through the Southern California Regional Purchasing Council in Anaheim, we get an introduction to companies’ executives and an opportunity to bid,” Jim Espinosa said.

That body is the regional division of the National Minority Supplier Development Council Inc., which is headquartered in New York. It is composed of representatives of major corporations whose task is to help minority businesses get acquainted with corporate purchasing agents.