Earlier this week on Tuesday, November 8, Marlin Steel CEO Drew Greenblatt was featured in Wharton University’s Innovation Navigation podcast on Sirius XM Satellite Radio.
In the podcast, the topic of the day was “The Revenge of Analog,” or how physical, manufactured goods are regaining importance.
Host David Robertson focused on the story of how Marlin went from being a basic bagel basket manufacturer to innovating their products and processes to massively improve productivity and quality to move into new markets.
The Early Days
Early on in the podcast, David focused the conversation on the state of affairs at Marlin Steel when Greenblatt first bought the company.
At the time, the factory was like something out of a Charles Dickens novel. There were people doing heavy manual labor with missing fingers and eyes while their only healthcare plan was “go to the emergency room.”
On top of that, the company was getting the vast majority of its business from bagel companies—making cheap commodity bagel baskets by hand. When the double-whammy of the Atkins diet killing carb consumption and the sudden flood of Chinese-made baskets being sold for less than the cost of the steel needed to make them hit, Marlin’s client list dried out almost overnight.
Marlin was faced with the very real threat of extinction. As Drew says in the podcast: “we were in shark-infested waters. We had to leave those bloody waters and find blue oceans.”
The Turning Point
David then moved the conversation on to the turning point for Marlin Steel: the call from the Boeing engineer. On this call, the Boeing engineer requested a high-quality steel basket that would be made to meet tight tolerances—and they needed to be made fast.
When Drew quoted a price that was double the usual price for a bagel basket to the Boeing engineer, the engineer didn’t bat an eye. This was the moment where Drew realized that it was time to switch markets to focus on highly-engineered custom baskets that meet tight tolerances—a market where a commodity-class product couldn’t compete.
The transition wasn’t painless. As David Robertson pointed out, “Boeing wanted a much tighter tolerance—with a bagel basket, you could be off by half an inch and they don’t care—but with Boeing that was not the case?”
It took time for Marlin to make the adjustment, including adding new factory automation, training employees, and learning how to adapt or die.
Making Gutsy Investments
When David brought up how Marlin “had some old wire bending machines, and you decided to invest in a pretty expensive automated bending machine—some of your employees thought it was like buying a howitzer to swat a mosquito,” Drew reminded him that the “machines” Marlin had been using to bend steel wire prior to that investment were manual tools.
Marlin’s workers went from using a couple of wood posts in a board to make about 300 steel bends an hour to having one worker operating five robots that could make 25,000 bends with much greater accuracy and consistency in that same time. Marlin would continue to invest millions in the acquisition of more factory automation.
Employees were transitioned from the heavy physical labor and given training in engineering and how to operate/repair the different robots that Marlin uses. Today, fully 5% of Marlin’s payroll budget is used to pay for employee training and education and 20% of Marlin’s staff are degreed mechanical engineers.
Being Nimble and Adaptable
When David asked Drew about why Marlin Steel was non-union, Drew explained that the biggest issue with unions was that “One day we’ll have a lot of sheet metal, the next steel wire products, then machined components the next… We needed a very nimble staff because the way workloads would come in was very uncertain. A union’s fixed job classifications would be very stifling.”
This is a different concern than the traditional pay issue that unions usually bring up. In fact, Marlin’s employees make 4 times more now than they did when the company was a union job before being bought back in the ‘90s.
In short, it wasn’t a pay issue, it was that a union’s insistence on defined job roles that would keep Marlin from being able to adapt to changing needs. Also, this keeps each employee working more consistently, as one person could be moved from one production line to another as needed—no sitting at home and hoping that there’s a big push for machined parts because that’s the only machine you know.
Reasons Marlin Likes Working with “Demanding” Clients
David asked about what the big challenges were in moving from bagel companies with loose tolerances to companies like Boeing, Toyota, Merck, and GE—what was hard about it and what Marlin learned.
Drew’s response probably surprised David when he said “they’re actually much more pleasant to work with because they’re black and white.” In other words, these new clients had much clearer ideas of what they needed from their custom basket designs—including design features and goals for improvements.
The way a part needs to be held, minimizing scrap, and increasing throughput are all clear, objective goals that can be met.
David pushed back with a quip about how working with leading manufacturers such as Toyota can be difficult because of how demanding they are on quality and precision. But, it’s this focus on quality and innovation to create ways to meet goals that makes them so good to work with. Also, the lessons that Marlin learns on each job sometimes leads to improvements for other jobs in different industries.
The major challenge is balancing what’s “cool” against what the client cares about.
Additive Manufacturing (3D Printing) and Innovation
Speaking of “cool” technologies, show host David Robertson asked about how Marlin is integrating 3D printing in its production process.
Right now, Marlin is using 3D printing in two ways:
- Producing parts for limited-run designs where large-scale tooling for the parts would be wasteful.
- Creating mockups of customer parts for parts that don’t yet exist.
The ability to create a physical mockup of a part to test it can be highly useful in cases where a customer needs to have a basket in place for an upcoming parts launch before the part has ever been made.
When the basket gets made, Marlin can use that 3D printed part to make videos showing the client exactly how their part will fit in the basket.
Innovating Processes with Incentives
Aside from encouraging innovation by including new equipment and giving employees vastly improved access to training/education resources, Marlin also fuels innovation by giving employees cash incentives.
Every new job-related skill an employee learns earns them a bump in pay. Also, every time an employee creates a really slick innovation, they get a cash bonus on the spot. Finally, employees can earn more money on their next paycheck for hitting really aggressive production goals quickly.
By making these bonuses so immediate and frequent, Marlin keeps employees motivated to continually hit goals and improve productivity. By attaching pay increases to learning skills, Marlin encourages each employee to learn new skills and be more flexible so they can work at different jobs in the factory.
Rebuilding the Middle Class Through Manufacturing Jobs
Dave ended the podcast with a reference to a NY Times article featuring the story of one of Marlin’s employees, James Branch. James came from a troubled background, but worked hard to complete his education and landed a job at Marlin Steel that helped him get on his feet and join the middle class.
Manufacturing jobs pay an average of $26 an hour, according BLS data cited by the NY Times, far more than the majority of service industry and retail jobs. Small business manufacturers like Marlin Steel provide the chance to make a living wage to millions of Americans.
If you missed the initial broadcast of the Sirius XM program, you can download it for free on iTunes starting Friday, November 11.