Graco Inc., Staying on top

Manufacturing in Action, Source : The Manufacturer US

The implementation of lean as well as major investments in the latest manufacturing technology has helped to make Graco Inc. one of the most profitable manufacturing companies in the United States today. Cynthia Garber reports

There is an old saying that describes things that run slowly as being like “molasses in January”—and that probably best describes what happened in Minneapolis, MN, back in 1926. That’s when the Gray Brothers were trying to service a car during a super cold winter’s day. “They found it very difficult to move grease because of the cold and that’s when they invented the pneumatic grease gun, a technology that is still used today to grease all sorts of utility vehicles, heavy duty over-the-road semis, and anything that pumps oil into engines or lubricates equipment,” explains David Roberts, president and CEO of Graco Inc., the company that grew out of that invention.

Today Graco is described by Roberts as one of the most profitable manufacturing companies in the United States. He says the company manufactures everything required in fluid handling—from adhesives to paint—and even to the equipment that pumps the caramel into Hershey’s Kisses.

“Graco equipment is most likely involved in the process when anything needs to be glued, sealed, painted, or finished,” he says.

Roberts calls Graco a large machine shop assembly manufacturer and says that it is rare to walk into automotive assembly plants anywhere in the world and not see Graco pumps in operation.

Headquartered in Minneapolis, the company has two manufacturing plants in that area as well as one in Sioux Falls, SD. Graco has three divisions: a lubrication equipment division, a contractor equipment division, and an industrial/automotive equipment division. “Through acquisitions, in the last two years, we’ve added a facility in North Canton, OH, and one in Lakewood, NJ, and as a result of those acquisitions we now have facilities in England, Canada, and Barcelona, Spain,” Roberts says, adding that its manufacturing comes out of the United States.

“We have been global from sales but we are mainly a US manufacturer. Actually 35 percent of our sales are outside of North America and 65 percent are in North America. So we are a global company in that we are actually shipping products into China that are being manufactured in the United States,” he says, noting that the company’s newly acquired overseas sites are a result of purchase. “That’s because we bought them that way,” he says.

Roberts credits both the implementation of lean and the use of the latest manufacturing technology as being major contributors to its success.

“The key is that we used a number of the most popular lean techniques and kaizen provided us with an opportunity to do that,” he says. To illustrate the success gained from the implementation of lean, he points to the fact that when Graco began its lean journey 15 years ago the company was doing about $166 million a year. “By the end of 2004 we were doing about $600 million in sales and during that period of time our work force dropped from 2,100 to 1,700—not because of any layoffs in our manufacturing operations but solely because of retirements and attrition,” he says.

Roberts says that, for Graco, lean has been the answer. “Because of lean we have been able to remain in the United States and still be very profitable without having to flee to low cost areas of the world like China and Mexico,” he says.

In order to continue to be successful, Graco has made some major capital investments in recent years. The latest has been the purchase of CNC (computer numerical control) machining centers. “These centers cost us an average of approximately $1 million each. They have allowed us to improve our productivity while reducing the manpower required for operating the plant and, as I said before, we’ve done that only through attrition and without any layoffs,” he says.

Roberts says that Graco’s manufacturing goals are to be the lowest cost, highest quality, and most responsive manufacturer in its market. Plans now call for the setting up a small overseas operation within the next few years. “It’s difficult to be the most responsive when you are manufacturing in Minneapolis and shipping to China, Korea, and Japan. So last year we did announce that we have plans in the works to establish a small assembly operation in Suzhou, China, which will probably employ fewer than 50 people who will assemble parts there that have been made here in the United States,” he says.

“We grew 13 percent in 2004, not through acquisitions but through organic growth and what we do internally through product development and seeking new markets. And, so far, we are up 27 percent for the first quarter of this year,” he says. “Thirty percent of our sales come from products introduced in the last three years. We added more engineers over the past year too. So we see a rich number of ideas coming from out of that pipeline that we would like to bring forward as well.”

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