Building On Brain Power

Posted on May 1, 2010 :: Cover Story
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Posted by , Insight on Business Staff Writer

Plexus finds success engineering and manufacturing for other companies

Imagine going into a restaurant and having a soft drink made just for you, a blend of your favorite flavors. Coca-Cola’s Freestyle machine – a beverage dispenser capable of blending more than a hundred different drinks – has its design, engineering and production roots at Neenah’s Plexus Corp.
Earlier this year, Plexus was tapped by the soft drink producer to build the behind-the-counter Coke machine and a self-serve version. Plexus employees helped design the new machine, which will be built at manufacturing sites in Appleton and Mexico.
While you won’t see the name “Plexus” stamped on the Coca-Cola dispenser or any other product, the company’s collective brain power has developed and built a wide variety of products, from mobile ultrasound machines and cardiac monitors to carrier-class routers and weapons-delivery guidance-and-control systems.
“We have an interesting business model: we design and build products for other people,” says Dean Foate, president and chief executive officer. “We’ve been able to develop new relationships and win new business, which has helped us offset the decline we saw in other markets.”
That business model is paying off for Plexus, which saw revenue climb 14 percent in the second quarter of fiscal 2010 (ending April 2) over the prior quarter to $491 million – a new record level for the company. The growth occurred as current customers increased their business and new projects came to fruition. Eighteen new manufacturing programs, expected to generate an estimated $137 million in annual revenue, have been signed in recent months. Coca-Cola has asked Plexus to keep the program’s potential revenue levels confidential, but some stock analysts say it could bring in another $200 million annually.
“We’re very excited about 2010 and that Plexus has been able to bounce back quickly from the economic downturn,” says Ginger Jones, Plexus’ chief financial officer. She joined the company three years ago after serving a similar role at Banta Corp., which was sold to R.R. Donnelley.
Plexus’ presence in the New North brings an added dimension to what the region offers, says David Ward, founder of NorthStar Economics and the author of a regional economic study that led to the creation of New North, Inc., a regional economic development corporation.
“The engineering and technical resources they bring to the region are critical. Having that kind of knowledge in the New North is a huge asset as the area gets more involved with advanced manufacturing,” Ward says. “There’s been a real movement in the high-tech industry from making your own electronic circuits to contracting engineering out. That has allowed Plexus to flourish.”
Fox Valley Roots
Formed in 1979 by Peter Standwitz, John Nussbaum and Gerald Pitner in Neenah, the company started out small, but saw steady growth through the 1990s and early 2000s. Today, Plexus employs 7,100 employees at 20 facilities in the United States, Mexico, Europe and Asia. In the Fox Cities, Plexus employs 1,915 and has manufacturing sites in Neenah and Appleton in addition to the corporate headquarters and Neenah design center.
Like Plexus, Foate has local roots. A Fox Cities native, he joined Plexus in 1984 and moved up the chain of command before being named CEO in 2002. “I was working in the automotive industry in Indiana and my dad couldn’t believe I left that job for this small company in Neenah, but we wanted to come back home. Looking back, getting out of the automotive industry was definitely the right choice,” he says.
Sitting relaxed in a conference room down the hall from his current office, Foate’s unassuming manner fits well with the company’s profile.
“Plexus has evolved in recent years where we are building an entire product, not just a part of it,” Foate says. “We also continue to help with design, engineering and getting the product to market. Our pace of new business wins continues at a healthy level.”
Plexus’ strong growth comes as the company plans to open its new global corporate headquarters on the site of the former Glatfelter Paper Mill in downtown Neenah. The four-story, 104,000-square-foot building opens in June and will bring together the company’s corporate 350 employees, who have been scattered around Neenah at different sites. The current corporate headquarters just off U.S. 41 will become the company’s technology and design center.
“It hasn’t always been easy to work on projects since there may be some workers here at corporate while someone else may be at a manufacturing site,” Jones says. “The new headquarters will bring us all under one roof and allow us to do more collaborative work, as well as providing space in this building for the future growth of the technology staff.”
While Jones says it probably would have been easier to build a new headquarters on an empty field somewhere, waiting for the Glatfelter site to be cleared by the City of Neenah for redevelopment was worth it. The building’s design pays homage to the site’s previous life as a paper mill. The brick on the front of building is reminiscent of the paper company’s smokestack, which still sits nearby and is slated to be developed into a park. Inside, the unadorned ceilings give the feeling that a former manufacturing building was converted into office space.
“We really partnered with the architect to get what we wanted – a building that honors the site’s past,” Jones says.
Walls of windows flood the building with lots of daylight and provide employees with views of the nearby waterways and downtown. The building’s center is a spiral staircase creating an area on each floor where employees can gather and share ideas. “That’s something we don’t have in our (current) set-up – the ability to have that area where you can go and just bounce ideas off each other. We work a lot in teams and this building makes that easier,” Jones says.
There’s also a large lunchroom and outside patio for employees to enjoy and the Neenah-Menasha YMCA is just a short walk away.
The Miron Co. is building Plexus’ new headquarters to Silver Leadership in Energy and Environmental Design (LEED) standards. (Plexus decided against seeking the formal documentation, which would have added to the project cost.)
“We’ve been thinking about making the move for awhile since we needed the space,” Foate says. “Then the unique location in downtown Neenah came up and we just thought it was an opportunity we couldn’t miss. Not only is it a highly visible site and creates a pleasant work environment for our employees since it’s close to so many restaurants and shops, it also shows our dedication to the community.”
Downtown Neenah – which has become home in the past five years to the corporate headquarters for Alta Resources and the Bemis Co. – is ready to welcome Plexus with open arms, says Bob Buckingham, director of Future Neenah, Inc.
“There’s a tremendous positive impact to having a global company locate its headquarters in downtown Neenah,” he says. “We’re excited Plexus wanted to be a part of the downtown community, which is very vibrant and has a vacancy rate of just 3 percent. Plexus is tuned into providing its employees with improved quality of life, which includes having access to these great restaurants and shops, as well as the YMCA and Shattuck Park.”
The new corporate headquarters means the current headquarters just off U.S. 41 at the Breezewood exit will be dedicated entirely to project design as well as education. Right now, Plexus hosts local classes for the Milwaukee School of Engineering (MSOE) in its first floor conference rooms, which are attended not just by Plexus employees, but also those from the Oshkosh Corp., Appleton and Albany International.
“The company’s support of our continuing education programs in the Fox Valley is essential. Without Plexus’ help, we wouldn’t be able to offer these advanced learning opportunities in the Fox Valley,” says Steven Bialek, associate professor and chair of the Rader School of Business at MSOE.
Plexus benefits immensely from having MSOE’s programs in the Valley, especially the master’s in management, says Steve Frisch, Plexus’ senior vice president of global engineering services and a MSOE grad.
“It allows us to grow our workforce from within and help prepare workers originally trained as engineers to do more project management,” he says. “There are not many educational opportunities for our employees to grow here besides taking the MBA in Oshkosh. This program at MSOE specifically helps engineers become managers.”
The company may also bring in employees from other parts of the world to go through training and classes at the education center, Foate says, adding that final decisions will be made once the corporate staff moves out.
Foate, who first suggested MSOE hold its local classes at Plexus instead of hotel meeting rooms while he was enrolled in the school’s master’s program in the 1990s, says Plexus believes strongly in supporting education, especially education technology. The company works with local high school students on robot leagues and helps support FIRST Lego League (a global program created to get children excited about science and technology). It has also helped fund the University of Wisconsin-Oshkosh’s first new academic building in 30 years.
“Anything we can do to support technology and learning is important – we’re hoping to get kids interested in it and then who knows? Maybe one day, they will grow up and study engineering and want to come and work for us,” Foate says.
Besides education, Plexus is also a strong supporter of the United Way Fox Cities, the Fox Cities Performing Arts Center and other initiatives designed to enhance the quality of life in the community. “It’s a little selfish too since we can then point to these things, such as the P.A.C., during the recruitment process,” Foate says. “It’s not always easy getting high-level people to come to Neenah, but once we have them here, they never want to leave.”
Plexus has never considered being headquartered anywhere else, Foate says. “I like to joke, there’s the Silicon Valley and then there’s Neenah. … What we do here is unique, but being located here hasn’t been a detriment to our business. We use technology – some of which we helped create – to do video conferencing and connect all parts of our business,” he says.
The Road Ahead
Like most other businesses, 2009 wasn’t pretty for Plexus. Foate points out, however, that while the company declined 12 percent, its competitors saw 20 percent declines. Before the decline, the company decided to close a manufacturing facility near Boston, which put nearly 200 people out of work. Some of the work from that plant made its way to Neenah.
“We are confident that 2010 is bringing us bigger and better things as our hard work pays off and we can start adding back,” Foate says.
Company executives placed their revenue guidance between $520 million and $545 million for its third quarter after reporting revenue of $491 million during the second quarter – which was the upper limit of what the company expected.
Plexus has a strong reputation as being an innovator in its industry, Ward says. For example, the MIT Club of Wisconsin recently honored Plexus with its annual large company award for helping customers create prototypes that turn their ideas into new products.
The challenge moving forward, Foate says, is to sustain the economic recovery and get past the uncertainty some industries are facing. “There is also the challenge of managing growth and making sure we have the capacity to handle growth at our facilities.”
Ward says Plexus is getting a lot of positive play on Wall Street as sales have increased.
“Plexus is in an industry that is among the first to recover in an economic slowdown and as they continue to do better, other businesses down the supply chain will also see growth,” he says.
Plexus is clearly evolving as it seeks to not only design and build devices for customers, but also deliver those products directly to customers, Foate says. With manufacturing and design sites around the world, that is easier since the end product is closer to the customer, he adds.
“Our large customers really appreciate that we have local expertise. For example, how we make something in America may not be how they want it in Europe or Asia,” Foate says. “They like that we are able to offer different features for different markets. It’s an ongoing evolution.”