Manufacturers in metro Milwaukee and across the United States saw a significant boost in productivity and profitability through 2010, and many believe that recovery will continue well into 2011 and beyond.
- According to a recent survey by Milwaukee-based American Society for Quality, 68 percent of the companies within the manufacturing sector expect revenue growth in 2011.
- In the Milwaukee area, more than 57 percent of the manufacturing executives who responded to the annual First Business Economic Survey, conducted by First Business Bank-Milwaukee, expect increased profitability in 2011. About 60 percent said their companies had grown during 2010.
- The national semiannual economic forecast by the Institute for Supply Management forecasts solid growth for the coming year, with about 65 percent of respondents expecting an average revenue growth of 6.5 percent in 2011.
“While 2010 has been a year of recovery in manufacturing, our forecast sees improvements in both investment and employment in 2011,” said Robert Ore, chair of the ISM Manufacturing Business Survey Committee. “Manufacturing growth is now in its 16th month as measured by and reported in the monthly Manufacturing ISM Report On Business.”
Port Washington-based Allen Edmonds Shoe Corp., a manufacturer of high-end men’s shoes, had significant growth in demand for its products in 2010, and the company is just as optimistic about 2011.
“In 2010, we will have grown the company, from a revenue point of view, by 16 to 17 percent, and we anticipate something similar for 2011,” said Paul Grangaard, president and chief executive officer, who was one of the featured panelists at the Northern Trust Economic Trends Breakfast presented by BizTimes Media on Jan. 21. “It could be substantially larger. We have some new partners for (2011). On top of that, we think our retail strategy is really taking hold.”
The company’s sales in the U.S. rose significantly last year, and it saw increasing interest from customers around the globe, much like many other manufacturers in southeastern Wisconsin.
The company has been a player in the Japanese market for several years, but saw new interest from customers in other Asian countries in 2010, Grangaard said.
“We are being approached by Asian countries that have traditionally exported almost exclusively to the U.S. and not imported that much except for food,” he said. “We’ve been in Japan for a number of years. But more important, given the size of the population base, are China and Korea.”
Prices for commodities such as steel, copper and other raw materials rose during the final months of 2010, and many experts believe they will continue to rise in 2011 because of increased demand. Allen Edmonds’ primary commodity is leather, which rose in price through 2010, Grangaard said. However, leather prices could end up decreasing in coming years.
“There is a potential inversion that occurs because as the economy improves people around the world start eating more meat,” Grangaard said. “As they start eating more meat, people can afford to start eating more veal. As more veal gets produced, it gradually means a greater supply of raw material coming onto the leather market because leather is a byproduct of the food process.”
New products, consolidated facilities
Allen Edmonds’ shoes are known for high quality, and the company’s most popular lines usually sell in the $300 price range. Later this year, Allen Edmonds will unveil a new line of shoes that will sell in the $170 price range and will be made in the company’s Dominican Republic facility.
The new line is intended to compete with brands that are imported from Europe and Asia, Grangaard said.
At the same time, Allen Edmonds is working to consolidate its U.S. production into Port Washington. Until mid-2010, the company operated a second manufacturing facility in Maine. That facility was sold and production that was done there is now being moved to Port Washington.
When that line is moved, Allen Edmonds could add up to 200 new jobs over several years.
However, the company is already working to add new employees to its existing production lines because of its increase in sales. At the end of 2010, the company had about 300 employees in Port Washington.
“We said that we’re going to hire 50 people by the end of (2010,) and we’re close to that,” Grangaard said. “We’re so busy that it’s kind of hard to get everybody processed.”
Because Allen Edmonds believes its sales could increase significantly in 2011, the company is now crafting plans to search for and hire a significant number of new workers.
“If our business grows the way I think it will in the first quarter we’ll be looking at what we can do to expand production more significantly,” Grangaard said. “It will definitely involve hiring more people – whether it’s just adding people into our existing lines and making room for them or actually going to another shift – we’re in the process right now of trying to figure this out.”
Contract manufacturing
Like many manufacturers that make their own products, Allen Edmonds also does a limited amount of contract manufacturing for other brands. This month, the company fulfilled an order from a new contract manufacturing client, Grangaard said. He would not identify the customer, but said they are a well-known American brand that has ordered more than 10,000 pairs of shoes to sell in their own stores.
“We’re fairly selective about (contract manufacturing),” Grangaard said. “We only do it for three companies now. These are household name companies that aren’t in the shoe-making business, and they’ve been impressed with the quality of work we do.”
Expansion through acquisition
Allen Edmonds is owned by Goldner Hawn Johnson & Morrison, a Minneapolis-based private equity firm. The company and its private equity owner are now beginning to search for add-on acquisitions.
“We’re looking for things that fit with great American men’s products,” Grangaard said. “The area where we fit – great American styling, great American production, very high quality – all of those we think seem to be in very long term trends.
“And having turned the company around, it fits us from a product producing company to be looking around. Our retailing concept is about those kinds of products that are high service in a high quality environment for men. There are a bunch of things that we think could fit into our stores as we go from our great shoe reputation to other product categories.”
