Serve with distinction
Specialization is the name of the game at Sprague Fluid Power Technologies
By Ken Brack -- Industrial Distribution, 10/1/1999
THE TEMPTATION TO ADD A WHOLE NEW PRODUCT MIX WAS HARD TO RESIST AT FIRST. Some of Sprague Fluid Power Technologies' competitors had done it -- branching into electrical automation equipment to combine with pneumatic automation components -- and found some success.But Paul Gunn, the president of Hingham, Mass.-based Sprague, and his senior managers used another approach as they strategized two years ago. It was based on one that had proven successful for the company for more than a decade.
Then and now, Sprague focuses on its core business of providing pneumatic, or air-driven, automation components and sub-assemblies to customers in the six New England states. Along with that, the company continues to selectively diversify with a few products that help it enter horizontal or emerging markets. As part of that strategy, in the past two years Sprague opened two retail stores that sell fluid connector products to contractors and others.
The 37-year-old firm did not completely resist coupling its core services with electrical automation assembly products. Rather than going out on a limb alone, in 1998 it formed an alliance with Columbia Technical Service, a contract manufacturer of PC circuit boards, electromechanical assemblies, electrical panels and other products.
Gunn says Sprague's strategy is to focus on "niche markets where we can be the best at what we do, like providing engineering support, sub-assemblies ... and provide customers the types of services he needs to keep him loyal." To help achieve that, Sprague has a 4,500-square-foot pneumatic sub-assembly shop beside its main office for jobs such as putting together a vacuum assembly.
"We have an excellent reputation with more than 30 years in pneumatic automation, and it's not going to go away," he adds.
Diversifying has helped Sprague weather downturns such as the recent PC board industry slump and the impact of last year's GM strike. Although sales were flat both in 1998 and during the first six months of this year, Sprague says other segments such as distributing aluminum extrusion products have been a boost.
The outlook for this year is improving, as Sprague's backlog in July increased 15 percent over the previous summer, and Gunn expects revenues to grow by five to 10 percent by the year's end. Perhaps the brightest trend is a resurgence of orders from high-tech companies, particularly firms that make circuit boards and companies that supply semiconductor manufacturers.
Air controls remain core
Founded as Sprague Air Controls, Inc. inside an old train depot by Jim Sprague, 90 percent of the firm's business remains pneumatic automation controls and equipment.
Within its air controls group, still the core focus of the business, Sprague's biggest accounts include automated machinery and international manufacturers like Polaroid and Texas Instruments. Sprague helps build machines that may end up being used in Europe, Asia or South America, while its field engineers and product specialists work with their customer's engineers in equipment design as well as component sales.
At a large Texas Instruments plant in Attleboro, Mass., Sprague sells components for the repair and maintenance of production equipment and is also called upon by TI engineers as they design new machinery. TI has 24 buildings and 4,000 employees at the site, where automobile bumpers, motor protectors, fluorescent light circuits and other materials are made.
Robin Liberty, a tool crib manager at one plant where aluminum, steel and copper is bonded and rolled together to make bumpers, says Sprague first corrected problems TI experienced with rolling and cutting machinery two years ago. Hoses that did not fit correctly were blowing apart, creating hazardous working conditions.
"It was a big problem. Sprague came in and did a presentation and showed high tech fittings and couplings," she says. "Some of the maintenance guys didn't match the hose and fittings exactly. Sprague came in to troubleshoot what type of equipment we needed. [Today] they also check the cabinets and make sure we don't run out."
Jill Legor, a buyer at Speedline Technologies MPM, which manufactures surface mount machines for circuit boards in Franklin, Mass., credits Sprague's point-of-use delivery system for pneumatic assemblies like pumps, filters and air regulators. One Sprague salesman is "devoted to Speedline," she says, adding, "everyone has access to him."
The distributor found another way to stand out again last year by teaming with Columbia Technical Services of Worcester, Mass. Although results so far have been mixed, Gunn says the idea is to take advantage of the growing integration of electrical and pneumatic controls systems. Sprague employees assemble components of a control unit such as valves/stacks, fittings and filtration, which integrate with electrical control units. Both companies believe the synergy holds great promise, offering manufacturers one-stop shopping for automation equipment at very competitive prices.
"We have some targets that are large," says Sprague vice president Tom Bazydlo. "It gives us tremendous electrical-pneumatic capabilities that others don't have ... to be able to serve any customer in any industry, whether a large assembly or sub-assembly; that's what that alliance really does for us."
Chris Coughlin, vice president of business development at Columbia, says the two companies are poised with their combined expertise to benefit from rebounding markets, particularly the semiconductor equipment industry. "Some of the things we created last year could be really strong as the Asian flu ends," he says. "Each is providing the other with leads we didn't know existed."
Aluminum extrusions provide niche
More than a decade ago Sprague found a way to enter industries such as biotechnology and pharmaceuticals by distributing aluminum extrusion products, or T-slotted frames used for machine guarding and workstations. Sprague represents Indiana manufacturer 80/20, which typically machines frames to exact specifications and ships them to an end user within 48 hours. Customers include Polaroid, where crews recently installed a clean room enclosure.
Four years ago, Sprague added a small machine and fabrication shop of its own to take care of emergency situations and select custom orders. About 80 percent of the orders get drop-shipped to customers, however, and typically Sprague crews will assemble the frames.
Mike Raimo, a mechanical design engineer at a chemical company in Massachusetts that supplies pharmaceutical manufacturers, says that during two-plus years Sprague has done more than 40 installations with the T-slotted frames. Many of those support hoods and ducts which surround laboratory equipment. The largest installation is the size of a garage, which needed to be closed off for production of a key chemical.
"It's a great product," Raimo says. "They must have everything down pat, they can get it [built] in 48 hours. It's pretty impressive when you think about it."
Typically engineers at Raimo's plant design the frame themselves using computer aided design software supplied by 80/20. Drawings are sent electronically to Sprague, where employees check prices and receive a bill of materials with lengths and cuts specified. Sprague sends in the order and takes care of the rest.
Raimo also credits Sprague outside salesman Tom Bennett, who visits his plant at least once a week. "If there's a problem he gets down here in an hour or two," he says. "It's good to have a sales guy with an engineering background, it really helps a lot."
Fluid connector group
Sprague also operates a Parker Hannifin Corp. fluid connector products store in nearby Quincy, which opened nearly two years ago, and one in Manchester, N.H., which opened early in 1998. It has been a successful way to expand into what company officials call the "yellow equipment" market: contractors with mobile equipment, utilities, waste haulers and others who prefer to walk into a store rather than be called upon by a salesmen at the job site. Several firms that sell farm equipment in New Hampshire have also become steady customers. The stores operate as separate profit centers.
Walk-in sales at the Quincy store are expected to grow 30 percent this year from roughly $200,000 during the first year. It's no secret why. It's located conveniently off the expressway a few miles from Boston. The store's well-lit aisles and orderly bins encourage browsing, and managers have added niche products such as hydraulic fluids, a line of Teflon sealants, O-ring lubricants and kits, even high-performance plumbing for race cars and classic vehicles.
Burr Cornwell, vice president of sales for the fluid connector group, says that in the past he advertised heavily to reach his customers, but good service and word of mouth are his biggest allies.
The store gets a good share of business from contractors working on Boston's "Big Dig," the massive project to replace the elevated highway cutting through the city and put it underground. Although the Sprague managers have not focused on Big Dig contractors -- who by 2004 should be largely done -- at the expense of long-term accounts, crews frequently arrive at the store seeking parts and repairs for items like steel hydraulics tubes which get bent on heavy machinery. Most of those repairs are done by store manager Sherri Otis, a six-year industry veteran.
"The Big Dig is not a primary focus; we're developing traditional MRO accounts," says Cornwell. "Even with that, they still come down here. We have a reputation of good inventory and service."
Intense competition
There's no denying that Sprague is up against some fierce competitors. Gunn's face tightens a bit when he confides to a visitor that one such firm, SMC Pneumatics, Inc., hired one of his salesmen last summer who covered New Hampshire. That makes a dozen times SMC recruited a Sprague salesman since 1988. While he doesn't like it, Gunn takes a little comfort in knowing those who left appear to have done well, which he says is partly a credit to the training and experience they received at his firm.
SMC Pneumatics, a wholly owned subsidiary of a Japanese firm, has aggressively pursued market share in the Northeast. Gunn credits SMC with saturating high-tech centers on the east and west coasts during the past 15 years, particularly semiconductor manufacturers and suppliers that use pneumatic automation controls for assembly.
"They've taken a piece of the pie, they have excellent products," Gunn says of SMC. "We're not the only ones. That's a challenge for us and other distributors."
An SMC Pneumatics executive at its U.S. headquarters in Indianapolis did not respond to requests for comment on why Sprague salesmen are recruited so heavily.
To help meet such challenges, Sprague continues to invest in technology for its operating systems and to develop a seamless presence before customers.
One goal this fall is to do more e-commerce with a new Web site that includes a catalog of about 800 fluid power accessories, which Gunn expects to expand to 2,000 items in a year or so. The strategy is to enable buyers at large OEMs such as Texas Instruments to order repeat items more easily, and to provide a more retail-like look for new or spot customers. Another important facet of the upgrade is to allow customers' engineers to download technical product specifications from CAD drawings themselves. Sprague already has Web page links to its suppliers' sites.
Still, Gunn strongly believes his inside sales staff "will always be the heart of the business," taking most orders over the telephone. The bulk of orders are custom actuators -- such as a cylinder with a specific bore and stroke -- which typically get drop-shipped by a supplier.
Meanwhile, during the summer Sprague upgraded its internal IT systems, including a new LAN server, its Web server and every inside connection.
Gunn says targeting niche markets and not overextending will continue to be Sprague's modus operandi.
COMPANY SNAPSHOT
Sprague Fluid Power Technologies
Headquarters: Hingham, Mass.
President: Paul Gunn
Founded: 1962
1998 sales: $11 million
Expected 1999 sales: $11-12 million
Employees: 43
Branches: Quincy, Mass.; Manchester, N.H.
Product categories: Pneumatic automation components and sub-assemblies; fluid connector products; T-slotted extrusions for machine and laboratory equipment framing and workstations
Web site: www.spragueair.com
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