Local companies think outside the box

Several former Pearson Packaging Systems employees began a much longer commute Monday. Instead of punching in at Pearson’s West Plains plant, they were cruising down the Palouse Highway to Valleyford Metal Crafters.

But when they walked in the door, the mills and lathes they had worked with for years were there to greet them. The equipment was transplanted over the weekend as part of a deal that has Pearson outsourcing more parts production to Valleyford.

After a day to complete the installation, the 11 new Valleyford employees were expected to be machining parts today. Their presence will almost double Valleyford’s workforce, says co-owner Charlie Goldbach, and the new work and workers from Pearson will add significantly to his company’s revenues.

“We basically bought an operating business,” he says.

But there is more to this deal than Pearson outsourcing its parts work. At the same time, Valleyford is in-sourcing Pearson’s pay and benefits.

Although the two companies’ wages are approximately equal, Pearson provides a richer health benefits package, and pays a greater share of the premiums.

To get Pearson’s business, Valleyford agreed to purchase a health benefits plan roughly equal to that offered by Pearson by the end of the year. And not just for the new employees, but for all employees.

During the transition, Pearson, which self-insures, will continue to carry its former employees on its plan.

“It has a large impact on our existing guys,” says Goldbach. “It takes us to another level.”

Valleyford customers include aerospace and telecommunications companies. The additional work from Pearson, which is already a customer, will help stabilize revenues, he says.

The new employees and machinery will also allow Valleyford to pursue other new business.

Goldbach says Valleyford placed its new equipment in space formerly leased to a tenant. The space can also accommodate a computer-controlled router that will be moved in later this month during a second phase of the transition from Pearson. A third segment of Pearson business remains out for bid.

Pearson Chief Executive Officer Michael Senske says he wants all the parts operations off the company floor by July 1. About 35 employees will move on to a new employer as Pearson, which makes machines that form, pack and seal boxes, focuses on engineering new products, and their assembly. Pearson has as many as 185 full-time employees, depending on orders.

He says Pearson solicited bids for its parts business two months ago. Valleyford is a good partner not just because of the quality of its work, but also because it values the contribution of its employees.

“The culture is fantastic,” he says.

Some secondary suppliers have also been identified as a result of the bid process.

Outsourcing will spare Pearson the expense of buying new machinery, and additional business from Pearson will enable Valleyford to justify new investment there. Keeping the work local will also assure timely parts delivery.

“Hopefully, it will be an even more stable employment environment,” Senske says.

He says Valleyford should be able to cut the cost of parts by 20 percent initially, but eventually by as much as 30 percent.

Pearson can invest the savings in new technology for its factory, and new product development.

Also, Pearson engineers will be able to make use of Valleyford’s broader manufacturing capabilities by designing parts into company packaging equipment that it could not have produced in-house. That will further cut Pearson costs.

Removal of the mills, lathes and other machinery will free up about 20,000 square feet of floor space. Senske says Pearson may invite a supplier or suppliers to move in. A move might cut their overhead and assure them easy access to Pearson.

It’s all part of the package. Clearly, when it comes to supplier relationships, Pearson thinks outside the box.