Turning point for bright young lights

Posted on 7 Oct 2010 by The Manufacturer

Looking for an inspiring tale of transformation from old to modern, sales-driven UK manufacturing with growing exports? Then look no further than this revamped British engineering company run by a talented and driven team, devoted to finding that elusive market differentiator in a commodity market. This is not a philosophy, MD Justin Levine tells Will Stirling

The Parvalux story is an insight into regeneration of old school UK industry. A company with a good brand but few modern practices has transformed into that one-time rare thing: a successful privately-owned British manufacturing business, competing on a level playing field and winning business from global competitors, including German, French and even Chinese companies. Parvalux could be a metaphor for the future of UK manufacturing.

“I can show you samples on the shop floor that we’re putting into volume production that you won’t find anywhere else in the world,” says Justin Levine, managing director of Parvalux, the UK’s biggest manufacturer of geared motors.

He is arguing, persuasively, for the power of branding as a market differentiator, where customers of products even as functional as geared motors want an aesthetic dimension to what they buy. “This is not a philosophy, customers have bought customised motors,” he says triumphantly. “Even with our very good customers, we constantly need to tender for work and examine our value-add proposition.” It would be hard to disagree with Levine such is his conviction and energy in explaining why Parvalux will succeed at what it plans to do. But it is a grand ambition.

Parvalux – the name derives from the Latin ‘parvulus’ and ‘lux’ and means ‘young light’ – was started in 1947, and has made complete gear-motor units since 1957. A one-time market leading company, it lost its way in the 1990s as opportunities to modernise were missed, and output and staff morale declined. New blood, a merger with its closest rival and a re-born common purpose has put the company back in track, and production is up to 250,000 units today. But while it operates in a vast and competitive market, Levine is bullish about prospects, now that some of the hard transformation work is done.

“The volume of DC technology brushed and brushless motors produced in Western Europe is an ocean and we are, at present, a drop. But what I see is our current product platform, with a pipeline of real projects – i.e. real prototypes received by customers and with letters of intent – the volume is there to double the size of our business. This is a pragmatic view.” Levine, a smart, strategic thinker with an MBA and 20 years experience in growing companies in the industrial automation sector, radiates the confidence that his approach, and that of owner and CEO Steven Clark, will claim further market share.

Then and now
Long before 2006, Parvalux had experienced tremendous success in geared motors, AC & DC brushed permanent magnet motors.

But it was a small, old fashioned manufacturing company that relied on small scale production techniques. Design IP all belonged to the founder, LJ Clark, Steven’s grandfather, some was undocumented and when he passed away in 2004, much of the design know-how went with him. There had been little modernisation. “The manufacturing processes were very much embedded in people’s heads. There was very little recorded IP, IT systems were scarce, ERP was certainly not heard of, the supply chain was predominantly English,” says Levine. “Had you said ‘show me something that is modern’ in any department, you would have struggled. Steven knew that change had to made.” But he needed some help.

Justin Levine had worked for automation group Schneider Electric for several years, a track record of turning around underperforming businesses within the group. Aged 36, realising that big responsibility did not bring control with it, and despite warnings that he was crazy to do so, he walked away from his job as global vice president for Schneider’s motion control business and set up Futurestech, a small management consultancy serving central Europe and the UK. One client was Parvalux. Steven Clark had worked for his grandfather’s company and had his own ideas for modernising the business, but had been thwarted. He inherited the business in 2004, looked for external advice and found Futurestech. Levine says, “I had grown tired of turning around French, German, and US companies. There is so much doom and gloom about UK manufacturing, that it has vaporised. I fundamentally don’t believe that, and we are disproving it here.” He made an equity deal with Mr Clark and moved back to the UK late 2006.

There was work to do. There is a point at which a lack of transformation and modernity means that a business is irrecoverable; my view was that Parvalux had not reached that point. It had a loyal workforce of 90 people [200 today]. The brand was synonymous with quality in the UK, the customer base was very diverse and stable, even though it had fallen in 20 years from 200,000 to 64,000 units; effectively there still was a decent trading platform.” And it was profitable; never in its history had the company lost money.

They repositioned the brand, devising a product design strategy and rebuilding the website which is now the main sales conduit. They hired a new management team and had to let some senior people go. “We recognised those people didn’t have the necessary skill set to drive the necessary change. It was very uncomfortable, but this is normally a symptom of organisations who do not train people to provide the required skill set for future success. With half the new management team in place, business began to grow.

Turning point
Parvalux needed critical mass and in 2008 the company bought a big competitor. Private equity-owned EMD Drive Systems, based in Halstead, Essex, was a fantastic fit – it produced a similar product but in high volume with less customisation, aggressively targeting different market segments to those of Parvalux. Parvalux made batches of perhaps 100 pieces, and had 3,000 customers. EMD had only 100 main customers but produced in much larger quantities. EMD’s volume business was a strong draw to Parvalux, whose entrepreneur owner Steven Clark was able to affect a cash purchase. “They had poor branding, and even their strategy was a bit woolly, but they were fantastic at production and engineering,” says Levine.

“For de accredits sign to manufacture, with time-to-market in mind, with a very high focus on recovering labour overhead, they were superb.” Soon after Levine arrived to run EMD, Lehman Brothers’ declared bankruptcy and spawned the global economic meltdown. Plan A, to run the two sites independently, was ditched and it was decided to consolidate. They acted swiftly and on Friday Feb 13th Feb 2009, shut the doors on the EMD factory. “We literally relocated it over seven days, picked it up, brought it to Bournemouth and recommissioned it. These were high volume lines with high volume customers attached, which sustained the value of the company we had paid for – the pressure was to reproduce quickly.” They very quickly created a single management team, combining the skill sets of the two companies. The acquisition helped lift production to 250,000 units p/year, from 87,000 in 2008 – about 25,000 of this is new business won since 2008. By combining two companies with different but compatible business models, having a focused management team with clear goals and beginning to modernise its production systems, the new look Parvalux began to build real competitive advantage in what Levine freely admits could be seen as a commodity market.

The Parvalux process was simple batch production. EMD’s model was a flow line, with staff working in cells like a car line, which didn’t stop unless there is a quality issue. “It introduced to our small business that there’s another way of manufacturing, which has a positive knock-on effect,” says Levine. “A key focal point in a business like this is to drive improved labour efficiency. We employ 200 people, about 70% of them direct labour. So we are focused on learning from efficient production methodologies and rapidly employing them.” On the shop floor, a lot of stock is held local to the production line. Operations Director Simon Rainger, who came from EMD and the automotive industry before, has his hands full and is cautious about lean. “Combining two companies presents challenges and we’re in the middle of managing a big change. Some lines are set up for a more TPS-style, pull system, while others are still batch and we keep plenty of inventory. On training we’re working with Business Link and Bournemouth College to recognise what our staff know as a formal qualification.

This is not a lean factory – we are 100% focused for now on managing diverse orders; we have a big product portfolio, extended supply chains and we need to manage large, short notice orders so inventory will always be needed.”

Investment in design
Combining two business cultures was step one. The second, key part of the strategy, is about product design and development. Much of Parvalux’s design IP had gone.

“We reconstructed a design and development function,” says Levine. Parvalux hired a technical director, Dr Martin Mathias, former head of the Bournemouth University design department, and now have 15 engineers all with Bachelor or Masters Degrees, many with industry experience.

Design is standardised with the SolidWorks design platform for general 3D-models. They use SPEED software for motor modelling and DonTyne gear calculation software for modelling of gears, developed by the University of Newcastle. This is all since 2006.

This strong design emphasis plays to Levine’s view of the central Parvalux value-add proposition. “Imagine you are a volume machine manufacturer 20 years ago. The typical buying process for a commodity item like a geared motor would be simply: select a product based on a standardised offer from a supplier. That trend is changing, and we have the evidence. Some of the OEMs we supply to no longer want a standard offer to fit their product platforms. They want differentiation, sometimes it’s aesthetic, or it might be a space constraint. We are looking to produce a bespoke product at a highly competitive price. Using modern RP techniques, we are able to bespoke the casting / gear technology/motor platform to provide a unique product. Sure, there is risk involved, but this is the future.”

Future for Parvalux, future for UK industry
Levine is convinced that consumers and business people increasingly want something different, and attractive design has a place in the most utilitarian products. The trick: give the customer whatever he wants, but manufacture it cost-effectively.

“Over four years ago when I was at Schneider, German companies bought mainly from German companies; I have seen a distinct change in that. It’s not just Parvalux and it’s not the weak pound. There are many geared motor manufacturers in Germany and elsewhere, but I suspect that the number of them who’ll tailor the product fully are far fewer. It’s not subtle changes, like a longer shaft; how many firms would completely retool to make a new casting? Or put a completely new gear train inside it that never fitted in it before. That’s what we do. It’s not a philosophy.”