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Business Observer Thursday, Mar. 25, 2010 8 years ago

Filter Family

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Who says American manufacturing is dead? At Melitta USA's factory in Clearwater, they're producing 10 million coffee filters a day.
by: Alex Walsh Web Editor

REVIEW SUMMARY:
Company. Melitta USA
Industry. Food and Beverage
Key. A “how-to” on manufacturing in America.

The charge that America is no longer a manufacturing nation, that it lacks the ability to mass-produce the simple anymore, just doesn't ring true to Marty Miller.

Miller oversees the nation's largest coffee filter manufacturing operation, housed within a 100,000-square-foot facility in Clearwater. His company churns out 10 million coffee filters a day.

As unemployment holds high, Miller works with roughly 130 other employees to keep the factory moving. And while globalization trends might force some companies to move manufacturing jobs oversees, Miller remains a staunch supporter of American manufacturing.

“I'm sure we could make it cheaper somewhere else,” he acknowledges, “but that's not what we're about.”

Miller is CEO of Melitta USA, a subsidiary of the privately held Melitta Group based in Minden, Germany. He says the American operation is responsible for roughly 7% of the larger group's international sales, which neared $1.6 billion in 2009. That puts its sales at about $112 million.

The company, founded in 1908, is named for Melitta Bentz, the German woman who patented the world's first coffee filter in that same year. The Bentz family still owns the Melitta Group today.

And it's the Bentz' family that decided to relocate the business' American headquarters to Clearwater 16 years ago. At the time, the family owned real estate in the Clearwater area. The family has since sold their area properties. But their investment in the area's manufacturing economy remains.

That continued investment is motivated by past experiences; the Melitta Group has tried exported manufacturing jobs before. Specifically, the company thought it might save some money by moving jobs connected to their coffee maker manufacturing arm from China to Mexico.

But as costs decreased, quality did the same. Miller says that notion was demonstrated perfectly by the number of people checking for defects at the end of the assembly line in each country: two in China, and seven or eight in Mexico.

For a company built on a brand name of trust, defects are not acceptable. In Miller's words: “You have to have the quality to support the price that you ask.”

Performance efficiency
Miller hopes that continued quality will make 2010 a bounce-back year. Indeed, 2009 proved to be difficult.

The company failed to meet its sales expectations for the first time in nearly a decade. “We were very disappointed,” Miller says.

Any sort of economic rebound would certainly help the company's efforts. But Miller needs to focus on the things he can control to ensure success.

A big part of that will center on his ability to maximize efficiency inside the company's coffee filter factory. He'll work with engineer Matthias Bloedorn, director of paper manufacturing, to help ensure factory output stays steady, maintaining quality and finding costs to cut.

The daily goal: 250,000 packs of filters, with 40 filters in each pack. That's 10 million filters a day.

Step one is getting the most out of the human element. To that end, Miller and Bloedorn have instituted an incentive program that rewards both individual, as well as overall team performance.

And it's not just volume — the program evaluates 10 categories, including safety and attitude, to determine an employee's eligibility for daily bonus compensation.

To help those employees maximize their output, Melitta is constantly considering new ways to install automation that might help alleviate part of the workload. One recent example is a labeling machine that helps accelerate the shipping process after packing.

At the same time, the company won't be automating for automation's sake.

“There's a balance between useful and necessary automation, and just going overboard,” says Bloedorn. There's really only one question in his mind when considering a new installation: will it save money without hurting quality?

Green means savings
Beyond the labor of its workers, Melitta USA has optimized the way it uses several of its capital resources as well.

Outside Bloedorn's office is a multi-colored chart, with trend lines that show decreased resource usage over time. It shows how the company has cut water usage per unit manufactured by 50% from its peak level by installing water-saving fixtures throughout the facility.

To reduce electricity use, the company cut back on climate control. Specifically, their on-site storage facility is now kept at a temperature between 60 and 80 degrees Fahrenheit, as opposed to the 68-to-72-degree window they used to use.

It's cheaper to buy jackets and fans for employees instead, Bloedorn says. Considering the facility in question measures 38,000 square feet, that would be a lot of jackets and fans that could be bought with savings. It's also likely been the main driver in reducing the company's electric usage per unit manufactured by 22%.

And when you're cutting rounded filters from rectangular pieces of paper, you're going to end up with plenty of scrap. Melitta recycles that paper, highly motivated by its cost — given milling, processing, and shipping costs, a ton of it costs roughly $2,000.

Indeed, it's cost that dictates the timing of any of these resource-saving moves. There may yet be additional savings from reduced resource usage out there; Bloedorn says the next potential project might involve replacing the lighting in the factory with fluorescent bulbs.

But the question for the company will be payback, a concept discussed in a November 2009 Review story on EcoTech Water LLC. If the company is going to spend thousands of dollars on new systems, how long will it take for savings to be realized?

Lately, that time horizon appears to be shrinking. Bloedorn says some projects that may have taken five years to pay for themselves in the past are now looking like they'll take closer to four.

No international incidents
Given Bloedorn's impact on the company's efficiency, it's important that he and Miller work well together. The same is true for the relationship between Miller and the larger group's German-based ownership.

Miller says he gets plenty of support from the leadership at headquarters, but has the freedom to run the American operation his own way. Ownership is involved on a daily basis, but doesn't smother: “He's not on my shoulder,” Miller says.

Part of that might have to do with the U.S. operation's unique role in the larger company. While Melitta USA continues to churn out coffee filters in this country, the larger Melitta Group does business in a number of industries. As one example, the group owns a large share of the vacuum bag market in Europe.

But it's more than letting the American subsidiary do its own thing. Miller says the tone used in everyday communications among the executive team is lighthearted.

A recent sales meeting in Canada provides an example. As the presentation began, the first PowerPoint slide had nothing to do with financial performance — instead, it listed medal counts from the Winter Olympics, which were going on at the time.

Now it's the upcoming World Cup that is generating buzz. And although Miller admits he's mostly in the dark on the subject, you can be sure that if the U.S. team wins any games, Melitta employees will know about it.

That sort of “needling,” as Miller refers to it, might say something about the company's overarching philosophy. For the century-old family business, it seems there's something familial going on among its employees.

Miller won't understate the importance of that company-wide mindset. “We have two things,” he says, “our brand, and our people. One can't exist without the other.”

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