Mettle Refiners : Management: When new owners took over Fabcon, they asked workers how to turn the company around. Results were startling.
You’re not supposed to be able to do what the team at Fabrication Concepts Corp. is doing.
The conventional wisdom is that ordinary manufacturing operations can’t thrive in high-tech, pricey Orange County. But sheet-metal fabricator Fabrication Concepts, which does business as Fabcon, is entering its 17th year here and has no plans to leave.
The company’s story is one of a remarkable recovery brought about by fairly unremarkable means: The most radical management technique is to ask the employees routinely how they think things could be done better.
Fabcon was teetering on the brink of bankruptcy in 1989 when brothers Bert and Don Ohlig acquired it as an investment.
Since then, sales and employment have more than tripled. The company has bought and moved into its own 33,000-square-foot building in Irvine, and annual profit margins of 4% to 6% have risen from what once was a deep pool of red ink. All of that has happened during one of Southern California’s worst and longest recessions.
The Ohligs didn’t revive Fabcon by pumping in millions of dollars or replacing the work force. Instead, Bert Ohlig said, they brought an antiquated front-office operation up to state-of-the-art standards and then let the production people have more say in how they did their jobs.
“The computer system was so old and overloaded, they were getting financial statements six months after the fact. They were operating blind,” Don Ohlig said.
The brothers replaced the entire system with new computers and software--and then asked the employees and managers what to do next.
Some of the suggestions were simple. Employees in the packaging department, for example, asked for better lighting so they could spot flaws and improve the quality of the products they shipped. (Fabcon now boasts that fewer than 0.5% of its products are returned for quality reasons. The industry norm is 3%.)
Some were more complicated, such as developing a 24-hour electronic bulletin board that allows customers to download into Fabcon’s system computer drawings of the parts they need. Using those drawings, Fabcon can do same-day cost estimates and ship finished parts in as little as three days--cutting processing time by 25% or more.
Fabcon is what once was called a job shop. Rather than make millions of the same part for one client, it specializes in small runs--anything from a single prototype to 10,000 units. Most of its orders are for components used in computers, telecommunications equipment and industrial electronics.
The Ohligs’ introduction to Fabcon came in the 1980s when the company, then called Fab Tek, started suppling a critical polished-metal reflector for some of the offset printing camera lights manufactured by Olec Corp., an Irvine graphic arts equipment business owned by the Ohlig family.
“Their work was excellent, the best we’d seen,” Bert Ohlig recalled. “They had a degree of precision we couldn’t get anywhere else, and they were very cooperative and informative in dealing with us.”
The buyer-supplier relationship lasted for years, and the quality of Fab Tek’s parts never varied. But the company’s financial condition did.
“Our purchasing agent (at Olec) came in one day and told us that Fab Tek was in deep trouble,” Bert Ohlig said. The sheet-metal company’s founders had little understanding of the business end of the operation. Though its revenue was about $2 million for 1987, the company was hobbled by loan repayments at high interest rates.
“There wasn’t enough left to buy material or make payments on the machinery,” Don Ohlig said. Seeing an opportunity, the brothers spoke with Fab Tek’s owners, customers and lenders. The consensus, Bert Ohlig said, “that the company had a lot of promise but needed some new leadership.”
The Ohligs made an offer for the company as an independent venture separate from Olec Corp. Their bid was accepted, and in February, 1989, they paid $10,000 cash and assumed more than $750,000 in liabilities to acquire Fab Tek, which they promptly renamed.
The Ohligs knew from the start that their expertise was in business, not production, so they kept most of the company’s staff.
The employees “trusted us and believed in us,” said Administrative Manager Elizabeth Michaels. “Before, the employees didn’t get a feeling that management had the right attitude. Now we all feel like part of a team.”
OC Enterprise: Fabcon
ABOUT THE COMPANY
Name: Fabrication Concepts Corp., doing business as Fabcon
Location: 1902 McGaw Ave., Irvine
Owners: Don and Bert Ohlig
Management: Daily operating authority is shared by general manager Jim Metzler, production manager Dave Martin and administrative manager Elizabeth Michaels.
What the company makes: Mostly metal components used in computers, telecommunications equipment and industrial electronics.
OWNERS REFLECT
How did you get started? We bought the company in 1989.
Where did you get financing? Most of it was borrowed through material suppliers, equipment companies and banks. We used our own homes as collateral for the bank financing.
What was:
* Your biggest challenge? Handling the growing pains. We started with 28 employees and now have 92.
* Your biggest mistake? Underestimating how long it would take to implement change. This includes the time to understand the objectives, evaluating alternatives, purchasing times, training, implementation and feedback.
* The best advice you received? To go to the local universities for assistance. We did, and they provided classes for employees at our facilities. They also provided some interns, who helped us with marketing. One designed our logo.
* The most important lesson you learned? There are two. We learned the value of delegating. Running two companies makes it difficult to stay on top of everything that is going on. We were delighted to see the employees taking the bull by the horns, making decisions and following through. And we learned to always keep our customers’ needs in mind as we were going through the changes. Your service must remain at the highest level even though you are preoccupied with other things.
What advice would you give to someone starting a business in this field? You must combine craftsmanship . . . with world-class business techniques. You can’t run a successful business with any part of the puzzle missing.
