Wisconsin Manufacturers Turn to Long-Term Temporary Employees

November 14 -- More manufacturers are gearing up to hire temporary employees, sometimes for jobs lasting many months, as they need the help but are reluctant to make permanent commitments.

Thursday, Ariens Co. said it was seeking 150 employees to build snow throwers and lawn-and-garden equipment in Brillion. Also, the company says it will hire another 150 people in January and February.

Some of the jobs could be temporary, but many new hires will stay on as year-round employees, said company spokeswoman Ann Stilp.

"The bigger challenge for us sometimes is our location," she said, since Brillion isn't a big town and residents also commute to work in Manitowoc, Appleton and Green Bay.

Recently, Harley-Davidson Inc. added 100 temporary jobs at its Menomonee Falls plant as the company prepares for the production of model-year 2014 motorcycles.

Harley says the employees have been hired for the work that runs from January until June at the powertrain operations on Pilgrim Road.

The company used staffing agencies and its website to recruit people for the jobs that pay roughly $16.75 to $23.30 an hour — similar to the pay scale at the York, Pa., motorcycle assembly plant that's seeking 400 temporary employees.

This summer, Harley completed its first year of seasonal surge production in York. That effort, also taking place at the company's other plants, is aimed at producing motorcycles closer to market demand, increasing manufacturing efficiencies and saving hundreds of millions of dollars in costs.

The company's plant in Tomahawk needs 60 more seasonal employees to work 10 months starting in January, said Harley-Davidson spokeswoman Maripat Blankenheim.

Wages at the Tomahawk plant are comparable with Menomonee Falls and the other plants, she said.

Some companies, such as outdoor power equipment makers, have long used surge production and seasonal hiring to build products close to demand and not carry excess inventory.

That's the case for Kohler Co., which hires seasonal employees to build engines in advance of the lawn-and-garden equipment season. In Waukesha, Generac Power Systems has used temporary hires to fill a glut of orders for generators after major power outages.

But more manufacturers are using the hiring strategy to fill year-round jobs while avoiding long-term commitments to employees, according to staffing agencies.

"Employers, especially Milwaukee-based manufacturing companies, seem to be favoring that because they're trying to get a handle on whether their growth will be sustained. Everybody is still in limbo about this economy. That's the bottom line," said Wendy Koppel, president and owner of Division 10 Personnel/AeroStaff, a Milwaukee staffing agency.

"Five years after the recession, this is the slowest recovery I have ever seen. One way employers are responding to this tentative feeling is they're opting for more long-term temporary employees," Koppel said.

Some companies use temporary hires as a way to try people out before they offer them permanent positions. It gives them more flexibility to fire someone if the job isn't working out or the work suddenly ends.

People hired for jobs that sometimes last only a few months should take the time they're with a company and get the inside track on permanent positions, said Jim Golembeski, executive director of the Bay Area Workforce Development Board in Green Bay.

"Even if you come in as a seasonal worker, companies are looking for people who stand out," he said.

A short stint at a manufacturing plant can be a way to sharpen your workplace skills and enhance your chances at getting permanent employment.

"One of the big problems with people who are out of work for a long time is their skills atrophy. It's a reason why many employers are reluctant to hire someone who has been unemployed for a couple of years," said Hank Cox, who recently retired from the National Association of Manufacturers in Arlington, Va., and is now a freelance writer on manufacturing issues.

"There's some good in it, and people adapt. But for most people, it can't be a good feeling to know their job is only for a few months. Overall, I think it's a negative trend that I hope doesn't become too prevalent," Cox said.

Rick Barrett                www.jsonline.com

For Lean Factories, No Buffer

The just-in-time approach to manufacturing, which has swept the world's factories over the past two decades, has made a virtue out of keeping inventories lean. But some manufacturers think it has gone too far, and that having a little extra padding might be a healthier option.

Popularized by Japanese auto makers, the just-in-time system is based on a company buying or making only what it needs to fill immediate demand. Although that helps manufacturers hold down costs by keeping stockpiles of components and finished goods low, it can leave them high and dry if production supplies don't arrive as expected, a risk highlighted by the parts shortages caused by the earthquake and tsunami in Japan.

Even before that disaster, some companies were modifying their just-in-time approach. Heavy-equipment maker Terex Corp. recently cut deals with its 15 biggest suppliers to guaranteed it would buy fixed amounts of parts for three months in advance.

A worker walks past a crane on the assembly line at the Terex Corporation plant, Friday, April 11, 2008, in Waverly, Iowa. Construction machinery makers like Terex Corp. are straining to keep up with foreign demand for equipment used on infrastructure development projects. (AP Photo/Charlie Neibergall)

Since January, lawn-mower manufacturer Ariens Co. has opened four new warehouses across North America to store finished mowers. Al-jon Manufacturing LLC, a maker of machines that crush metal waste, has taken to keeping a stash of hard-to-find parts at its factory in Iowa.

"Just-in-time makes sense, but it's vulnerable to disruptions," says Terex Chief Executive Ron DeFeo, "so what we're seeing now is the theoretical being adapted to meet the world of the practical."

Nobody expects manufacturers to revert to their old ways of piling up masses of parts and products. But many manufacturers have gotten stretched too thin in recent years.

Paul Martyn, a supply-chain consultant in Chicago, says manufacturers became so obsessed with reducing inventories they squeezed out the cushioning they needed to cope with business booms or interruptions.

"Prior to the recession—and now in the recovery—we aren't just lean, we've become anorexic," he adds.

The March 11 disasters that damaged factories and hobbled ports in Japan have thrown the situation into sharp relief. The disruptions quickly radiated out, putting kinks in the global supply chains of several industries. Auto plants in the Midwest and electronics factories across Asia have scrambled to find substitutes for Japanese-made parts. Many other industries say they are still assessing how the disruptions will filter back to them.

To be sure, companies have built up their inventories over the past year as demand has recovered. In February, the latest month for which data is available, U.S. manufacturers and traders had inventories valued at $1.46 trillion, up 9.1% from a year earlier.

But demand has grown. too, in some cases far faster than manufacturers' ability to build any buffers. The inventory-to-sales ratio, a measure of the volume of goods in the economy relative to demand, currently stands at 1.23 and has hovered near this historically low level for the past year. The ratio spiked during the recent recession, as companies got stuck holding unsold goods, but in general it has been trending down for years.

"One reason this recovery hasn't been faster is that demand is there—but there hasn't necessarily been product on the shelf to meet that demand," says Mr. Martyn, the consultant.

Many companies say the just-in-time philosophy, which has been celebrated for making companies and the economy as a whole far more efficient and profitable, also has discouraged suppliers from ramping up, for fear of getting stuck with unsold goods if the economy tanks abruptly, as it did in 2007.

Former Fed Chairman Alan Greenspan, in a 1997 speech, praised "sophisticated, just-in-time inventory systems" for making the economy more flexible. But that flexibility showed a dark side when the economy crashed four years ago. Companies that had bought raw materials and hired workers with the expectation of selling to customers would get sudden calls canceling orders, and were left saddled with surplus products.

Many companies floundered as a result, and found their customers unsympathetic. That's why many suppliers are now resisting calls from customers to ramp up.

Terex, based in Westport, Conn., has seen its business skyrocket over the past year as demand snapped back, especially in developing markets that want its mining and construction machines. "In a just-in-time environment, you let suppliers figure out what you'll need six or seven months out," says Timothy Fiore, the company's vice president of strategic planning. But, he says, suppliers are demanding assurances that they won't get caught holding the bag if they build stocks for customers like Terex and then demand suddenly falls off.

"We had a supplier actually tell us a couple of days ago: 'You guys were rough on us when the bottom fell out, so why should I help you now?' " says Timothy Fiore, Terex's vice president of strategic sourcing.

Part of Terex's response has been to "freeze" its commitments to key suppliers, in effect promising to buy specified amounts of goods over the next three months. As each month ends, the company's commitment clicks forward another month, giving suppliers some additional security.

Terex, which does nearly two-thirds of its business outside the U.S., carries about $1.7 billion in inventory. Mr. DeFeo, the CEO, estimates moves such as securing additional parts and materials from key suppliers "has added a few percent" to inventories, "which is a big number in a capital-goods industry."

"What we're seeing is a general move toward building safety back into the system," says Alex Niemeyer, head of the supply-chain practice for the Americas at consulting firm McKinsey & Co.

Producers have always faced occasional supply disruptions, caused by events ranging from oil embargoes to civil wars, especially as businesses have grown more global. What's changed is that the disruptions are becoming more frequent.

"It used to be every three or five years, something happened," says Mr. Niemeyer, now it's become more constant.

Al-jon, a small, privately owned equipment maker in Ottumwa, Iowa, jumped on the just-in-time bandwagon long ago, trimming inventories and cutting back on the number of suppliers it used. For years, the strategy worked fine, says President Kendig Kneen.

Lately, however, Al-jon has faced growing delays. The company has seen its lead time for obtaining steel gear-reduction assemblies grow steadily over the past year; it now stands at 16 weeks. "In the past, we'd just count on a vendor having it on the shelf for us—but nobody wants to hold goods," says Mr. Kneen.

The company has quietly built a small buffer stock of scarce parts while also seeking additional suppliers, including one in Germany, to give it more flexibility. "We've tried everything, but in essence it ends up that we have to lay more inventory in," says Mr. Kneen. "But that's a challenge, because cash flow is tight."

The alternative, however, is going without what's needed to fill orders, and thus losing out to competitors.

Daniel Ariens, CEO of family-owned Ariens, says he realized he was missing opportunities to sell more over the past six months because he didn't have enough of his company's bright-orange snow blowers and lawn mowers built and ready to ship to retailers, who continue to demand delivery on short notice.

As he looked forward to the spring selling season, he decided the company, which is based in Brillion, Wis., needed to fill four leased warehouses around the country, its biggest inventory buildup since the late 1990s.

Mr. Ariens remains a fan of the just-in-time approach, but sees how the theory is stumbling in practice. For the past nine months, he says, he has had trouble getting enough rubber belts and tires for his machines.

"A lot of the supply chain for those things in the U.S. has moved to China," he says, and so he has to order six weeks in advance and sometimes faces delays in getting what he needs. Recently, however, his rubber supplier moved some production back from China to a factory in Tennessee, which Mr. Ariens hopes will make it easier for him to get faster shipments.

To be sure, many of the things companies are doing now can be undone. Warehouses can be closed as easily as they are opened. But other changes are likely to be more long-lasting.

J.B. Brown says just-in-time has shifted the balance of power between suppliers like him and his much-larger customers. "The whole dynamic of how companies work with suppliers has been turned on its head," says Mr. Brown, the president of a family-owned foundry in Bremen, Ind., which produces metal parts for 250 different customers, including many multinationals.

Mr. Brown says he is expanding output at fast as he can. but that the memories of how large companies squeezed suppliers during the recession remain fresh for him and others. "We definitely have more clout right now," he says, "and I think we have to be careful not to abuse that." Still, he's done away with volume discounts—something unthinkable a few years ago.

www.online.wsj.com

Ariens Company To Acquire OPE Distributor Sovde of Rygge, Norway

BRILLION, WI – November 18 -- Ariens Co. said Wednesday it reached an agreement to acquire Norwegian power equipment distributor Sovde of Rygge, Norway.

Terms of the deal were not announced.

Sovde will continue to operate as a distributor between Ariens and independent power equipment dealers in Norway, the company said.

"While it is not part of our long-term strategy to acquire distributorships, the decision was based on a 40-year relationship with the Sovde family who grew the Ariens Sno-Thro brand to become the largest-selling snow thrower brand in Norway," said Dan Ariens, president and CEO.

Ariens also recently acquired British tractor company Countax.

Ariens Co., headquartered in Brillion, is a manufacturer of outdoor power equipment for consumer and professional use.

Firms Spend More - Carefully

Equipment Purchases Make Up For Recession Cutbacks, Not To Raise Production

Companies in the U.S. are stepping up purchases of equipment and software at the fastest pace since the late 1990s. But much of the spending is aimed at replacing older equipment after recession-related postponements or to improve efficiency—not to raise production or boost hiring.

After one of the sharpest declines in spending on equipment and software, companies in the U.S. boosted their spending on such products at a 21.9% inflation-adjusted annual rate in the second quarter, after the first quarter's 20.4% increase, the U.S. Commerce Department said.

The second-quarter jump was the biggest since 1998, when enthusiasm for technology was running hot. It was a much stronger increase than what was seen after the previous two recessions.

That stands in sharp contrast to the muted hiring and lackluster consumer spending that have characterized the economy since it began growing again in the middle of last year.

International Paper Corp., for instance, cut capital spending to $534 million last year from $1 billion in 2008. This year, it expects to raise spending to about $800 million.

Some of the company's higher spending will add capacity in developing markets such as Brazil, where demand for paper products is growing. But in the U.S., where the bulk of International Paper's operations are, the money will go into maintenance, improving energy efficiency and meeting regulatory standards, rather than boosting capacity.

"Businesses invest when there's demand," said International Paper Chief Executive John Faraci. "There's not going to be any [U.S.] capacity expansion, or for that matter job creation, until you see an increase in demand."

American companies, particularly manufacturers, recently have been raising output without adding workers.

The Labor Department reported Tuesday that productivity, measured in output per hour of work, fell at a 0.9% annual rate in the second quarter from the previous quarter. It was the first quarter since the end of 2008 in which productivity didn't rise. That's a hint that companies may soon need either to increase workers' hours, hire new ones or install more labor-saving equipment.

Companies may keep increasing spending on equipment, computers and software even if they don't add capacity. Nomura Securities economist David Resler calculates that businesses didn't spend enough in 2009 on new equipment to offset the wear and tear on their existing equipment. As a result, the capital stock—the inflation-adjusted value of all business equipment and software in place in the U.S.—dropped 0.9% from 2008—its first decline since World War II.

Mr. Resler estimates that even with the recent sharp increases in capital spending, the total capital stock is still $100 billion less than it was two years ago. That suggests that capital spending could continue to grow strongly the rest of the year.

The rebound in capital spending and strong demand from overseas markets such as China have boosted companies that make equipment and software. Revenue at technology companies in the S&P 500 index was up an estimated 21% in the second quarter versus a year earlier, according to Thomson Reuters, and profit rose by 65%. Capital equipment makers such as Caterpillar Inc., Rockwell Automation Inc. and Illinois Tool Works Inc. reported large second-quarter sales and profits gains.
Sales at Bishop-Wisecarver Corp, a Pittsburg, Calif.-maker of motion systems used in everything from wood-shop machinery to food-processing plants, are up sharply from last year, and are on track to be as strong as in 2007, before the recession kickded in.

Bishop-Wisecarver President Pamela Kan thinks some of the rebound has come from companies trying to make plants more efficient, but she worries that many customers are catching up on projects put off during the downturn. That makes it difficult for her to gauge how strong business will be in the future and plan accordingly.

"I don't know how much of this is just pent-up demand," she said. "It's a finger in the wind now."

As a result, she's hesitant to hire, but is looking to add a few workers to the company's payroll of about 45. She doesn't plan to make any big purchases, in part because the company did major upgrades to its equipment right before the recession hit.

In general, manufacturers, which are benefiting from the global economic upswing, are boosting capital spending more than services companies are.

In a survey conducted by KPMG International in June, 35% of U.S. manufacturing executives said they expected to increase capital spending over the next year, while just 7% said they expected such spending to decline. In comparison, 27% of service company executives expected to increase spending, with about 9% expecting to spend less.

On Monday, Carrols Restaurant Group, which operates Burger King franchises and other restaurants in the U.S., said it expected to make capital expenditures of $40 million to $45 million this year, up from $37 million in 2009, but below 2008's $62 million. Most of that increase will be devoted to remodeling and equipment purchases at existing restaurants.

"We have limited capital spending for new-unit development this year so that we can continue to reduce debt," said company President Dan Accordino.

Ariens Co. of Brillion, Wisc., which employs about 1,000 workers making lawn mowers and snow blowers, has been buying capital equipment steadily over the past two years, taking advantage of the flood of inexpensive machinery that came on the market as other companies pulled back. Those purchases were aimed not at increasing Ariens' manufacturing capacity, but rather to bring in house work that it used to have outside suppliers perform.

Last year the company bought a pulley-making machine from a former General Motors Co. supplier for $1 million—a new one would have costs $4 million, said CEO Dan Ariens—and began making pulleys it used to buy. "It kept about 15 of our people busy," he said, helping the company avoid layoffs.

Mr. Ariens reckons he will keep buying equipment, but that he will be getting less bang for his buck in the year ahead than he has in the past year.

"I'm pretty confident that the cost of hardware and software is going to go up as the recession abates," he said.