Being a manufacturer these days is tough enough without coming in one day to find your machines in four feet of water.
But that’s exactly what happened to Canton-based Republic Storage Systems Co., a manufacturer of lockers, shelving and pallet racks, on July 28, 2003.
“I came out at 4 a.m. and couldn’t believe what I was seeing,” says Jim Anderson, Republic president. “There was four feet of water in the plant. There were bricks in the street that had been part of our plant. We had no power for nine days.”
Operations came to a halt. Only small groups of employees could work on cleanup until power was restored because only the areas lit using portable lights and generators could be worked on due to safety concerns.
“As a result of the flood, we took a hell of a financial hit,” says Anderson. “We had some very angry customers. They were understanding, but they still had a school system that had funded a $25 million school that had no lockers. The next five months for us were very trying. Our information system would say that we had parts in inventory that had actually been washed away and we didn’t know it. We would think we had parts of a certain color, but didn’t, so orders weren’t complete.”
The final damage tally was $11 million. Republic had insurance coverage for $5 million.
“We applied for and received an SBA disaster loan for $5.9 million,” says Anderson. “We got support from Congress and our local officials and the community. When you think about a company with $65 million in sales, and you take a broadside of $5.9 million, that is a significant financial impact.
“Our order book still isn’t what it usually is, and we are still paying a price for the flood. Some of the damage was hidden, and we are not finding it until later.”
Everyone pitched in to keep the company going.
“It brought us very close together,” says Anderson. “Everyone’s concern was how we could get the company back. They weren’t worried about pay, just what needed to be done.”
Anderson has also taken the rebuilding of the business as an opportunity to examine how everything in the company functions.
“All of us are spending a lot more time on customer service issues,” says Anderson. “We got rid of the water and started looking at all of our systems. We saw a lot we didn’t like. We have to change some of these things forever. We need to change them and do it differently. We are approaching all of these things methodically and improving customer service.”
Compounding the challenges was a labor agreement that was set to expire in June of this year and skyrocketing steel prices.
“We had to deal with our labor costs and health care costs,” says Anderson. “We asked the union to renegotiate the contract and they agreed. Everyone in the company took a pay cut. Employees started paying for more of the health care, and the deductible was changed. It was not an easy thing for the employees to do, but they did it; they stepped up. It was voted in by a two-thirds majority.”
Getting the labor issue settled has left rising steel prices as a continuing focus.
“We are a company that everything we do and sell is made of steel,” says Anderson.
The company gets 75 percent of its revenue from lockers, with 70 percent to 80 percent of that segment coming from school districts and the balance from private athletic clubs or businesses. The remaining revenue comes from shelving (20 percent) and pallet racks (5 percent).
“We’re a company that put in a bid in 2002 on school lockers that will be installed in the summer of 2004 with steel prices that are dramatically different now than they were then. No way is the school board going to accept a new bid. A 3 to 5 percent increase in product prices is built into your outlook, but you don’t build in a 50 percent increase. Now we are looking at 2005 jobs and are faced with the dilemma of how much price we should build in to protect ourselves.
“All of these issues are intermixed and going on at the same time. We are in the school market, but school levies are not passing like they used to. We have to grow our nonschool business in lockers and shelving while maintaining our rack business.” How to reach: Republic Storage Systems Co., (330) 438-5800
