In this episode of The Sound of Automation podcast, Bryan Powrozek sits down with Wipfli Partner Laurie Harbour to discuss how the right providers can help make a positive impact in North American manufacturing, and why industry knowledge is key. They also talk about the value of benchmarking as a path to continuous improvement. From rightsizing your business to networking with peers, listen to this episode for tips to help your small to medium-sized manufacturing business thrive.
Transcript:
Laurie Harbour 00:00
The automation, we gotta do a better job of making sure people know manufacturing's cool. There's just so much, you know, Industry 4 .0, there's so many new opportunities for the next generation to bring into our manufacturing companies and take us to the next level.
Intro/Outro Narrator 00:17
Welcome to The Sound of Automation, brought to you by Wipfli, a top 20 advisory and accounting firm.
Bryan Powrozek 00:37
Hello, and welcome to The Sound of Automation. I'm the host, Bryan Powrozek, and I'm very excited about the guest joining me today, and not only for her extensive knowledge in the manufacturing industry, but also because her and her colleagues have recently joined Wipfli. My guest, of course, is Laurie Harbour, formerly of Harbour Results, and now, Wipfli, Laurie, how are you doing today?
Laurie Harbour 00:59
I'm good. Thanks for having me, Bryan.
Bryan Powrozek 01:00
Oh, no, excited to have you. And today we're going to be talking about the importance of industry knowledge in, in finding advisors. I run into that all the time and talking with my clients. Um, but before we get into that, uh, just figured, you know, for the folks in the audience who might not be as familiar with you, you know, maybe introduce yourself and talk a little bit about why Harbour chose to join Wipfli.
Laurie Harbour 01:24
Yeah, no, that would be great. So, Laurie Harbour, former president and CEO of Harbour Results, small 15 -person consulting advisory firm that was located in Southfield, Michigan. We have spent 16 years doing operational improvement throughout multiple service lines. So, you know, specifically probably more process driven. So, stamping, molding, die casting, precision machining, tooling, automotive tools and dies. And so, that has led us into multiple markets. So, automotive seems to be kind of obvious since we're based in Detroit, but medical and agriculture and industrial products of all kinds, right? So, it's been a very exciting sort of 16 year run. But additionally, we do a lot of what we call small and mid -sized benchmarking. So, we're gathering data from six or seven hundred manufacturing companies a year. And across all those process types we talked about, we do it on behalf of several of the trade associations, as well as within tool and die, which is kind of led by us. And we utilize that benchmarking to do strategic planning with companies, to sit and provide, you know, a real sense of market intelligence and data into their business so that they can make decisions. And so, we had been working with several folks from Whitley and some of the prior, the companies that Whitley has acquired, like Miller Prose, like Clayton McKervey, in trade associations and other activities throughout throughout our client base and had really good relationships with those folks and then met a lot of people from Whitley. And my partner, Scott Walton, and I had said we would never, you know, move into a new company unless we could find value alignment and a cultural fit. And we'd had multiple opportunities to do this with other firms and there was never that fit. But with Whitley, it was just very, very different, right? We serve a very similar customer base, so that sort of mid -size manufacturing company, the folks that we met and interacted with were just values were just clear on similar to ours, right? And the culture of the team and everybody we met through the process was really just amazing. And in such a short period of time, it's been eight weeks almost to the day that we've been part of Whitley, the opportunities and the interaction has been so positive and so exciting that we just, we actually just had a meeting and just talked about how great it's been for eight weeks, even though there's always challenges and integration. The value alignment, the cultural fit has just been tremendous. So that was kind of really why we did it.
Bryan Powrozek 04:20
Oh, it's fantastic. And I think it's very apropos of the topic. You know, obviously as you talk about that alignment and that fit, you know, it's really proven out in kind of like you mentioned in the last eight weeks. But, you know, as you start talking about being an advisor to business owners, especially in that small to mid -sized area, you know, making sure there's that alignment and that knowledge of how they operate their business, because anyone can go in and do a lean assessment or a technology assessment or any of the various types of, you know, consulting and advising that the businesses do. But without that specific knowledge of how the industry works, you're really just applying general practices. You know, I've seen it in my own client base where, you know, companies that, and it's kind of funny to me when it's companies who, when they came to work with us said, well, we picked you because of your, the time you've invested in getting to know our industry and our business. But then when the project comes up to source a new ERP or do some sort of software selection, they lose sight of that and they go to, well, we need somebody that understands SAP or NetSuite or whatever the software is. And they miss that piece, because that's that in whether you're talking a back office function, looking at somebody's operations, that understanding of, you know, the industries, like you mentioned, precision metal form and injection molding, all of those businesses run slightly different and have slightly different things that are important that can help them get ahead of the pack. And so having that specific knowledge is critical in my opinion. And so I know that you kind of mentioned there, a lot of the industries you serve, but, you know, I'm just curious if you could give some examples of things that Harbours worked on in the past that, you know, that show or kind of illustrate that point of the importance of having industry knowledge when looking for a provider.
Laurie Harbour 06:25
Yeah, I think the industry knowledge has been very critical in helping. I mean, let's face it, people want to do business with people that they connect with, right? And a lot of times, we end up being able to connect at a level that, because we know their business, we always talk about the fact, like Scott Walton, my partner would say, I can advise you because I made all these mistakes. I sat in your seat and I was president of a company and I made a lot of those mistakes, right? So those are things that really help us to make an impact. But it's interesting because we have a little bit of a different business model than some of the other big consulting firms in that we're very focused on forming that relationship and making an impact, growing within that, which is what also works great about Wipfli because we're getting all kinds of opportunities now to add services to help our customers that we didn't have before, right? We didn't do tax and accounting or R &D credits or any of the opportunities around software selection and the multitude of Wipfli services that we have to offer them. So as we're going in, and one of the things we do a lot of is we do assessments. We go in and spend two or three days in a company. And although a lot of people do assessments, we're doing it from that experience of not only process type, but what we do, and for us, it's kind of like kicking the tires with the client. They get an experience with us to say, wow, I really like these people. They know their stuff. And then that then leads to sort of what we call the tip of the spear. It then leads oftentimes to strategy and then into other work. And we've had some Wipfli folks participate in those in the last eight weeks and just the number of leads that have been identified that we could never have done before. We could never have service. Like one client just signed up to be a new tax client for Wipfli because they needed it. But we would never have thought of that before, right? But part of our business model is once you do that assessment, you kind of get into the strategic planning side of things and then you start working operationally to support them. We end up having long -term clients. I've put together kind of a business case of a molder that we work with in South Dakota. They're about a $60 million molder. We've been working with them now for 16 years. And we've really been able to do a significant amount of revenue with them. But more importantly, have really been able to make an impact in their improved profitability, improved efficiency, improved leadership development. So we do their strategy refreshes every year. And then we introduced Wipfli even as a partner a couple of years ago. And now they're doing all their tax and audit work, their R &D credit work. And now we're talking to them about Industry 4 .0 and some leadership development with our leadership team that we have down in Kentucky. How do we help further develop this young leadership team? So our goal is to get in and assess the gaps, help them strategically understand where they want to be operationally and in business, and then ultimately help drive that operational improvement. So every project is a little different. But we have several clients that we've had for more than 10 years or more. And every year they just renew and the scope's different.
Bryan Powrozek 09:44
Yeah. And a lot of that, you know, kind of, as you mentioned, I like the story you related about Scott, you know, that I, I know this because I've, I made those, those bad decisions and, and, you know, had those same issues. Uh, I, I found that myself, you know, in transitioning from engineering to public accounting, uh, there was almost that, uh, and it's something you mentioned early on, they like working with people that they know when they trust and they connect with. And so, uh, having a heavy technical, you know, manufacturing client base, knowing that I've been through their trials and, and been on their side of the table, uh, you know, kind of helps us connect a little more and maybe even get them to open up a little bit, or, or you just know a different question to ask, you know, versus, uh, the way a lot of, uh, you know, strictly compliance focused. And I'm speaking from the, from the accounting profession side, but if you're just compliance focused and you're thinking about tax regulations or us gap and how this is accounted for, um, you can potentially miss some of those, those opportunities to advise. Uh, if you're just, you know, kind of pigeonholed in on, on whatever your specific, uh, area of expertise is.
Laurie Harbour 10:53
Right. Well, and you know, as a lot of your customers are, right, we small and mid sized companies, sometimes multiple generation, you know, small businesses that, that don't have all the tools, they don't have all the financial capability to hire some of the large firms that do the work that you know, much of the work that we do as well, but they're, they need the help, they start for direction, they start for guidance. And they want it not in a hey, you're just here to sell me something, they want it in a I truly care about your business. And I want to see you succeed. And I think that's another area of alignment for us. And Wipfli is that, you know, we're our, we always joke, we use the Simon Sinek why approach. And we our why was to get up every day to make an impact in North America manufacturing. And I think we aligned with a lot of people at Wipfli on that. And now we're able to say, look, I don't need to, I'm not trying to bring in a core account, you know, someone like yourself on compliance issues, because for any other reason than a care, I mean, yeah, sure, we're gonna, you know, we're gonna help you and we're going to be able to provide more services to you. But it's because we see a gap that we can help, you know, make you guys better as a company.
Bryan Powrozek 12:07
Yeah, and I feel like having had the opportunity to see both the assessment, the business assessment you're referring to as well as the Harbour IQ tool that you've developed, all of that, that's kind of where your industry expertise kind of guided, right? I've seen the list of questions and it's an extensive list of questions in that business assessment, but in talking with Scott and Gene on that, it gets tailored based on the company you're going out to meet and your knowledge of how, okay, a typical injection molder, these are going to be the things we want to look at, but then you also have enough experience and exposure to say, wait a second, this is something I haven't seen at others, let's dig a little more in there. And then that assessment can serve as the roadmap for how you develop those services for clients and gives them something also to point back to, right? Hey, we talked a year ago, this is what we said was important. We worked on it for a year and now here we are today. Here's your A to B comparison on how far your business has come.
Laurie Harbour 13:19
Yeah, absolutely. That's the goal. And, you know, there are interesting meetings because sometimes people push back, right? Because every small business thinks they've got it all figured out. But it's I always kind of liken it to that health exam we all have to have every year that they tell you your cholesterol is high, we need to eat better and exercise more and drink less and all those things. We may pick and choose those things that are the best. But the reality is that roadmap is, is us having to, to sort of guide where where would we start first, what's going to make the biggest impact to improve your overall performance as a business. And then you're right, that checking is important, people kind of get excited about, I want to be better than I was a year ago, right? And I want to make those improvements. So it's really been a great tool for us to help people see and we do a lot of data analytics in it. So we leverage Harbour IQ to say, okay, you're a $50 million moulder, or stamper. And anonymously, we share benchmarking data with them that says, here's where you stack up to your peer group, right? And, and here's the opportunities that this roadmap gives you to close that gap a little bit. And, and it really addresses a lot of things that helps them that even though the truth is when you do that assessment of them, they know they have challenges. And sometimes you're telling I always say to them, if I'm telling you things in the assessment that you didn't know, we have a much bigger issue. I'm hoping that I'm telling you things that you go, yeah, no, I know we have that problem. But more importantly, we're going to give you the roadmap of how to fix it.
Bryan Powrozek 14:53
Yep.
Laurie Harbour 14:53
So if we're surprising them, then there are more trouble than we think.
Bryan Powrozek 14:58
Exactly. Something you mentioned there that I really like and have seen with a couple of the associations I'm involved in is everybody clamors for that benchmarking data. If you're a small business owner that's kind of got past the, okay, I know how to look at my cash flow and I'm managing my internal and you're ready for that next step of KPIs, finding an industry benchmark, an industry association that provides that benchmarking data that you can align yourself with because I think that I've seen a lot of these companies take whatever the benchmarking information as, this is the gospel and if I'm not doing this, then I'm behind. Whereas I've taken a more practical approach that this is another data point to look at and understanding that your day's sales outstanding or your inventory turns or whatever the case may be, this is just what the average company is doing. Now, how does your business model stack up to that average company? Maybe there's a reason that you're turning inventory slower or faster and just having that recognition as you're looking at your strategy. Now, obviously, if there's one of the benchmarks that you're way below and that's one of those pieces of low -hanging fruit that you can address to improve your operations, by all means, do it. But also, look at those benchmarks critically and understand what they actually mean and not just blindly chase the metric with really no reason as to why.
Laurie Harbour 16:31
Absolutely. And I always tell people too that you don't necessarily have to be the best. You need to be trending towards the best, right? That's the whole premise of continuous improvement in that as long as the trajectory is going in the right direction. And in today's market, as you know, manufacturing is a huge challenge, right? It's always an up and down kind of scenario. And since COVID, we had this massive 40% growth in durable goods. So all companies were really struggling to meet demand because it was so high in 2021. And then we had people issues and so on and so on. And then you get into 2022 and people went, oh crap, we ordered too much. So now we need to slow down a little bit from an inventory standpoint. And now you're just watching kind of volumes going up and down, right? Tough, tough economy, tough time. So we're constantly, to us, benchmarking and understanding the market intelligence on a quarterly, annually basis is critical because it changes every year. And what we might've been seeing last year is very different than what we're seeing today. And now that a lot of the federal funding has gone from COVID, companies are beginning to struggle. So those assessments and understanding where they are and understanding where the benchmark is and how they can close the gap is important because we want to continue to make these companies, help these companies thrive, right? As opposed to fall to the wayside in tough times. So it's a really important tool.
Bryan Powrozek 18:04
I'm glad you brought that up because it's, I don't know. Maybe it's just the Google algorithm that, you know, I've, I've clicked on too many articles about companies and bankruptcy that now it's feeding me more, but it, it does seem like there's, there's an increase in the, the number of, of bankruptcy filings you hear about. I hear from clients about big orders being delayed or postponed or, or canceled outright. Um, and so I, you know, with the election coming up later this year, I think everybody's kind of hedging their bets. And, and so assuming things are slowing down, you know, that's, everything looks like it's, it's slowing down a little bit and for companies to navigate those tough times, as you say, how have you seen business owners kind of break that cycle of you mentioned it, you do the assessment and they say, if we're telling you something you don't already know, you know, let us know. So business owners know where the, some of the problems are in their organization. It's, it's often comes down to a challenge of prioritizing, right? And where are they going to focus their resources? So how have you seen some of those small to mid -size, you know, business owners and business leaders finally pivot and start tackling those issues as opposed to just kicking the can down the road.
Laurie Harbour 19:18
Yeah, that's a great question. We've been talking for 18 months now about this sort of theme of hunkering down. And the key to what we have done and built our business on is that manufacturing companies need to be flexible. Flexible to rise with demand and flexible to shrink with demand, right? So as long as you can... There are two things that sort of kill companies, right? Not enough demand and too much demand. So in COVID when we saw really big demand, companies really struggled to make money because they were throwing labor at it and they were throwing overtime at it and just cost in order to get out and not upset their customer. Then you turn around now and you've got... I mean, most of my clients are down between 10 and 40% right now. And it depends on the market, but there's really not a booming market aside maybe aerospace and defense. But the difference there is those are smaller volumes, right? So even automotive is slow and down. And so in this hunkering down theme, it's really about recognizing that volumes have softened and we need to make the hard decisions. In 21 and 22, we didn't want to make the hard decisions. We didn't need to make the hard decisions and we couldn't find labor to support what we needed. Now we kind of got the labor and now we have too much of it. And so in our data analytics, we're seeing a tremendous heavy... We're getting ready to put the outputs out for this year's annual study and we're seeing a tremendous amount of sort of heavy labor and heavy inventory. We built inventory to keep people and now six, eight months in or now six months into the new calendar year, people are going, wow, we're not meeting our budgets, we're way behind, volumes are soft. And we didn't want to let go of people. I have a great example of a die caster here in Grand Rapids, Michigan that I went in in March. They had way too much inventory. They weren't making very much money, way too labor heavy. And I said, guys, you got to hunker down, you got to hunker down now. And I'm not telling you the sky is falling, but you need to match supply and demand. They made cuts where necessary. They laid off some folks. They ranked and believe me, I'm now into laying off people. I'd rather grow, but we still have to right size our business. They have their people and said, which ones are not performing the way that we need them to. They eliminated SG &A costs. They drew down inventory. They did unique things like, you know, made people take vacations all at the same time and so on and so on, cut all over time. There's no, you had to get approval to run over time. And in a 10% down quarter, they added two or three points of margin to their bottom line because they hunkered down and they right sized the business. They're never fun decisions, but they're important decisions, right? Because we've got to be able to meet supply and demand. So those company, your, our data showed last year, third of the population we were surveying was in financial trouble. And I'm interested to see where that's going to fall out this year. But I would venture to say, if I was a betting woman, that it's comparable. It's still about a third and companies have got a right size, their business. It's a real challenge today.
Bryan Powrozek 22:39
Well, you know, and it's interesting to me to hear that, you know, and having having talked with your, your colleague Kara on a previous episode and, and just knowing the volume of data that, that you all process to, to try and get to these insights and to find it, um, you know, and, and you're just one advisor looking at a handful of industries. I mean, there's, there's countless advisors across the U S that it, it really underscores the, the kind of the theme of this podcast is that, that industry knowledge that, that you've refined and you know what to look at so that you can go out and have that tough conversation with a, with a molder, you know, who may be subscribing to some, uh, you know, some general, you know, economists, you know, uh, YouTube channel or podcasts, and then they get general market updates, which are great. And you should, you should take those for what they are high level signals of, of where things are going, but ultimately you've got to find those, those, uh, sources of information that really understand your business and, and not only understand what's going on, but then can interpret that for you and, and help you make educated decisions of, of what to do, because yeah, it's not an easy decision to, to lay some folks off, you know, especially, um, you know, I think back to like the, the 2007-8 or 2007, 2008, you know, downturn, unfortunately back when I was working in the auto industry and everybody was laying off. So it's, you know, it didn't, it was unfortunate, but, but it wasn't, you know, unheard of, and so to, to make those tough decisions now, as you said, to hunker down, uh, you need a good group advising you. And so that's, I think that's a great illustration of kind of what we're talking about here.
Laurie Harbour 24:26
It's important that data that information, you know, sometimes we get to in the business as leaders of our company, and we need to be able to step out, go to our association, you know, trade association meetings, go to, you know, any kind of sort of industry events that you see in town, things that can help just get you out of your space of the plant and the facility alone and talk to other people how you doing what's happening. You don't have to share trade secrets, but be able to gain some knowledge through the networking processes. It's a huge deal.
Bryan Powrozek 24:59
I, you know, it's funny, I always kind of cringe a little bit if I'm getting ready for an event and I reach out to, you know, clients or prospects, I know, oh, are you going to this year's conference? No, we're not gonna make it. It's like, sometimes you need that reset, like you mentioned, to step away from the business, you know, get out there with your peers, hear what they're seeing, you know, and kind of help you recalibrate and take some time to work on the business. So I think that's a great recommendation to business owners out there, is make sure they're making time for that. They make time for everything else in the business. Setting some time aside to work on the business is critically important.
Laurie Harbour 25:41
Absolutely. And bring the younger generation, like who's your successor, right? A lot of the younger generation doesn't love networking events, right? They grew up differently and they don't love all those networking events, but take them and show them and they learn. And, you know, I take a lot of our team out to events and, and the knowledge they can capture and how they turn that into support in your business is huge. So we've got to, we got to develop the next generation in this space, especially if we don't want to lose manufacturing in our country.
Bryan Powrozek 26:13
Yeah, you know, that, that gets into the, the, the demographic issue and it seems like every conversation I have now kind of leaps back to that, the workforce and, and finding people. And yeah, I mean, it's, it's a different world post COVID than it was pre COVID and, and, and I think a lot of, especially when you get into the, uh, now the manufacturing, yes, you're always going to have to be in the plant, you know, building the product right there. They haven't figured out a way yet to do remote work for that, but the engineers you're working on the, uh, the technical folks, the sales folks, it's, it's like, Hey, we can, we can do this from anywhere. Um, you know, and so trying to balance that in, and really that then opens it up to, well, I'm in Michigan. And so I was pretty much, you know, when I came out of college, I was going into the auto industry, some in one way, shape or form with an engineering degree, that's where you were going. Well, today I could be working on in, you know, some other aerospace or defense or wherever, anywhere around the country. So now it makes that competition for labor even more aggressive. So as you said, it even puts a bigger price on, on having the strategy, knowing your business and how you're going to grow it and develop it and develop the next generation, because that's what, I mean, that's what the employees are going to be looking for, right? They want a place where they know they can grow and develop and, and, and build a career.
Laurie Harbour 27:35
Absolutely. And they want to work somewhere cool, right? I mean, we got to do a better job of making sure people know manufacturing is cool. And technology, the automation, there's just so much, you know, industry 4 .0, there's so many new opportunities for the next generation to bring into our manufacturing companies and take us to the next level. And that's what we need.
Bryan Powrozek 27:56
Yeah, I actually had a professor from Purdue tell me that, that manufacturing's got a PR problem, right? And you've got to convince, you've got to convince the parents of the kids going to college now that it's not, it's not the dead end career that it was painted for, you know, for decades, you know, it's a completely different world with the excitement and innovation. And so you don't need to go to Silicon Valley to work on some really cool stuff that's pretty cutting edge.
Laurie Harbour 28:25
Absolutely. Yeah, no, there's a ton of opportunities. And, you know, we have to get the older generation to embrace the younger generation, they bring them some things that, that we don't have some tools, some some things that make them they don't like inefficiency. So that's a great thing in manufacturing. But they want to be heard, and they want to be listened to. So we got to open up the door and give them, you know, take a risk in areas that are not going to be damaging to our customer. And, frankly, we got to extract the tribal knowledge from ourselves and give to them. So it's sort of this bringing experience of the older generation into the new technology driven group, and collectively make a bigger impact. Otherwise, we lose that experience. Yeah, it retires. And then you just have a bunch of really smart people who've not lived it or done it, right. So we've got to, we've got to, we owe it to the next generation to be more open to training them in that way.
Bryan Powrozek 29:24
Excellent. Well, Laurie, I think that's I think it's a fantastic point to kind of wrap it up on I I appreciate you taking some time this morning to to come on the podcast and just really excited to have you and the rest of the Harbour team as part of Wipfli.
Laurie Harbour 29:38
Thank you. I appreciate being here and we're excited for it too. So let's go help manufacturers.
Intro/Outro Narrator 29:44
Thank you for tuning in. Don't forget to like us, subscribe, and share on social. To learn more about Wipfli, visit us at Wipfli.com. That's W -I -P -F -L -I .com. Perspective changes everything.
