Formula delivers success for Sun Hydraulics Corp.
Published in: The Bradenton Herald
Date: 3/9/2006
By: Tilde Herrera
Sun Hydraulics makes things not meant to be seen.
The company’s hydraulic valves and packaged manifold systems are buried deep in the mechanical inner workings of recognizable objects, such as cranes, amusement park rides and airplane cargo loaders.
Demand for these veiled parts used by a huge cross section of industries has propelled this local company into one with net sales of $116.8 million in 2005 and a physical presence in six countries.
It’s a publicly traded corporation that operates on financial analysts’ radars, but you won’t find a typical corporate hierarchy. In fact, you won’t find any annual budgets, forecasts or office doors at Sun Hydraulics, either.
“(We’re) a lot different,” said Allen Carlson, Sun’s president and chief executive officer.
The company, the subject of Harvard Business School case studies, believes it has a formula that works. It spends a lot of energy making sure the variables — delivery performance, new products, diverse geographic presence, a one-stop-shop of a Web site and a strong work force — add up.
“We look at them as one of the shining examples of manufacturing,” said Peter Straw, executive director of the Sarasota-Manatee Area Manufacturers Association. “They were operating under lean principles before it even had a name.”
Founded in Sarasota in 1970 by Bob Koski, Sun went on to open facilities in Manatee County, England, Germany, South Korea, China and Kansas, as well as a sales office in Bordeaux, France. It went public in 1997.
About 55 percent of Sun’s sales come from North America, with 30 percent originating in Europe and the remainder from Asia. Of all of its products, Carlson said its packaged systems — comprised of custom manifold and electro-hydraulic valves — appear to have the highest potential for growth.
Carlson credits Sun’s speed of delivery as the single biggest factor behind the company’s growth. The company ships orders on time or within seven days about 92 percent of the time.
In 1998, the company changed its order scheduling by challenging its workers to get products to meet the deadlines customers wanted. When deadlines couldn’t be met, the company identified the constraints and tried to eliminate them.
In the late 1990s, Sun began investing heavily in its Web site to allow its customers — mostly engineers — the capability to order and configure products online.
Sun’s manufacturing productivity has a lot to do with automation, Carlson said. In some aspects of the company’s manufacturing involving high levels of automation, 70 percent fewer employees are needed for production.
“Today, about half to two-thirds of our production has got some degree of high automation,” Carlson said. “The other third has some degree of automation. Even if it’s not robots moving stuff around and there’s still people involved in the process, there’s still a fair amount of automation involved.”
That doesn’t mean people are obsolete. Sun employs about 650 workers at its North American facilities, with the majority based in Manatee and Sarasota. The company also has more than 150 employees between its European and Asian operations.
A rough patch by Sun in 2001 was mirrored by the domestic manufacturing industry. But during its hard times, Sun refused to hand out pink slips.
“Our response was not to lay anybody off because we knew that the recovery would happen,” Carlson said. “It was just a matter of timing, and we would need good employees to grow our business when the economy turned around.”
Single-digit percentage gains in net sales and net income followed in 2002 and 2003 for Sun. In 2004, Sun had a 33 percent growth rate.
The company announced Monday that in 2005, its net sales increased by 24 percent over 2004 while net income climbed 64 percent to $12.8 million for the same period. Sun’s stock, traded under the ticker symbol SNHY, finished Wednesday up 65 cents to close at $23.12 on the Nasdaq market.
“Right now, it seems like all the economies that we’re in in the world are all doing well at the same time, which doesn’t happen often,” said Chief Financial Officer Tricia Fulton.
Horizontal management systems don’t happen often, either. There are few official titles or office doors at Sun. The company operates without layers between employees at the top and bottom to foster open communication and give employees the freedom to make decisions.
“My role is to basically stay out of the way and let them do their jobs,” Carlson said. “In a lean, horizontal organization, you have to because if everything had to come through my desk for approval, I’d become the bottleneck.”
Sun Hydraulics
Founded: 1970
Number of Employees: About 800
Products: hydraulic cartridge valves and manifolds
2005 Net sales: $116.8 million
Keys to success: delivery performance, new products, geographic presence, Web site, workforce, horizontal management structure
Copyright (c) 2006, The Bradenton Herald, Fla.