Elbridge Firm Bucks Manufacturing Trend
While Others opt for Cheap Foreign Labor, Northeastern Electronics makes Products and Money in the U.S.A.
Originally posted on December 13th, 1992 by James T. Mulder for syracuse.com
Everyone thought Northeastern Electronics Co. Inc. of Elbridge was crazy when it decided to compete head-to-head against factories in Taiwan.
After all, cheap labor has made Taiwan a mecca for electronics manufacturing. To fatten profits, many U.S. companies buy or build their parts in Taiwan and other places overseas, making it next to impossible for domestic manufacturers to compete. Northeastern, a cable and wiring manufacturer that supplies big companies like AT&T and IBM, is pulling the plug on that conventional wisdom.
IT IS PROFITABLY manufacturing AC power cords and other electronic cables it once imported, and taking work away from Taiwan factories.
“Nobody can tell me that we can’t compete internationally,” says Steven M. Peltz, Northeastern’s president and owner. “We’re doing the opposite of what you read in the newspapers.”
And it is thriving while some of the region’s biggest factories, like Smith Corona and Inland Fisher Guide, are shutting down and throwing hundreds of people out of work. Northeastern employs 45 people in Elbridge and 40 at a plant in North Carolina. It expects to add another 40 jobs here early next year.
There’s nothing mysterious about Northeastern’s success. Peltz says the company has worked hard at achieving a level of world-class quality. It’s invested heavily in equipment and employee training. Its philosophy stresses long-term growth, not short-term profits. That’s the formula small manufacturers must adopt to compete in the global economy, according to Peltz.
Peltz, a 36-year-old Liverpool native, started the company 10 years ago. In the beginning, Northeastern just sold products for other manufacturers. In 1984, it began selling cables imported from overseas. Two years later, Northeastern started manufacturing some wiring.
Everything was going fine until the recession hit in 1990. Northeastern was forced to lay off three workers.
“We had never gone through a layoff before,” Peltz says. “That was the wake up call that told us we had to change the way we manufacture.”
Northeastern hired a manufacturing consultant and revamped its process. Under the old system, products weren’t inspected for quality until they reached the end of the assembly line. Now quality is checked and rechecked by every worker who touches the product, according to Peltz. When a product comes off the line now, it’s ready to be shipped.
Northeastern beefed up employee training. The plant used to operate on a five-day work week, from 7 a.m. to 3:30 p.m. It switched to a four-day week, from 7 a.m. to 5:30 p.m. Employees now come in on Fridays for two hours of training from 8 a.m. to 10 p.m. and get paid overtime. Training sessions focus on team building, process control and other issues.
The changes yielded significant results. The company cut its delivery time from about eight weeks to two weeks, and its scrap rate by about 50 percent. It has an industry standard of three defects per million parts.
NORTHEASTERN’S commitment to quality has been recognized by major customers like AT&T, IBM and Asea Brown Boveri Ltd.
Northeastern makes a cable AT&T uses in a computer notebook power supply system. AT&T used to get these cables from Taiwan.
“They (Northeastern) are willing to take any necessary actions to fulfill their customer requirements,” says Mark Ostrom of AT&T. “Many companies claim they can do it all; very few actually do. Northeastern is a company that will.”
Last year, Peltz opened another plant in North Carolina to make AC power cords. He set up a separate sister company – Cordest Designs Inc. – to run that operation. The move signaled a major shift in Northeastern’s strategy. Previously, sales of imported AC power cords and other cables had accounted for nearly half of Northeastern’s business.
“Everyone thought we were crazy to try manufacturing these cables domestically,” Peltz says.
PELTZ’S GAMBIT worked. Every customer who had been buying imported cables now buys Northeastern’s made-in-America version. That’s because Northeastern makes a better quality cable at a competitive price, says Peltz.
He says many big U.S. manufacturers are discovering parts made in low-wage factories overseas are not always a bargain.
High defect rates and slow delivery tend to wipe out these overseas factories’ price advantage, according to Peltz.
That’s why Tandy Corp., the largest retailer of consumer electronics in the world, stopped importing most of its products. It now buys most of them from domestic makers.
IN ADDITION to the Cordset operation in North Carolina, Peltz started another sister company in July called ConnSys Corp. ConnSys, which operates out of the Elbridge plant, specializes in making computer cables.
Northeastern is owned entirely by Peltz. The ownership of the two new sister companies is split between Peltz and several partners.
Northeastern generated sales of $3.5 million in fiscal year 1991 which ended March 31.
In three years, Peltz expects all three companies to have combined sales of $10 million.
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