In with the new10 November 1998
HOIST travels to Oak Creek, Wisconsin to find out how Morris Material Handling is adjusting to independent life
Pete Kerrick only had time for a quick lunch. He had to dash off to a Kaizen meeting. Kerrick is vice president, Americas equipment group, Morris Material Handling, and Morris has grasped onto the Japanese-rooted philosophy of continual improvement by small steps.
Some see Kaizen as a spiritual beacon as much as a business guide, so perhaps it is somehow appropriate that Morris should embrace Kaizen as it embarks on its new life as an independent company.
It was March 1998 when Harnischfeger completed the sale of 80% of P&H Material Handling to its management and the New York finance company Chartwell Investments for $340m. The sale was prompted by the problems of Harnischfeger: P&H itself was, and remains, in sound shape, says Kerrick.
An early move was to change the name of the company from P&H to Morris Material Handling, the Morris name being that of the 114-year-old UK company that P&H acquired in 1994.
Kerrick describes the management style of the new company: “We are running this like a privately owned business and trying to rid ourselves of corporate bureaucratic procedures,” he says. The company is planning to outsource certain central administrative functions to keep the corporate overhead slim.
One of the advantages of independence is that there is less need to compromise, to fit in with the corporate group. For example, former owner Harnischfeger introduced a management information system three years ago, but as it was applied across the board for the whole group, says Kerrick, there were certain compromises that had to be made and, for the materials handling company, it has not proved as efficient as it could be. Morris is now looking to implement its own, simpler, business system by August 1999.
Though the name of the company has changed, the product branding (contrary to the impression that may have been given in Hoist Issue 2) remains the same. The cranes and hoists remain P&H badged, for without the P&H name the value of the company would be considerably lower than the amount paid. “The P&H trademark is very highly valued and is not going to go away,” Kerrick says.
Under the terms of the sale, Morris has the right to use the P&H brand for 15 years after Harnischfeger divests itself of the 20% stake it still holds in Morris. Morris pays Harnischfeger royalties for 10 years for the privilege. Every crane made by Morris in the USA will be badged as a P&H for the near and mid-term future, says Kerrick.
The Morris name will become familiar in the USA through the service companies, which previously traded under the name Pro Care Service. In the UK the name UK Crane Services, adopted only in 1994, is also being dropped. All is Morris now.
Any disruption that the sale may have caused to working life for employees does not appear to have affected business too badly. Recent orders include: a container handling crane for Salt Lake County, Utah; a 70t hot metal ladle crane for a steel mill in Mexico City; and a fully automated 60t crane going to a metals producer in Colombia in November.
The company continues to pursue its strategy of developing its network of company-owned distribution and service centres and this has helped the standard cranes business grow 30% in the year to October, says Kerrick.
Morris has 11 fully owned service and distribution centres in North America. Including branch offices, it has a total of 33 locations that are either sales outlets or full service and manufacturing sites. On top of this, it also has six independent outlets in the USA. (It owns all its Canadian and Mexican distributors.) Since publication of the last issue of Hoist, Morris has acquired, in Canada, Overhead Crane Service & Supply Company Ltd which is based in Burlington, Ontario but has three regional offices, plus two Australian companies, Powerlec and JDN Monocrane (see Round Up).
Though it lags behind market leading KCI Konecranes in the crane servicing market, Morris is very excited by this business sector. In fiscal 1997, 47% of its $350m revenue was from the aftermarket business and 53% was from sales of original equipment (40/60 standard/engineered products).
But the original equipment market has dropped and in fiscal 1998 57% of revenue comes from the aftermarket business. The split in original equipment has reversed to 60% standard cranes and 40% engineered products.
Unlike Kone, Morris simply does not know how many cranes it has under service contract. The only figures that it has tabulated, says Kerrick, are the revenues that have accrued.
Another positive factor, says Kerrick, has been “the growing acceptance of the UK product” by US customers. The UK wire rope hoist is the Redi-Lift line, while the US-made custom-engineered wire rope hoist is called the Hevi-Lift. Products made in the UK factory, in Loughborough, are sold in the USA with a P&H badge on.
A new electric chain hoist is coming out of Loughborough in early 1999, and Morris is looking to increase global product standardisation between what it makes in the USA and in the UK, Kerrick says.
A further development at Morris’ Oak Creek headquarters this year has seen the introduction of a cell approach to manufacturing. This would have happened regardless of the sale, Kerrick says, as part of on-going manufacturing improvements. Working teams were set up last year and reorganisation of the shopfloor was completed in May.
The result is significant savings in manufacturing times. For example, it now takes one week instead of four to manufacture a wheel. “A wheel used to travel 35 miles (56km) during its manufacture,” says Kerrick. “It now travels just 100 feet (30m).” Chartwell Investments, as its name suggests, is in the business of making money, not cranes. Clearly it is looking to realise a profit on its investment and move on. Morris cannot afford to stand still. Kerrick says the new owner is looking at a four to seven year horizon for ownership.
“They certainly expect growth in both sales and bottom line,” he says.