The phone rings and Peter Young’s deal du jour is interrupted by a frantic customer begging a favor. Dialogue done, Young darts out his door. Sprinting past the row of administrative offices, he plucks a hair net from his suit pocket and covers his head before entering the sterile production area.
Production floor supervisor Pat Boyer harkens to familiar footsteps and looks up to see Young conferring with manufacturing manager Bill Scheppler. She doesn’t even have to surmise the conversation’s content. Boyer instinctively anticipates a changeover because it’s a typical scenario — and business as usual — at Harry London Candies Inc.
“I can’t tell you how many times I’ve gone to production and asked them to switch over production lines to service a customer in a crunch or to do something very difficult because a desperate customer asked for something on tomorrow’s truck,” says Young, president of the North Canton candy manufacturer. “Instead of getting a groan, I always get a ‘No problem, we’ll get it done’ response.”
It’s all in a day’s work when you’re a world-class confectioner who creates some 2,000 comfort-food products people can’t get enough of. But a bystander business strategist might scan the company’s colossal product line, size up Young’s boyish countenance and presume his Pollyannaish perspective connotes a business naiveté that will eventually collapse his company.
Some would sermonize that the key to production efficiency and sales success is a narrowed product line and a fixed production schedule.
In his own defense, Young could cite Harry London’s stellar sales. But he doesn’t. (He does disclose that the privately held, family firm has had a 26 percent compounded annual growth since 1994, and, when pressed for an estimate, narrows 1998 fiscal year sales to “between $20 and $40 million.”)
Young could also boast about his economics and law degrees. He might maintain that his manufacturing method is pure prowess, buttressed by business acumen amassed while directing the international transactions of billion-dollar global glass manufacturer Guardian Industries Inc.
But the leader of Harry London, a third-generation confectionery founded in 1922, simply smiles and offers a plate of Pretzel Joys and an “on the other hand” viewpoint.
“The common business advice is that you have to focus on a limited number of products to be really good at something. But what if you could make a wide variety of products?” he poses. “So many of our customers, particularly big partners such as Disney, Segrams/Universal Studios, May Company, Dillards, Sally Foster and others we work with, don’t want to deal with a dozen different chocolate companies. They want one-stop shopping at a quality house. We’ve found that’s been a tremendous marketing advantage.”
Instead of scaling back on SKUs, the family has excelled in new product development, creating a large-scale quality line consistent with the firm’s reputation — from handed-down, hand-made recipes to the high-speed, high-volume products the company manufacturers today. Harry London has also found complimentary channels of distribution and established strategic partnerships with a blue-chip customer base.
The real challenge, Young acknowledges, has been how to supply the demand while being an efficient and low-cost producer.
“By our industry’s standards, to be able to make 2,000 products on 12 production lines is somewhat extraordinary. We’re unique in that we work very hard to be efficient while doing that.”
Harry London’s quest to pump up the volume and turn on a dime has resulted in a handful of de facto guidelines similar to a must-read manual for efficiency minded manufacturers.
Adapting technologies
Young says that even though Harry London makes the highest-quality chocolate in the world, the company strives to be the low-cost producer in everything it makes.
“If we see an area in which we’re inefficient, instead of saying, ‘This is a weakness so let’s stop doing it,’ we say, ‘How do we become efficient in this area?’ We can’t just go look up the candy buyer’s guide and say, ‘Oh, here’s a machine that could do this.’ We scour the world looking at technologies in other industries, and we adapt them to our own manufacturing methods.”
Young credits Joe Waggoner — his wife’s brother and Harry London’s grandson — with the technical savvy and production expertise that engenders efficiency on the floor. Waggoner, who grew up in the family business, concedes that when he returned to Harry London in 1988 after a four-year stint in the Army, he was concerned that many lines were still hand cut.
“I looked at that and said, ‘We can’t do that forever!’” Waggoner laughs. With knowledge of new technologies developed in other parts of the world, Waggoner envisioned tailoring those to his own industry to automate various practices and systems.
For one of Harry London’s confectionery processes, Waggoner adapted equipment and machinery initially designed for a semiconductor manufacturing business. He also applied principles and technologies originally developed for baking purposes in the pharmaceutical area.
When Young joined Harry London in 1994, the push was on to achieve higher volume. That required larger machines. But the equipment, by design, was less flexible and more difficult to change over for different product runs. That’s when the company began spending big bucks for custom-built equipment, devoting time to optimizing space and planning for expansion.
Space utilization
Any manufacturer can purchase a machine that spits out a lot of product. The task lies in making myriad products and packaging them in multiple ways simultaneously (be it flow wrap, twist wrap, boxed or bagged). Understanding how to use space efficiently and productively plays a big part in that process, says Waggoner. A production line might be only 50 feet long, but if space is not used efficiently, 200 feet might be needed for packaging.
“When there’s a load of pallets or totes crowding the packing area, that doubles the product handling process and reduces efficiency. The trick is to cut down on work in progress (WIP) space,” says Young.
Scrutinizing new technology, Waggoner found ways to reduce WIP. “Before, a machine that would wrap 50 pieces of candy might have been 50 feet long. Now, because of electronic control, they come in a little square box, making it very efficient,” he explains.
Waggoner says that, due to Harry London’s growth spurts and capacity constraints, raw materials and finished goods were once warehoused in the same location. The setup snagged efficiency. After recently doubling the size of its facility to 220,000 square feet, the company now has separate areas for packaging, shipping and receiving — and innovative systems for each.
In a seven-story warehouse, conveyer belts snake upward into a ceiling section with dedicated packaging bays. Packaged product is then directed to specific distribution stations. And instead of stacking product on traditional 60-inch high bins, a “long and high” rack design stages 40 truckloads worth of pallets.
“When you start looking at pushing the envelope in other products and areas, it’s a constant process. You can never settle back and be content with what you’ve got,” Young says. “Come spring, when the rest of our advanced production equipment and robotic packaging machines are installed, our production capacity will grow exponentially, because the type of equipment and space we’ve designed is even more efficient.”
Inventory control
Controlling inven
tory, whether raw materials or finished goods, will make or break a company, Young says, because “it’s an enormous cost center.” For Harry London, manufacturing 2,000 SKUs means not only managing the product itself, but regulating the 20,000 or more items required to make it.
A new computer inventory control system that networks Harry London’s two on-site and three off-site warehouses has simplified the process. As product goes from raw material through production into finished goods and shipped product, everything is bar-coded and tracked via radio frequency.
Information is readily available in real time. The inventory control system is networked with purchasing, production scheduling and accounting systems.
“Now we plug in sales forecasts and the system actually tells us how much raw material we have in stock, what we need to order and when it needs to be here,” Young says. “If you’re going to make a lot of products and be good at it, you must be able to do this. Otherwise, it’s humanly impossible to manage efficiently.”
Fresh perspective
“If you’re an engineer and you grew up in one industry, your only frame of reference would be that industry. That really limits you,” Young observes. “But if you can bring in people with a lot of fresh ideas, you can think outside the box. That gives you a tremendous advantage.”
When Harry London died, his wife Iola brought in her daughter, Bonnie Waggoner (Harry’s stepdaughter) and Bonnie’s spouse, Cedric Waggoner. The business eventually passed to Harry’s grandchildren, Mercedes, Joe and Allison Waggoner.
“It was new blood and they brought in a fresh perspective. They made a good business team,” Young says.
He credits his wife with being the creative genius behind much of Harry London’s product development, particularly the Disney line. Allison Waggoner, though not a shareholder, is actively involved in the creative area of store merchandising and gifts.
“And Joe’s the guy when it comes to candy making, production machinery and laying out cost-effective production lines,” he says.
Harry London also recruited seasoned professionals from outside the industry to fill both technical and managerial roles. Young says doing so has resulted in higher efficiency and greater ingenuity.
“We brought in people that, when they applied their skills and knowledge to this industry, it was like a gold mine for us,” Young exclaims, offering as an example the highly technical military background of maintenance chief Greg Gagnon, a former Army buddy of Waggoner’s.
And the administrative roster reads like a Fortune 500 marquee: COO & CFO Ron Ocasek; VP of human resources and retail operations Frank Zeiher; and logistics director Dave Miles — all recruited from Reiser Foods; and marketing VP Maria Post and product development director Ginger Ryder — both lured away from Disney.
“They all came from different industries, but they have complimentary talents that were perfectly adaptable to us,” Young says. “Considering that last year we introduced about 200 new SKUs, and next year we’ll match that number, we’re thinking well outside the box.”
No politics allowed
Young counsels that to build an international powerhouse that is productive and efficient, you must have a highly skilled, elite work force that can work as a team. At Harry London, team chemistry is just as important as worker capability.
“We’ve been very careful about the folks we’ve recruited,” Young says. (Careful to guard against union infiltration, he will only say the number is “upwards of 350.”) “I’ve been to a lot of factories in my life and I wouldn’t trade one of our employees for anything. They all know what their responsibility is, they do it well, and they also know they’ve got to help each other.”
New hires at Harry London are clued in very quickly that egotistical “turf-territory thinking” is the first deadly sin.
“If there’s anything that wrecks productivity and kills a good worker’s spirit, it’s having to waste time and energy worrying about whether someone’s stabbing you in the back,” Young says. “One thing we don’t tolerate around here is ‘politics’ and ‘turf,’ because if you’re the victim of someone’s backstabbing, it’s impossible for you to be productive. It’s like a cancer in an organization.”
Young says that if an individual can’t check his or her ego at the door and operate as part of a team, that person doesn’t belong at Harry London.
Strategic partnerships
Since many confectioneries are family firms, and candy making is a seasonal business, there’s a common justification to eschew expensive equipment purchases that, if in place, would make a manufacturer more efficient.
“A lot of companies in our industry say, ‘Why spend a million dollars on this piece of machinery if it’s only going to run six months out of the year?’” Young confides.
He says that developing strategic partnerships with other companies has enabled Harry London to make full use of its equipment throughout the year, resulting in greater efficiency all around.
Contract business with big players such as Disney and Universal has helped plateau seasonal peaks and valleys that bite into the bottom line of other confectioners.
“These strategic partnerships have worked great for us, because their high season is late spring and summer, which is our slow season,” he says.
Young reveals that his “pie chart for success” has become a mix of branded wholesale products (50 percent), retail margin sales (20 percent) and private label contract business (30 percent).
“Our branded wholesale business includes co-branded products like Disney’s ‘Mickey & Co.’ product line, and the ‘Dawgpound Chocolates’ deal we just closed with Bernie Kosar. Our retail margin sales includes our eight Harry London stores, our mail order division, Internet sales, fund-raising and corporate gifts. And our private label business includes specially developed lines for Disney and others.”
Young says that mix will change as the company grows. And grow it will, he assures.
“We’re moving forward with some fairly major and aggressive marketing programs. Our retail and branded wholesale business is going to grow explosively, and, with a projected sales growth of 70 percent, the real fireworks start next year.” How to reach: Harry London Candies Inc., (800) 321-0444
