Necessity is the mother of innovation Featured

8:34am EDT October 23, 2001

Most people's lives are a series of twists of fate that are either capitalized on or not.

For Edward Crawford, CEO of Euclid-based Park-Ohio Industries and a 2001 Innovation in Business Master Innovator, necessity has been the mother of innovation and innovation has been the lifeblood of success.

Consider how Crawford landed in Cleveland.

"My father was an electrician," he says. "Like a lot of fathers in 1948, he wanted to take his family to California for a better life. The simple story is that the truck blew up in Cleveland and we stayed."

It just goes to show that often, opportunity rises from the face of adversity.

No one knows where Crawford would be today if that truck had made it to the West Coast, but most likely he wouldn't be CEO of Park-Ohio, which is paving the way in manufacturing logistics with 4,000 employees and $750 million in sales.

With an entrepreneurial spirit and youthful ambition, Crawford began his career as a salesman for steel container manufacturer Inland Steel. It didn't take long for him to get the entrepreneurial bug and he and a friend founded their own steel container business.

"I felt that we could do it better and more effectively," says Crawford.

But there was one problem.

"We got all of the equipment," he says. "We forgot one major issue -- working capital and access to working capital."

Crawford needed steel and had no capital. The answer came out of necessity -- convince a steel producer to basically lend them the steel, then produce the containers, deliver the goods at a discount for on delivery payment, pay the staff and the steel company and turn it all around in less than a week. Simple, right?

"I viewed the container business as steel in and steel out," says Crawford. "How long does it take to convert the steel to product, sell it and collect the money?"

Although the concept may sound familiar today, that wasn't the way it typically worked in the early 1960s.

"It is the concept which is very fashionable today -- zero net working capital," Crawford explains. "But using that process, the company went from $0 in 1962 to $18 million in 1969, and I was the SBA Man of the Year."

Capitalizing on problems

With the innovative process in place, Crawford continued to be successful and grow his business. But he always faced the same problem -- access to capital.

"Because of all my experience, I began to think that possibly there was a way of accessing capital by buying troubled companies -- motivating people and making changes," he says.

In the '60s, unlike today, there were not a lot of entrepreneurs looking for companies with problems.

"It was a brand new concept to go in and buy something and get it at a discount because of those problems," says Crawford.

But taking on those challenges opened the door to capital. And, as if amassing manufacturing companies and making them profitable wasn't enough, Crawford came across another failing manufacturing company, only this time it was a public company.

"We came to Park-Ohio in 1992," he recalls. "In the preceding five years, the company lost $50 million. I became the chairman on June 16, 1992, and in the fourth quarter we made 2 cents a share. We then went 33 quarters in a row of increased sales and earnings, growing the company from $66 million to $850 million."

With a new company came new challenges and new ideas. Crawford's most illuminating experience came with a trip to Mack Truck to discuss a line of fasteners from RB&W, one of the companies within Park-Ohio.

The story goes that when Crawford asked why Mack bought all of its fasteners from a single source, leaving it vulnerable in his eyes, the answer was that is was more efficient to get 78 fasteners from one source than to order 78 fasteners from 78 sources.

That is when he realized things were changing in the manufacturing business.

"When I came in to the building, I thought of Mack Trucks as a manufacturer. When I left the building, I realized that, in essence, they were going to be an assembler," he says.

That one meeting prompted Crawford and Park-Ohio to make yet another innovative move.

"Logistic supply chain management came to me when I saw the efficiency -- why would manufacturers have working capital?" he says. "Why would they have their floor space tied up? Why wouldn't they get us to deliver everything?"

Crawford immediately applied the concept of logistics supply chain management -- getting the customer what it wants, when it wants it, right to the workstation, with net zero working capital. This way, his clients are really converters. Some don't even need a sales department, Crawford says.

In reality, his approach to business fundamentals hasn't really changed since his early days.

"It is a long carryover from 1962," he says. "It is the conversion of raw material."

Today, Crawford is driving the concept of supply chain management, which, at its basest level, is the conversion of raw materials. However, as he spends more time and capital on the logistics part of Park-Ohio, he envisions selling off the pure manufacturing companies.

"We have committed all the resources of the company in the last four or five years to the building of supply chain management," he says, adding it is where the company is headed.

Currently, it represents close to 70 percent of the business.

"At noon today, our client's computer will tell our computer -- which we invested some $30 million and runs 52 warehouses serving 15,000 active industrial accounts -- what they need, how much they need and when. That trend is going to continue."

How to reach: Park-Ohio Industries, (216) 692-7200