From racecars to telecommunications, the story of KARLEE’s goal to become vertically integrated explains how companies need to consistently reevaluate who they are in a changing marketplace. Lorie Russo has the story.
There are many businesses across the country founded in someone’s garage, but few that achieve the level of success of KARLEE, a Garland, Texas, operation that has built a reputation in slightly more than 25 years for being top-notch in its field.
Now a contract manufacturer of precision sheet-metal and machined components for the telecommunications, semiconductor and medical equipment industries, KARLEE was founded in 1974 by Lee Brumit, who operated his small manufacturing business out of a garage. The company originally produced metal components to support Lee’s racing hobby. But advancing technology has sparked changes within KARLEE, which continually reinvents itself through sound, proven business practices and philosophies. “Changing technology changes business demands,” says President Rick Cherry. “What was modern two years ago is now obsolete.”
With a strategy incorporating innovative manufacturing processes and old-fashioned business sense, KARLEE has enjoyed success through the business acumen of Lee Brumit’s wife, JoAnn (who assumed the helm as chairman and chief executive officer, making KARLEE a woman-owned business, in 1985) and through Lee’s engineering skills. It has grown from $1 million in sales in 1979 to $80 million in 2000, from 3,000 square feet to 210,000 square feet and from 13 team members to 550.
“We’ve grown tremendously in the last seven years, averaging over 25 percent each year,” adds Cherry. This year, he notes, KARLEE doubled its revenues, going from $39 million in the last fiscal year to its current $80 million. This has occurred through the company’s move toward contract manufacturing and vertical integration. “Through the years we’ve added different processes,” Cherry explains. “We do such things as our own welding and silk screening, painting and mechanical assembly. We’re doing full turnkey integration now.” Few competitors, he adds, provide a total systems approach including prototype-design support, sheet-metal expertise, machining, finishing, value-added assembly, testing and dedicated customer support. “Our goal is to be fully integrated by acquiring different processes to reduce lead times and costs for customers,” Cherry says.
From Concept to Product
KARLEE now supplies vertically integrated services that support customers from initial component design to a finished, assembled product. Those services include:
• Advanced design engineering support
• Prototype production
• Manufacture and assembly of precision-machined and sheet metal-fabricated products
• Product finishing (painting, silk screening, plating)
• Value-added assembly integration (cabling, power-supply and back-plane installation, electrical testing)
KARLEE’s state-of-the-art manufacturing equipment features robotic CNC punch presses, brake presses, welding and hardware-insertion machines. Additional equipment includes pulsar laser-cutting machinery, water-jet equipment, robotic welding equipment, high-speed CNC machining centers and CNC lathes. Finishing operations include an automated wet-paint and powder-coating line with an in-line iron/phosphate wash system, and silk-screening and imaging processes. Support technologies include CAD systems, a DNC network system, a CAD/CAM programming system, graphics workstations, an EDI transfer system and a fully integrated ERP system.
Among its vertically integrated manufacturing capabilities are CNC milling and turning for machined components, complete sheet-metal fabrication including plating and painting, and value-added assembly. Its sheet-metal fabrication work ranges from small brackets to enclosure assemblies, and its machining items extend from circuit board spacers to large vacuum chambers. Currently, KARLEE’S equipment assets are valued at $20.2 million.
“We focus on maintaining a small customer base,” Cherry explains. This strategy allows KARLEE to deliver the level of sophisticated service that customers demand, and at the same time manage the growth of a small company in a controlled fashion. Right now, KARLEE supplies to four Fortune 500 customers who distribute product worldwide.
On the Grow
Last year, KARLEE spent $4.5 million in capital investments directed toward its precision-components manufacturing, Cherry notes. “We try to keep only the most modern equipment,” he adds. “Once a piece of equipment is seven or eight years old we turn it in for an upgrade.”
KARLEE’s manufacturing space now totals 210,000 square feet. The company acquired a second facility, called K-2, of 85,000 square feet in Garland that went into operation last December. A proposed K-3 plant of 125,000 square feet is set to be completed in August 2001, creating a campus environment. KARLEE employs 425 team members in manufacturing, 118 people in administrative/support areas and seven senior executive leaders.
KARLEE’s shift toward more collaborative, committed partnerships has required the company to be much more proactive in anticipating and responding to customer’s current and changing needs. The company addresses changes in customer requirements by being responsive and flexible to schedule changes, adjusting to customer growth requirements and integrating new production processes to meet new requirements.
Cherry explains that the company consistently achieves preferred-supplier status by meeting a host of requirements, which include PPM goals for quality, on-time delivery goals, just-in-time manufacturing, KanBan support and engineering support, quick turnaround on prototypes and quick response time to request for quotes (RFQs).
Values for Leadership
KARLEE also achieves its goals by operating from a set of core values that encourages growth, development, leadership, trust and social responsibility. To better carry out these core goals, KARLEE’s entire work force is organized into operational, administrative and support teams. A steering committee formed in 1990 develops in-depth leadership within the company. A senior-executive-leader team formed in 1997 prepares the company for the next stage of growth, providing strategic focus and listing expectations, and overseeing the company’s performance to ensure that goals are met. Additionally, KARLEE has incorporated Hoshin techniques, concentrating on the core critical steps a company must take to achieve its vision and mission. KARLEE’s current Hoshin is to use lean-manufacturing strategies to improve efficiency and productivity. The company’s encouragement of open communications among teams fosters a high level of performance and company focus, and team participation in setting goals. It also empowers teams to manage and improve their processes.
KARLEE’s continuous-improvement techniques have earned it a number of prestigious awards. Most recently, the company won the Texas Award for Performance Excellence in 1999 and the 2000 Texas Business of the Year Award from the Texas Association of Business/Chamber of Commerce. KARLEE also has applied for the Malcolm Baldrige National Quality Award for good business practices. At the crux of this award is the way in which a company makes its business practices a way of life, an objective that always has been a integral part of KARLEE’s strategy.
“The award is based on continuous- improvement principles,” Cherry says. “You need to make sure these principles become a way of life for your company. It’s like a journey, something you have to be living and doing.”