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Poised for Growth

Author: Jane Hodges Young
June, 2013 Issue

After a period of decline, North Bay champions of manufacturing say things are looking up once more.

 
 
If what goes up must come down, then the opposite must also be true. Case in point: manufacturing in the North Bay.
 
Back in the heady days of telecom, North Bay manufacturers that fed the growing industry were riding high. Sonoma County even got a new nickname: “Telecom Valley.” Then the bubble burst and the economy swung into reverse.
 
But after an excruciating period of decline, North Bay champions of manufacturing say things are looking up once more, and, if the trend holds, there’s a good chance we’ll soon be “firing on all cylinders.”
 
“The outlook is more than optimistic,” says Dick Herman, president of 101MFG, a private alliance of Northern California manufacturing executives that’s dedicated to enhancing the competitive posture and economic success of its members through executive networking, best practices, cost reduction and educational programs. “It almost defies logic considering the very difficult economic times we’ve been through, but businesses are literally putting millions of dollars into capital investment—and they’ve started hiring again,” Herman explains.
 
According to Herman, in the last year, some of the firms in his organization have grown by as much as 25 percent, and the 300 companies that he regularly tracks in Northern California are growing at a clip of between 9 percent and 11 percent on average. “I can’t be too scientific about my numbers because most of these companies are privately held, but what I can see with my eyes lets me gauge what’s going on,” he says.
 
And Herman really likes something else he sees. Those jobs Bruce Springsteen sang about in “My Hometown”—the jobs “that are going, boys, and they ain’t coming back”—well, guess what. They are coming back, after all, at least in the North Bay.
 
“Another great trend we’re seeing is more careful analysis of investment decisions, including whether or not it’s best to manufacture off-shore or in the United States,” Herman explains. “Numbers and technology have changed in recent years, and they’re now on the forefront of the mind. Manufacturers are asking about the total costs of their products—not just in terms of labor, but time-to-market, logistics costs and protecting IP. Not in every case, but in some, the North Bay is coming out favorably.”
 
Herman sees jobs returning from Asia, even though the wage differential for labor remains quite dramatic. “A machinist in the North Bay will earn $24 to $27 per hour. In China, maybe they’ll earn $3 to $4 per hour. But the two aren’t apples-to-apples. Often, advanced manufacturing uses automated setups and material handling—and this can dramatically cut labor hours. If you have your supplier nearby, you can design, build, tweak, redesign, rebuild and tweak again. If you’re six weeks away by boat, that’s hard to do.”
 
As manufacturing picks up in the North Bay, you can bet your bottom dollar that this time around, things will be different. If there’s one thing North Bay manufacturers learned from “The Great Recession,” it’s how to be lean, mean fighting machines on a diverse platform.
 
“What we’re seeing is a very healthy trend. It looks much different than the telecom era. Manufacturers aren’t so focused on a single industry—there’s a nice breadth and depth where we’re seeing growth. I, personally, don’t think there’s potential for another bubble to develop. From my point of view, this time, we’re building a very nice base in multiple industries. If it were a stock portfolio, it would be a good one.”
 
While the North Bay is immediately famous for its production of wine and food, there are many local ventures that are manufacturing unique products. The companies aren’t on the Fortune 500 list (yet), but they are making names for themselves and they’re important to the manufacturing groundswell that’s helping put the North Bay economy back on track.
 

The bellwether: Datum Technologies

“The biggest indicator as to how things are going generally is the machine shop,” says Herman. “They’re like the canary in the coal mine. Nothing in manufacturing gets started without the machine shop, where all the specialized tools and parts are created. And right now, they’re just going gangbusters in the North Bay.” One prime example is Datum Technologies of Santa Rosa, founded and co-owned by Analisa Hunt, CEO/CFO, and her husband, Richard, president, who describes himself as the “sales and marketing detail guy.”
 
“We see the future turning around, and we’re spending our financial resources in anticipation of attracting more and larger customers,” Richard says. Demand has been so high that Datum “had two shifts running daily all last year, and while we’re in a brief lull right now, we expect to be returning to two shifts again shortly,” he explains. In anticipation, Datum recently placed a purchase order of more than $200,000 for a new, five-axis vertical machining center, a large piece of equipment that’s scheduled to arrive later this year.
 
Like all precision machine shops, Datum works with design engineers from various companies, providing design for manufacturability (DFM) recommendations and building their first-run components, which then lets the companies determine the feasibility of introducing a new product to the marketplace (known as a NPI, or new product introduction). “We do the quick-turn prototype NPI work and once companies decide it’s viable, then it turns into production work for us,” Richard explains.
 
Datum focuses on the semiconductor, defense, medical, oil and energy industries and, since 2011, has been ISO 9001:2008 certified, which means it meets strict standards established by the International Organization of Standardization. This enables Datum to work with many large international companies, most of which require vendors to be ISO certified.
 
Datum is a prime example of companies understanding the need to diversify. Richard and Analisa (both of whom are former Hewlett Packard employees) previously owned another machine shop in Petaluma, which they operated from 1993 to 2002, riding the telecom wave until the North Bay tech industry collapsed after the 9/11 terrorist attacks in 2001.
 
“We learned many valuable lessons from that,” Richard says. The first take-away from the experience was the importance of customer diversity. The second was to not accumulate long-term debt. The couple then founded Datum Technologies in January 2003 only to face another wicked recession five years later. They made it through the downturn because “Analisa is a very frugal business manager,” Richard says. “When we spend money, it’s for a specific reason and the return on investment is there. Otherwise, she won’t authorize spending the money. That’s how we managed to weather the recession—we’re just not highly leveraged financially.”
 
With an eye on the future, Datum isn’t sitting still. “Our strategic plan is to continue to diversify our customer base. We need to get into different markets so one industry doesn’t control us,” Richard says. Datum is currently targeting the aerospace industry and, effective May 3, successfully completed an extensive two-stage audit and was recommended for AS9100 certification by ABS Quality Evaluations. This is a required step to qualify for contracts with such major firms as Boeing and Northrup Grumman, among others.
 
Datum currently employs 10 people and plans to add more once it begins aerospace work. “Recently, we negotiated a new, seven-year lease on our facility [located at 327 O’Hair Court, behind G&C Auto Body in Santa Rosa], acquired an additional 850 square feet of office space and designed a new quality assurance lab, CEO office and conference room to handle the growth. We’re well positioned for ramping up,” Richard says.
 

National security: Moose Boats

Like the saying goes, when one door closes, another one opens. While many companies like Datum Technologies suffered devastating effects from the 2001 terrorist attacks on America, others prospered, especially those making products that were necessary to boost security. One prime example is Moose Boats.
 
Moose Boats was founded by Nicasio resident Roger Fleck after a long career in industrial design. Fleck was always fascinated by boats and even built a wooden sailboat back in the 1960s that served as his residence for years. After he retired in 1988, he began working on designing an aluminum catamaran and, in the course of building out his own vessel, he discovered there was a market for it.
 
“He started building on spec [to customer’s specifications] in 2000 in Nicasio,” says Abbie Walther, vice president and general manager of Moose Boats. “After 9/11, Roger attended a trade show and the U.S. Navy saw his boat. At the time, the Navy was in the market, because it needed smaller, more maneuverable boats to patrol its larger vessels—it didn’t want any more USS Cole incidents [the ship was bombed in a terrorist attack in October 2000]. Our product fell into its niche.”
 
In 2002, the Navy ordered multiple Moose Boats (the Moose name evolved after Roger’s wife and company CFO, Catherine, described the original boat as “big and robust, like a moose”), and the company relocated from Nicasio to the Port Sonoma Marina, located at the mouth of the Petaluma River in San Pablo Bay.
 
“We’re unique within the aluminum boat industry, since our primary focus is on catamarans instead of mono hull vessels. The design allows for greater lateral stability in patrol and rescue boat applications due to lessening the effect of wake and sea-state,” Walther explains. “When it comes to putting out fires or boarding other vessels, it’s an ideal, stable platform.
 
“When we got into the market in 2000, we got the reputation for stable, well-built vessels—we’ve been called ‘the Hummer of the sea.’ [Like those sturdy military vehicles], the boats are robust, high quality and, in a sense, overbuilt. Every single one is built to military specs,” Walther says.
 
Moose Boats has 25 employees, 18 of whom are directly involved in manufacturing the boats, which sell for $425,000 to $1.3 million, depending on scale and complexity. Because they’re on the high end of a niche market, production is limited to seven to 10 boats each year.
 
“We’re pretty content with the size of the business, and we’re not really planning to expand at this point,” Walther says. “At this scale, seven to 10 projects per year is achievable. Currently, we have 18 months of work in the pipeline and we’re comfortable with that order book. This isn’t an easily scalable business. It’s tempting to go for larger Coast Guard-type projects, but it would require additional training and management/administration to reach that expansion. We’re proud of our finished projects and quality is the hallmark of our product line. If we scale up, we might have to sacrifice quality and, since that reputation is interlinked with our brand, we want to keep it where it is.”
 
In addition to its Navy vessels (38 out of 80 Moose Boats are owned by the Navy), the company has provided boats to the San Francisco, Oakland, New York and Los Angeles police departments, and to fire departments in Tiburon, Humboldt Bay, New Orleans and San Francisco, among others. Many of its boats are on duty throughout the East Coast after a strategic sale on Long Island in 2005. “Once they start buzzing around in the water, we get calls,” Walther says. “Word of mouth and exposure are our best sales tools.”

 

Everyone eats: Blentech

If you’ve ever stopped at a casual dining spot (think convenience store) and served yourself a cup of soup, chances are it was originally cooked on a machine made right here in the North Bay by a company called Blentech.
 
While food production is a major business in our neck of the woods, people sometimes forget that machines are necessary for food to be “manufactured.” Back in the mid-1980s, Darrell Horn, an avid athlete and entrepreneur (he was an alternate Olympian in track and field) became interested in manufacturing winery equipment for the growing California wine industry. He hired welders and engineers who had a background in the food business, and they helped him understand that there was a larger market for food machines than for winery equipment.
 
“For a manufacturing business, Blentech decided that food was more interesting than wine,” says Daniel Voit, Blentch president. “After all, everyone eats. Not everyone drinks wine.” So Horn decided to specialize in manufacturing food processing equipment and, 27 years later, Blentech is one of the chief suppliers to top food companies all over the world. “If it’s a name you’re used to seeing in the grocery store freezer case, it’s probably our customer,” Voit laughs.
 
Blentech specializes in cooking and blending applications, such as ready and prepared meals that are precooked and frozen, then sold to grocery stores or restaurants. It employs 56 people, most of them at its facility on Dowd Road, just off Hearn Avenue in Santa Rosa (it also has sales offices in Arkansas, Texas, Tennessee and Mississippi).
 
Blentech specializes in machines and food processing systems. Individual machines can be as large as an entire room, and systems vary in size depending on the process and throughput requirements. While its focus is on food production, Blentech’s machines can also be used in pharmaceutical, chemical and biochemical applications.
 
A major key to Blentech’s success is its hands-on approach to business. “We spend a lot of time in food factories. Our engineers engage with our customers to understand specific challenges so they can develop processes that provide solutions,” Voit says.
 
There’s a Blentech machine that makes egg fried rice (it’s the only one in the world!), and one that makes sushi rice. Another provides a continuous method of producing processed cheese. There’s even an automated hummus production machine. And don’t forget the one that makes Swedish mashed potatoes, the system that blends peanut butter and the continuous sausage crumbles cooker (for pizzas). Blentech also makes cooking systems for caramelized onions, carnitas, jams, jellies and fruit pies, plus a plethora of other things beyond imagination. But the biggest seller?
 
“A large, automated taco meat cooker. If you want to produce taco meat and sell it to the big guys, you have to buy one of our machines,” Voit says. “The second biggest seller are machines for making high-quality, prepared soups like the kind you get in delis, sandwich shops and restaurants.”
 
Blentech experienced a brief slowdown in production early in the recession, but in mid-2009, “the floodgates opened,” Voit says, “and every year since has been better than the last—and every year has been a record year.”
 
When you talk with the folks at Blentech, you find people who obviously like their jobs. Turnover is low and average tenure is 15 years. Even Voit is on his second tour of duty, returning after leaving for another job “because it’s such a great place to work.”
 
This is a good thing, since Voit says the biggest challenge Blentech faces by being headquartered in the North Bay is finding “trained, skilled labor. I can advertise for an engineer and I’ll get good applicants. But if I advertise for a fabricator, I get only a handful of résumés. Schools just don’t embrace training fabricators, machinists and assemblers—good jobs that pay well,” he laments.
 

Graffiti-free zone: Coval Molecular Coatings

Sometimes in manufacturing, it all comes down to an “A-ha!” moment.
 
As the former owner of Marin Marble, Rick Stenberg was in the natural stone business for 26 years. In that time, he found one of the biggest issues with natural stone is to find an effective sealer that preserves the look and repels stains.
 
“The problem is that most sealers have limited performance, their toxicity level isn’t user-friendly, and none of them can stop the etching effects of food acids,” Stenberg explains.
 
So a few years ago, when he was attending a trade show, Stenberg was intrigued with a coating that protected white marble from red food dye and lemon juice, things that “would normally destroy the marble, and it wasn’t impacted at all,” he says.
 
“So I asked the guy who was distributing the coating to put me in touch with the inventor, who turned out to be someone who’d been involved with coatings in the aerospace industry and I had worked on the space shuttle program, so we had something in common. He’d been testing it for years and was just going to market with it. I tested and studied it for 18 months and decided it was real,” Stenberg says. Since then, Stenberg and the inventor have developed and tested myriad “mind-blowing” applications for the product, and Coval Molecular Coatings was born. Stenberg is now the CEO of the Petaluma-based firm.
 
“Remember the way math was done on an abacus and then eventually evolved to calculators? Well, the sealers that are available on the market today are at the abacus stage,” Stenberg explains. “And this one is the scientific calculator. Any coating on the market today has large holes when viewed under a microscope. If you use other coatings, no matter what they may be or how much they may cost, it’s like covering something with 12-inch dinner plates: the intersections leave large voids. By comparison, our coating would be like covering something with beach sand—the small granules fit tightly together.”
 
Basically, Coval’s coating cross-links molecules (nano-sized quartz crossed with hydrogen and oxygen atoms) and creates what’s known as a covalent bond—hence the name “Coval”—which, along with ionic bonds, are the strongest in nature. Best of all, it’s nontoxic.
 
“It creates in impenetrable surface,” Stenberg says, which makes it incredibly versatile. And Stenberg has barely scratched the surface (pardon the pun) when it comes to its potential uses. It’s particularly attractive to school districts and local governments in graffiti abatement efforts, he says, since mild cleaners are all that’s needed to remove a tagger’s mark.
 
Coval is now specified for the Los Angeles Unified School District, which spent $20 million in graffiti clean-up last year, to put the coating on all the signs, bathroom walls and other surfaces where graffiti is problematic. All new traffic signs are now specified for the city of San Francisco Traffic Department as well as the Parks & Recreation Department now have Coval coatings. And there’s even an experiment underway to see if a certain famous bridge might benefit from a Coval coating.
 
When used on glass, Stenberg says the coating is invisible and often “makes the glass look like it’s in high-def, because the coating fills all the tiny holes.” It’s being tested on a building in Beijing, and, according to Stenberg, the windows have remained clean even though it’s a heavily polluted area.
 
A well-known amusement park in California used Coval coating on its hotel lobby floor and hasn’t had to wax the floor since. All the furniture in the same hotel was also coated and is now impervious to wine, coffee and soda stains. The brass on trains in the amusement park no longer gets polished since Coval coating was applied.
 
When tested on the bottom of boats, fuel consumption decreased by 8 percent, “and it doesn’t pollute the waterways,” Stenberg says. “We hope to soon start testing on planes to see if it would eliminate the need for de-icing and on tablet computers to prevent surface scratches on the touch screens.”
 
Federal and state fish hatcheries are testing to see if Coval coating on concrete ponds would prevent marine growth from attaching to the surface and help in their cleaning efforts. More than two years ago, Coleman National Fish Hatchery in Anderson, on the Battle Creek tributary of the Sacramento River, applied a coat of Coval to a section of its facility that’s normally cleaned weekly, and it’s remained spotless. “If they put it on all their ponds, it would save them about $700,000 per year in cleaning costs,” Stenberg says.
 
Major dams are looking at it to seal their concrete and extend the life of their assets. Electrical companies are investigating the impact the coating could have on transmission towers. “These are galvanized steel structures that have a limited life cycle because they rust and wear away—setting up the potential for the tower to fall. On the East Coast, it’s estimated to cost almost $900,000 per mile to replace the towers,” Stenberg says.
 
A test of Coval coating on galvanized steel was conducted in a corrosive chamber with high ultraviolet light and salt fog. “On normal galvanized steel, white rust showed up within 24 hours. On the galvanized steel with our coating, white rust didn’t appear until 864 hours had passed. Red rust showed up on the regular galvanized steel in 136 hours—with our coating, it never showed up, even after 1,200 hours of testing,” Stenberg says. “The product has tremendous potential for preserving our national infrastructure.”
 
But to Stenberg, the most “gee-whiz” application is as a fabric sealer. “It doesn’t change the look or the feel of the fabric. On white leather, permanent marker cleaned off without leaving a mark. It’s also very stain resistant.” While it can be used on clothing, it’s also caught the eye of auto manufacturers who are considering using it on their upholstery.
 
“The technology is blowing people’s minds,” Stenberg says. And, as one can imagine, competitors would love to get their hands on the product, so Stenberg is tight-lipped about its actual production, but all research and development, laboratory work and production training is done at the home office in Petaluma.
 

Back to the future

While the outlook for manufacturing in the North Bay is bright, there’s one final trend that Dick Herman of 101MFG does find a bit troubling: The workforce is aging. Even more troubling is the fact that we have “an aging entrepreneur class.
 
“About 95 percent of the businesses I track are privately held, and their owners are getting on in years. In most cases, there’s no real succession plan,” Herman explains. “What’s the default? Will they wake up one day and look at their husband or wife and say, ‘Let’s check out’? Selling a midsized machine or specialty shop takes years of planning, someone groomed for leadership and the capital to pull it off. Owners don’t want the alternative—selling to someone out of the area, auctioning the equipment or having their employees end up on the street looking for jobs. It’s an issue we need to address, and that’s something I intend to do with 101MFG in the future.
 
“But on the whole, we’re really coming into the next period of growth well poised,” Herman concludes. “I spend a lot of time in other parts of the Bay Area, and we have it pretty good here. We really have a very positive economic situation, and it’s time to exploit it.”

 

 

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