CEO Interview: Better solutions

Gary Vermeer, founder of Vermeer Manufacturing, loved to fly planes. Inevitably, he’d combine a trip demanded by his growing business with a family excursion. And so growing up, siblings Bob Vermeer and Mary Andringa literally had a bird’s eye view of their father’s business.

The company plane is even more vital these days. Bob recalls a recent three-day trip that took him from company headquarters in Pella, Iowa, to Denver and Grand Junction, Colorado; Ontario and Fontana, California; Oregon and Salt Lake City. But the trip was important, since it involved Mark of Excellence presentations to winning dealers. “Mary and I started in the 1980s working hard to have an open relationship with our dealers and it has paid off,” Bob says.

The leadership team of Bob and Mary has been at the helm of Vermeer since 1989, guiding the firm their father founded in 1948. The company has gone far beyond its agricultural beginnings to become the utility equipment firm contractors now know. And its product line keeps expanding beyond construction and agriculture, venturing into landscaping, environmental recycling and even surface mining.

While there’s a clear division of responsibilities between the two, one senses a unified vision, something they’d claim is the result of their emphasis on what they call the “Four Ps,” – people, principles, product and profit. Bob, who is chairman of the board and co-chief executive officer, oversees the legal, product safety, finance and the forage product areas. Mary, who serves as president and co-chief executive officer, directs the firm’s industrial product divisions and usually takes the role of company spokesperson.

The two have a bedrock respect for each other. “When I was teaching preschool in Nebraska,” Mary says, “Bob encouraged me to relocate around Pella, saying, ‘you never know when you might want to get involved – and in the future, there’s going to be more women in this business.’ That was 25 years ago, so he was definitely ahead of his time.”

For the past 10 years, a major thrust for the company has been lean thinking, or what Mary terms “the relentless pursuit of waste.” You soon learn it’s a subject the two are passionate about.

What first attracted you to the lean process?

Mary: Although we’re privately held, we’ve had an outside board of directors for 20 years. One of our board members was from a company that was a lean pioneer. He told us, “You’ve got to quit building buildings and adding all this capital cost to the business. You’ve got to understand what lean is all about.”

So we visited his firm, and studied what our cross-town friends at Pella Corporation were doing. It started to click with us that it’s taking waste out of our processes. We knew our manufacturing gross margin was not at all where it should be – we were making batches of products, say 50 at a time, and as a result doing a lot of firefighting. We started adapting lean processes in manufacturing, but what we did not realize at the time is it can affect every process.

Bob: The best part is it involves so many of your people and it gives them ownership of any new procedures they’ve helped develop. It gives them a sense of pride because all along they felt there was a better way.

Mary: Being lean is strategic for us. We’ve used it to better understand our marketing, to have a better understanding of our customers. It’s helped us understand their satisfaction levels and put our marketing into a format where we could see what the needs were in our markets, and how we could address them.

One of the points in our five-year vision is to be good stewards of our earth. We try to recycle everything we can, and several of our products fit right in with this, from our directional drills to our chippers.

What has been the impact of your lean initiative?

Mary: There are so many benefits to lean thinking. One is much better inventory management, and that’s something dealers have always struggled with because inventory is cash.

While we’ve been implementing lean practices for a number of years, it’s only been in the past two years we’ve focused on improving lead time, quality and the man hours per unit. That’s when we decided to put all our effort into one manufacturing line and learn what and what not to do so we could take that information to our other lines.

We expect our learning line to always be ahead of our other lines. We’re now at a point on this learning line where we’re going from raw steel to a built machine in three days. The lead time before we started this lean process was 52 days. We’ve reduced man hours per machine by 78 percent. Still, we know we haven’t been through the terrific demands of a hurricane season yet.

Bob: This all benefits the end user of our products, too. Because of our lean initiatives, our quality and reliability is higher and they can get a machine much more quickly.

There was a period of time when our people said, “When is this going to go away? When are you going to quit this lame stuff?” Now people are enthused about it and want to be on our advanced teams.

Mary: We’re not at all where we want to be. For instance, we’re working in our parts center to get better processes with parts ordering. In this environment, learning is a continuous process.

Bob: We’ve found out that it extends beyond Vermeer into your personal life. What do you have in your closets that you can recycle? It makes you more intent in everything you do.

How are your markets doing right now?

Mary: We’ve had a good year in both our track trenchers. We’ve put tracks on our model RTX1250 trencher, equipped with quad tracks, which gives our customers a lot of flexibility, especially since it extends the amount of time they can use these machines during the year. We believe tracked utility trenchers are a growing market – in fact, almost anything on tracks is growing.

We’re excited about the terrain leveler. We initially saw it as a site prep machine, which is closely aligned with our other infrastructure products, but now we’re starting to get into surface mining. This product takes a lot of steps out of the traditional blasting process in mining, so it’s a great solution.

Still, we realize that mining is a new market for us, and for our dealers. Because of this, we’ve hired geologists with mining backgrounds to help us evaluate ore conditions in certain mines. There’s a lot to learn, including a whole new vocabulary.

But this is just part of what our dealers need to know. They also need to know chemistry to sell our composting products. They have to be versatile learners.

Bob: And we’ve seen exciting things on the international front with this machine, from coal and gypsum mines in Australia to digging out harbors in Dubai, Saudi Arabia.

Mary: We’ll also continue to build on our line of landscaping products, which put us in an aligned, but different area. We’ve got our tree equipment and our mini skid steer, and are offering more solutions for landscapers. That’s fun.

Bob: Of course, directional drilling plummeted in the first part of this decade, but it’s really come back in the past two to three years. There are still a lot of water and sewer lines that have to be replaced plus gas and oil and they’re using our equipment to do that. And environmental sensitivities also help directional drills.

Mary: Our chipper and grinder demand has been steady, but they’ve not experienced the huge market we experienced after the hurricanes two years ago.

With our grinders, one of our big initiatives is designing the machine so the wood waste doesn’t have to go through two grinding processes in order to meet the requirements of certain applications – especially producing chips used for heating and cooling plants. We love the fact that the end product has a use.

What about new products?

Mary: At this past ICUEE, we introduced our D16x20 Series II and D20x22 Series II directional drill, plus the S400TX mini skid steer, designed for rental and landscape contractors. We just started producing a new tub grinder, the TG5000, to fill up the line. And since we plan to expand into the wood waste and compost markets we knew we needed turners and trommel screeners.

Bob: We’ve expanded our line by introducing an elevating face compost turner, and through our recent 50-percent acquisition of Wildcat Manufacturing, we now also have drum design compost turners. These machines have applications in composting, as well and wood waste and landfills. We also saw Wildcat, which is based in South Dakota, as an opportunity to have another manufacturing facility in the United States besides Pella.

I know you consider your dealers as critical to your success. What are you doing to currently address their “care and feeding?”

Mary: Our dealers are professional spokespersons for the Vermeer brands. Many of them are sizeable enough to have rental fleets and work with customers on whatever their needs are. We encourage our dealers to be part of our planning process, and to align their own planning with where we’re going.

Bob: We’ve also seen the investments we’ve made here in our facilities also happen at the dealership level. There have been great, positive changes from 20 years ago in how they represent us and how they represent themselves to the customer.

And it helps that we’ve now got the third generation of the Vermeer family joining the firm and many of the dealers are now in their second generation and understand the dynamics. And before a member of an incoming generation can become part of a dealership they have to go through an evaluation process just to make sure we have the right people in place.

Speaking of generations, is there a succession plan? What key values would you want to see future leadership carry on?

Bob: We started working with an outside firm in 1989 to devise strategies on building the next generation and now we’re working with Loyola University out of Chicago. Mary’s son, Jason Andringa, is an environmental market segment manager and my daughter Allison Van Wyngarden is a dealer distribution manager. We let all of our family know early on if they wanted to work for us, we had certain requirements – an MBA, a three- to five-year period where they worked somewhere else, and a promotion in that other job.

In addition to welcoming family members, we’re also very aware that we need to have great opportunities in the company for non-family members.

Mary: We emphasize to everyone in the family that we want them to do the kinds of things that make their hearts sing.

How would you describe your corporate environment?

Bob: We have an open book policy and let people know exactly what’s happening in the company, including profitability. Mary and I also make sure our employees know that our doors are open. And then there’s Vermeer Cares, which is a program where our employees can support each other. For example, if someone has a house burn down, our employees can elect to take an amount out of their check to give to them. We also give our employees opportunities to go on service trips – we sent three teams of people down to New Orleans after Katrina and two teams over to Greensburg, Kansas, after the tornado. We give them Vermeer equipment to use.

We feel all of this gives people an opportunity to be stewards of what they have. And they usually find the ones they’re truly benefiting are themselves.

Mary: People can also donate their paid time-off days to give to people who are facing medical or other issues.

Another initiative is our Employee Training Camp. At different times, every employee attends a four-hour training session at our Global Pavilion. While topics vary, there’s usually an overlying theme, and this year it’s quality. We brought in dealers to speak to our employees about quality and how it affects their business and the businesses of their customers. This showed our employees their work reaches far beyond Pella.

In your five-year vision, you said you wanted to see a 15-percent rate of growth and a 25 percent growth in international sales.

Bob: We’ve based these goals on past achievements. We see a lot of growth in our environmentally related products – trenchless, grinders and chippers. The international piece is really exciting, though. We believe our innovative products and worldwide sourcing will give us these kinds of opportunities.

What do you think makes Vermeer different from other companies?

Bob: Our “Four P” philosophy – people, principals, products and profit – is our bedrock. We believe in Biblical-based principals, but we’re not trying to force that on anyone. We have an emphasis on innovation, plus we have a lot of fun.

Mary: Bob’s right. Our Four Ps really promote caring for the customer and for each other. It also encourages innovation because the whole culture here is one of continuous improvement.

Seven goals, five years
Bob Vermeer presented these five-year goals to the Vermeer board during the first quarter of this year:

  1. Achieve a 10- to 15-percent annual rate of growth.
  2. Increase focus and presence to better serve key global markets.
  3. Attain either the No. 1 or No. 2 position in core markets.
  4. Continually deliver more economic value to the customer by improving key lean metrics.
  5. Positively impact quality of life through our products and as stewards of our environment.
  6. Provide a challenging and rewarding employment experience for Vermeer team members throughout the world.
  7. As an outcome of market-based strategy initiatives, quickly deliver innovative solutions to the marketplace.

Vermeer’s industrial product line up
Trenching equipment
–Ride-on trenchers
–Walk-behind trenchers
–Track trenchers
–Vibratory plows

–Directional drills
–Vacuum excavators

–Brush chippers
–Horizontal grinders
–Tub grinders
–Stump cutters
–Compost turners
–Trommel screens

–Mini skid steers

Surface excavation equipment
–Terrain leveler