Les Middleton is a key player on the team that is turning around Manitowoc Cranes. D.Ann Shiffler reports exclusively for ACT.
The vibe at Manitowoc Cranes has clearly changed – it’s confident and upbeat. Second quarter results showed the company is profitable, enjoying a 9 percent increase in orders and a 25 percent increase in backlog year over year.
The cloud of uncertainty that hung over the company for the past couple of years is dissipating, and the initiatives outlined by the new management team are coming to fruition. The most prolific of those initiatives was the decision to move crawler crane manufacturing from Manitowoc, WI to Shady Grove, PA. For the most part, that task is complete and remarkably well done.
In mid-August I visited Manitowoc’s Shady Grove facility and saw first-hand the impressive transformation that has taken place. The facility that produced rough terrain cranes and boom trucks can now produce Manitowoc’s legendary crawler brand, including the newest MLC300 and MLC650 models. The manufacturing plant has been reorganized and retooled to be more efficient, productive and cost effective. The flow of the facility has been strategically rearranged to assure that when the crane market picks up, Manitowoc will be ready to ramp up production and produce high quality cranes.
The transformation that is taking place within Manitowoc is being led by Barry Pennypacker, who took over as president and CEO about 18 months ago. Shortly after arriving, Pennypacker brought in a few key players to help him turn around the company, including Aaron Ravenscroft and Les Middleton. Ravenscroft and Middleton had worked with Pennypacker at Gardner Denver and Wabtec.
“Barry needed a team who could hit the ground running,” said Middleton. “We had some natural synergies. Even though we had our own specializations, we understand each other’s behaviors as a team.”
Familiarity and trust give the team the ability to make decisions quickly.
Middleton serves as Manitowoc’s senior vice president of the Americas, and his specialty is supply chain and operations management. He has been a leading force behind the implementation of lean strategies.
I found Middleton to be very well spoken, smart and easy to talk to. He is passionate about his work, and success seems like fun to him. He is committed to seeing Manitowoc’s return to glory with products that are of the utmost quality and that make money for their owners. He made it clear to me that he is just learning the crane business and that he is “not a crane junkie, yet.”
But he is a quick study. After just a few minutes talking, it’s apparent that his ‘crane speak’ is strong.
“I’ve always been in love with heavy equipment,” he said. “And I’ve worked in the oil and gas sector and a lot of places that these products end up. I appreciate large machines, like cranes, that hit a home run with the work they do.”
Last month, after seeing the amazing changes that have transpired in Shady Grove, Middleton and I had a candid chat. I think you will be interested in what he had to say.
WHICH CRAWLER MODELS ARE BEING PRODUCED IN SHADY GROVE?
We have assembled the MLC300s and MLC650s here on site. Historically, we have been building MLC165s and 999s here since 2015.
Right now, we are basically producing product to meet customer demand. Coming into the move, we had built a lot of buffer inventory to make sure we could meet customer demand during the transition. We expect to return to real production volumes starting in Q4 of this year.
MOVING CRAWLER MANUFACTURING TO SHADY GROVE WAS A $13 MILLION INVESTMENT. WHAT ARE THE BENEFITS? WHAT ARE THE PRODUCT IMPROVEMENTS ASSOCIATED WITH THIS INVESTMENT?
At the product level, when you close a facility, we honestly tried not to make changes to the process. We don’t want to introduce any new variables that will create quality issues or concerns. We studied exactly the way the work is done in Manitowoc and we transferred it here. Once it’s here and stable, then we start to work on optimization. So, in terms of actual product change, the move in my mind is zero of that because you can actually reproduce the same level of quality of product that we were producing from the origin side.
With respect to benefits for customers though, this will come down to lead time and execution time. Our focus is being able to produce a crane on a much shorter lead time than we had historically quoted organizationally. It’s the same thing with attachments, whether it is lattice components, sheave packs, major weldments or assemblies, historically we would quote 10 to 12 weeks. We’ve built our processes here to respond in four weeks.
The move also allows us to leverage our fixed asset pool, which essentially lowers our costs long term. That’s a real play for the market because it will allow us to compete with a more cost-effective solution when the volume starts to return to the business. We need a certain amount of volume lift from the market to really make it effective. When [this volume lift happens], our total cost will be lower and this will allow us to compete more effectively on the global stage.
I SEE THAT YOU HAVE BUILT IN A LOT OF EFFICIENCIES, UTILIZING UNUSED SPACE AND CONSOLIDATING SOME OF THE LINES.
Yes. It all plays back to that fixed asset, fixed cost basis. There’s been a huge play on taking cost out of the business by utilizing the existing footprint. You saw on your tour, the only space we have added is the new paint line, and the rest of it is reclaimed space out of the existing Shady Grove footprint that we didn’t know we had. It was space that was under-utilized. We were doing things that were non-core basically. We’ve outsourced some of that activity now.
SUCH AS THE CYLINDER MANUFACTURING?
Exactly. This allows us to focus on manufacturing the whole good rather than the component. The bottom line is you can’t feed capital to two major factories. As a corporation, we only have so many dollars to reinvest in terms of operational excellence in real capital expenditures. As your footprint enlarges, it’s difficult. You are taking that spend and diluting it across multiple businesses. Today we have a much smaller footprint, and we can focus on what we think is more important with all the product lines on one campus and spend money more wisely. You get leverage when you go up on volume.
WHAT CRAWLER MODELS WILL BE PRODUCED AT SHADY GROVE? IS THERE ANY PRODUCTION STILL HAPPENING IN WISCONSIN?
We have not product pruned as a part of the plant closure in Wisconsin. In our mind we will let the market tell us which machines we will produce. We will produce MLC165s, 999s, the 14000, 16000, the MLC300 and MLC650 and if customers want, a 2250 or an 18000. We are capable of building those here.
As the adoption rate of the MLCs improve, I think you will see us eventually say we will no longer produce 18000s or 2250s. But there’s a real loyal base for the 2250s in particular, and if someone wants three or four of those machines, we would build them and we are capable of building them.
The new lattice boom production line is fully operational at Manitowoc’s Shady Grove facility.
DO YOU HAVE NEW CRAWLER MODELS IN DEVELOPMENT?
I won’t comment directly on which new products are coming out, but we are actively designing new crawler models. In our product line, we are weak in the space between the branded crawlers and where the 999s pick up. And we don’t have anything larger than the MLC650, so obviously there is a product gap there. There is work to be done to flesh out the rest of our [crawler] product offering. The engineering and product management teams remained in Manitowoc, and they have a product plan for the next three years.
DO YOU ENVISION PRODUCING ANY MORE OF THE MODEL 31000?
Clearly, we remain keenly interested in these models. The machine performed very well on the stadium job in Atlanta. Maxim, who we’ve partnered with on the machine, is actively bidding work. They feel there is work for the machine.
We are not rushing to build another 31000 at this point, while we are capable of building another one. If there’s a run on big stadium building or if the work profile presents itself, we are glad to fill that market niche.
DO YOU HAVE ADDITIONAL WIND TURBINE SOLUTIONS IN THE PIPELINE IN TERMS OF CRAWLERS?
We are experiencing healthy demand out of the wind industry at this point. We have released our new 3.5-meter boom, which on both the MLC650 and MLC300, are targeting the wind industry. It gives us the ability to reach higher and gain capacity. We’ve ended up with a secondary benefit that even in full luffer, we’ve really increased our capacity. We are seeing 20 to 30 percent gains in capacity.
It isn’t just a wind play, although obviously that’s how we’ve been marketing it. It also gives people in the heavy lift [sector] the ability to get up and over.
Certainly the MLC650 and MLC300 are tailor made for the wind market – they offer excellent lifting performance in their respective classes, the VPC optimizes overall stability so we see improved capacities at high boom angles and both the VPC and VPC-MAX attachments reduce transport loads since auxiliary counterweight is not required on the crane. The compact footprint of the VPC-equipped cranes makes it easier to travel between wind towers, and you don’t have to handle additional counterweight during the lifting sequence.
DOES THE COMPANY STILL PLAN TO BUILD ON ITS LEGACY BRANDS?
Obviously, we don’t want to lose our history. We are very much believers in the power of the brands, whether it’s Grove, Manitowoc, Potain or National Crane. We believe they all have intrinsic value and we will continue to produce product that meets the expectation of those customers. In terms of leveraging it, there is no intention to blend these brands. Everything is not going to become yellow.
The go forward strategy is that all the brands will continue. We recently restructured part of the business specifically around National Crane boom trucks to create its own totally focused product team, from operations to supply chain. It will have its own mini profit and loss or value stream so that they can focus and operate that business like the brand was intended. It will be a more agile, more customer-focused business. When we try to homogenize, it doesn’t necessarily work well for that particular brand.
WHAT IS IN DEVELOPMENT IN TERMS OF THE USE OF CARBON FIBER FOR STINGERS AND OTHER STRUCTURAL COMPONENTS? DO YOU SEE THIS AS AN AREA OF TECHNOLOGY YOU WILL CONTINUE TO PURSUE?
We do. We see this as a part of our future product offering and a future technology, whether it’s carbon fiber or some other composite. We are still obviously in the infant stage, but we continue to evaluate it. It will be a part of our new product development schedule going forward.
We see it from an attachment standpoint being attractive. Lowering the weight perhaps, the ability to have higher strength in a smaller package. There are a lot of possible applications, the problem being getting it industrialized and being able to manage the cost aspect.
IN TERMS OF CHANNELS OF SALE, GROVE/MANITOWOC HAS TRADITIONALLY BEEN DEALER FOCUSED. IS THIS STILL THE STRATEGY FOR THE NORTH AMERICAN PRODUCT LINES?
We are very much third-party distribution supportive. We think that’s the correct model going forward. Our customers really benefit from having local access, whether it’s a product expert, parts inventory, not to mention sales. [Distribution is] close and intimate in their market. For us to be able to replicate that type of capability would be a huge expense for the organization and I don’t think we could end up with a better product than we are offering today. We believe we have the best channel hands down, and we have the absolute best people available, the best organizations available to represent our products in all our markets. That’s not to say we can’t improve and that’s not to say in some regions of the country a given dealer isn’t the strongest, and so forth, but it does not mean the model is flawed.
WHAT MANUFACTURING PROCESSES ARE STILL OPERATIONAL IN WISCONSIN?
Our Port Washington facility is still operational. We manufacture the lower works of the crawler there, the crawler tracks and the carbody. It’s an effective place to produce these, and it gave us a soft landing spot for some of our key manufacturing personnel from Manitowoc. Quite frankly, it’s a retention play for us. We have a large investment in capital equipment there and we were out of space to do that in Shady Grove.
We couldn’t cost justify moving many of the large pieces that are there and [these components] require a larger footprint than we had available. In addition, our Crane Care aftermarket team for crawlers and our design engineering group for crawlers still remains in Manitowoc. Today they are at the existing facility. When that property is sold, that division will move to local office space of some sort.
We did that because we didn’t want to introduce a bunch of variability by losing our technical competencies. We were very conscious to retain those teams in their entirety and allow them to remain there.
HOW IS MANITOWOC DOING OVERALL?
We are dealing with constant speculation about the business. How we are doing overall? This probably comes from Barry Pennypacker, our CEO, as much as it does from me. He said it very eloquently in the Q2 earnings call: We are starting to feel the benefit from the actions of the last 12 months. We have effectively restructured a large portion of our organization.
We continue to make progress towards our overall goals. Product quality is improving on new products we have introduced and in our legacy products. We’ve been hearing from our customers that ‘these are the best cranes that we’ve seen.’ The feedback we have been getting out of the marketplace on the most recently delivered machines seems to be far better than our historic quality levels.
The streamlined management processes internally allow us to be much quicker to make decisions and to course correct. Overall, we are starting to feel like the business is starting to gain some momentum. We’ve seen some sporadic improvement in terms of end markets. It’s mixed, but we are seeing strength in boom trucks and all terrain cranes. The oil and gas play is coming back and we are starting to pay attention to rig counts.
Last year you asked Barry about the speculation of Manitowoc being purchased by another company. Back then, his answer was that we have to perform. When you perform, you don’t have to worry about being bought out. I think we are making progress to that commitment. We are performing. We are moving the needle in the right direction, and the business has become healthier.
IT SOUNDS LIKE YOU WORK A LOT. WHAT DO YOU DO IN YOUR LEISURE TIME?
I have three children and I enjoy spending time with my family. It’s more difficult as the kids get older, but family time is important.
As a hobby, I like to build furniture. It’s good no brain time. I grew up on a farm and I like to repurpose items around the house. My dad would piddle around in the garage and make things. With the advent of the internet, it’s easy to make things. I’m self-taught. I like to work with reclaimed wood. I don’t really build any original designs. I’m a great copier. I also like to play paintball.