Focus on niche markets leads to strategic growth

BY MARY JO MARTIN

Editorial director

In a nutshell, the Acorn Engineering family of companies might best be described as semi-custom manufacturers of semi-standard products. But in truth, there is so much more to Acorn Engineering and its offerings.

Acorn is likely one of the most highly diversified manufacturers in the phcp industry today. President and CEO Don Morris says the one common strand uniting Acorn’s numerous divisions -- some of which were acquisitions -- is that they are all involved in plumbing. “In all of our businesses, I try to expand the product line from a generic one to a customized, more specialized line. If water flows through it, and it can be sold through distribution, I’m interested in producing it.”

The Acorn family of companies currently includes:

• Acorn Engineering -- manufacturer of engineered stainless steel plumbing fixtures
• Acorn Aqua -- drinking fountains, water coolers and chillers
• Neo-Metro -- residential luxury bath fixtures
• Whitehall Manufacturing -- healthcare/therapy products acquired in 1986
• Elmdor Stoneman Manufacturing --access doors and roof flashings acquired in 1989
• AcornVac -- vacuum plumbing systems for correctional and supermarket industries
• Chronomite Laboratories -- tankless/instantaneous water heaters acquired in 1999
• Potter  Roemer -- fire protection equipment -- and Fire Pro -- fire fighting monitors and nozzles; these joint partnerships with Smith Industries were established in 2002
• Acorn-Gencon Plastics -- custom injection molding acquired from Craddock Industries in 1996.
• Murdock-Super Secur -- traditiotional and contemporary outdoor drinking fountains and hydrants, pre-engineered buildings for parks and recreation applications, and bicycle security; Super Secur acquired in 1979, partnership with Acorn and Murdock formed in 2004. Murdock started business in 1853, and is Acorn’s oldest division.
  
  

Acorn is also involved in several joint ventures in Germany, the United Kingdom and Canada.

“We’ve kept Acorn Engineering under a relatively low profile in years past,” said Morris. “I always ran my divisions under different names. So when we acquired companies, we retained their name to take advantage of brand recognition. I like to keep the essence and key personnel of companies that we acquire. The accounting functions with all of our divisions are integrated through our sap system, but each have their own customer service representatives that they can contact directly.

“Because our divisions operate under different names, many wholesalers do not realize that they are all part of the same company. We want to show our brand name more strongly in our marketing. We’ve changed the look of our website and literature to reflect that. It allows us to be considered as more of a package with our buying groups and wholesaler customers.”

Strategic operations

Most of Acorn’s products are made in either City of Industry, Calif., at 500,000 square feet of plants, or at one of two plants in Tijuana that total 250,000 square feet. “If I’m going to make my own product, I have to be price competitive,” Morris explained. “So part of our strategy has been to have operations in Mexico. It started 23 years ago. We now have 400 of our total 1,200 employees in Mexico. The Mexican facilities are fully integrated with our other operations; they are on the same sap system, the phone system -- a four-digit extension allows us to reach anyone at any of our facilities; video conferencing; faxing; and e-mailing.

“We are a vertically integrated manufacturing operation. We buy stainless steel and do the deep draw work, fabrication, assembly and final shopping. We go from raw material forward. This really allows us to control the quality of everything that goes into our products.”

According to Morris, products made at the Mexican plants require higher labor content and more repetitive labor. The more custom, specialized products are done at the U.S. plant. This division of product manufacturing is made to best utilize the lower labor rates in Mexico, which allows Acorn to be price competitive.

In addition to these facilities, Acorn also has a design office and sales/marketing hub in Delaware, where vice president-sales and marketing Ken Clark is based. Currently, nine people work out of that office, although Morris expects it to continue growing.

“My labor rates, along with housing costs, are better in Delaware,” he said. “I want to build a design team out East, partly because in California we have difficulty finding engineering talent. The aerospace market sucks up a lot of the talent in that market, and the housing costs are such that it keeps a lot of younger, talented engineers from settling in California. I pride myself on not being constrained geographically, within markets or with materials.”

Acorn Engineering also fields distribution centers in Chicago, Cincinnati, Union, N.J., Myrtle Beach, S.C., Miami, Atlanta and Dallas. These facilities inventory stock items, such as Acorn Aqua, Chronomite, Elmdor and the terrazzo mop sinks and shower basins that are typically stock items with plumbing wholesalers.

However, most of Acorn’s products are engineered and customized from standard configurations. These orders are produced per customer request.

“When an order is placed, it triggers our engineering department to customize the configuration to meet the specifications and then we make the products,” Morris explained. “Our lead times are four to 10 weeks. That’s pretty good for special order products. It used to be 12 to 16 weeks. Our sap system and better manufacturing processes have helped us get those numbers down. Our goal is to keep it under 10 weeks for everything we make. People lose patience after that. There is such a mentality of just buying off the shelf, so we have to do our best to keep lead times as short as possible.”

An unusual twist

In what might be considered one of the most unique facets of Acorn Engineering, the company also owns Elmco Sales Inc., a sales representative organization begun by Morris’ father, Earl L. Morris, which actually preceded Acorn Engineering. In fact, Elmco is the acronym for the Earl L Morris Company, which the elder Morris founded in 1948. The name was officially changed to Elmco in the early 1950s. Elmco Sales is now comprised of several partnerships that represent Acorn and other manufacturer’s products -- including a 50-plus-year representation of Jay R. Smith Manufacturing. Their offices include:

• Elmco/Duddy -- based in City of Industry, Calif., with an additional sales office in San Diego
• Elmco & Associates -- based in Sacramento, Calif., with additional stocking warehouses in San Francisco and Reno, Nevada
• Elmco/Ford -- based in Las Vegas
• Elmco/Stewart -- based in Phoenix.

“We’ve got 110 people involved in the Elmco division,” Morris noted. “This division gives us a very good birds-eye view of the industry. Part of my involvement with the Elmco side of the business is to see the market through other eyes. It really helps us see how Acorn fits into the entire picture. One of our strengths is that we have these two sides to our operation. It helps us look at the direction we’re going.”

Continuous growth

In 1954, Earl Morris expanded his business by establishing a new manufacturing division called Acorn Engineering.

“My father spent the early years of his career with Crane Co. and also Zurn,” Morris described. “During World War II, he worked for Crane selling pipe, valves and fittings to the shipbuilding industry in Southern California. He got a taste of what we call specification products, and when he started his own companies, he made that his niche. We make very little product that comes off the shelf, in a box, ready to go. Most of our products are engineered for a specific purpose.”

Earl Morris presided over the business until shortly before he passed away at the age of 90 in 2003. Together, Earl and Don partnered in the business after Don joined Acorn in 1969. Earl concentrated primarily on the engineering side, while Don oversaw sales. Since that time, the Acorn Engineering family of companies has experienced tremendous growth.

“When I started here, we had 30 employees and Acorn operated out of one facility in City of Industry that focused on a complete line of deep drawn and fabricated stainless steel plumbing fixtures,” said Morris. “Today, we have more than 75 patents and literally thousands of products. All of our R&D processes and the direction of the company flow through me. My current goal is to double our size in a seven-year period that began two years ago. That requires a minimum of 11% growth each year during that period. We’ve done it before, but it will require new markets, new products and perhaps more acquisitions.”

The two most recent product lines that Acorn has initiated are a new water cooler and drinking fountain complete product line called Acorn Aqua, which launched in 24 months from inception to production. Additionally, the company is introducing a new safety product line called Acorn Safety that is scheduled to launch in the third quarter.

Both Acorn Aqua and Acorn Safety are product offerings that wholesalers stock, and which are very familiar to the industry. Acorn’s move into these two new markets expands the company’s profile within the plumbing industry.

Because the majority of Acorn’s product offerings are highly specialized, the company emphasizes training for its customers and reps. There are five product trailers on the road year-round -- two for drinking fountains, one for AcornVac, one for Whitehall (hospital products), and one for all products. They move among the Acorn reps, who then conduct field training with lunch and learns for wholesalers, contractors and engineers.

At the City of Industry facility, Acorn has a dedicated showroom and learning center where they conduct plant tours. These involve one- or two-day learning sessions where customers can get more technically competent on Acorn’s products.

Acorn is also committed to green product development, for example, its vacuum flush toilet that uses less than a half gallon of water. “We’ve been looking at more green products for about the last seven years,” Morris explained. “Water conservation is a huge issue in California and other parts of the country and the world. We’re also putting greater emphasis on recycling.  This is going to be huge in our industry. We’re cutting edge with some of our systems and we’re looking at ways to get there with others.”

Planning for the future

A third generation of Morris family members is firmly in place to ensure continuity. Don has three children involved in the business -- daughter Kristin Kahle, who is vice president of Neo-Metro and has 15 years at Acorn; son Randall, with 10 years of experience, who is the general manager of Chronomite; and son Barrett, who has been with Elmco Duddy in San Diego for two years.

“We’ve got our continued succession in place,” said Morris, “which is a good feeling for employees to have when it comes to a family owned company. I’ve got no plans to retire. Zero. I hope to work with my children as my dad did with me, until I die. We’re not for sale; we have no plans to be acquired. I frankly wish they’d stop calling.”

One of the things that Morris is most proud of is the longevity and loyalty of Acorn’s employees. Morris likes to have a mix of about 60% of employees who are, as he puts it, “homegrown,” meaning they begin in entry level positions and work their way up, along with 40% who are experienced veterans hired from other companies.

“You’ve got to treat your people right and they treat us right,” he said. “I’ve been able to keep them with me because I’ve been able to expand the company and they’ve been able to grow along with it. If I hadn’t opened my horizons and chosen the path of growth, we wouldn’t have the people and talent here that we do. We’re very aware of the retention of our employees and we reward that longevity. Without our employees, we are nothing. We could never have realized the growth we’ve had without the many talented individuals who work for Acorn’s Family of Companies. It all works hand in hand.”

For additional information, visit www.acorneng.com.