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Continued: Looking to engineer a resurgence

  • Article by: TODD NELSON , Special to the Star Tribune
  • Last update: August 9, 2009 - 4:57 PM

Chuck Raymond enjoys building machines that conquer difficult technical problems for medical device companies and other clients of his Plymouth-based Prototype and Production Systems Inc.

Defying solution so far, for Raymond and many other manufacturers, has been the recession. A recent increase in contacts from existing and prospective clients, though, has raised Raymond's hopes.

"I think we're going to come roaring back," said Raymond, a self-described "refugee of Honeywell research" who founded PPSI in 1989. "We've got a lot of people that have been on the sidelines that are starting to show interest."

Raymond's background combines mechanical, electrical and computer engineering. PPSI's staff includes mechanical, electrical, chemical and computer engineers. The company produces custom automated machinery, industrial ink-jet printing components and systems, printed circuit board processing equipment and custom extrusion equipment. It also offers engineering consulting and services.

Last-resort supplier

PPSI has a reputation as a last-resort supplier of niche, high-tech machines, often incorporating robotics, for clients that tend to be quick to invest in new solutions. That has helped in good times but may have been a disadvantage as the economy soured, Raymond said. Capital spending fell sharply last fall as companies responded to plunging markets by cutting previously approved projects.

"We've done well by trying to be on the leading edge, to do things that are a little bit more technically challenging," Raymond said. "So our customers are early adopters. That's why the recession has hurt us harder than most, because the early adopters have a harder time selling the projects internally."

PPSI recorded revenue of $2 million last year. The company has 12 employees and recently moved into a 10,000-square-foot manufacturing facility. The new space includes a $100,000 controlled-environment area that a medical device client paid to have PPSI install so the company could conduct extrusion experiments on the client's behalf.

This year, PPSI's revenue could range from $1.8 million to $2.5 million, said Victoria Raymond, Chuck Raymond's wife and PPSI's general manager. That depends largely on whether clients engage in what can be a flurry of year-end spending on custom automation services.

"Around August and September, people realize they have money in their capital budgets that has to be spent before January," Victoria Raymond said. "That can make a huge uptick for us ... but it's hard to predict with what's happening this year."

Once PPSI develops an original product to meet a client's needs, the key to its business model is getting repeat sales with other customers, she said.

"The thing about custom automation is, the first one is usually a break-even," said Victoria Raymond, who joined PPSI in 2001 after years in telecommunications management. "You really make your money when you sell multiple copies."

It can be risky, but PPSI tracks the labor and other expenses that go into each job to determine whether the job has been profitable, she said. Such tracking also is helpful in bidding on new jobs.

Seeking outside advice

Both she and her husband have gotten feedback from peers serving as informal, confidential advisory boards, Victoria Raymond through the Women Presidents' Organization (www.womenpresidentsorg.com/) and Chuck Raymond through Vistage (www.vistage.com). In one instance, Victoria Raymond made a presentation to WPO members about a plan to introduce a PPSI product overseas; the feedback from her peers who told of negative experiences from similar efforts persuaded the Raymonds to drop the plan.

For the wide variety of automated equipment that PPSI produces, one thing it doesn't have is a large machine shop to turn out parts.

"Once we design everything, we get parts made from all over the country," Chuck Raymond said. "We're very good at knowing who's good at building what. ... We feel that we can buy machining much cheaper than we could possibly do it in-house."

When the components arrive from suppliers, PPSI goes to work assembling and testing the machines. "Our value add is really making sure the machine works perfectly before it leaves here," Chuck Raymond said.

Ken Tannehill, president of Printed Circuits Inc. in Minneapolis, said he bought two post-etch punches -- machines that aid in manufacturing printed circuits -- from PPSI largely on the strength of its design.

"Their design was superior," said Tannehill, who also wanted a local vendor in case problems arose. "They actually turned a manufacturing piece of equipment into an inspection device as well."

That is, before the post-etch punches carry out their functions, they examine incoming parts to make sure they have been made correctly.

"Which is absolutely unheard of," Tannehill said.

Two promising growth areas for PPSI are industrial ink-jet printing and tubing extrusion, the Raymonds said.

Growth prospects

Applications for the company's industrial printing products include printing logos on corporate-issued laptops or printing wood-grain or other patterns for laminate tabletops.

"We like to print on anything that's not paper, because paper printing is so competitive," Chuck Raymond said.

Industrial ink-jet printers make a single pass over whatever they're printing on, instead of the multiple scans that desktop ink-jets require, he said. Take away the multiple scans, and single-pass printers are eight times faster than regular printing.

The key is maintaining the correct flow of ink to the printer head at the right pressure, Chuck Raymond said. He developed a miniaturized ink supply that works with commercially available single-pass printer heads.

PPSI makes and sells both ink-jet components and color flatbed ink-jet printers, after customers started asking whether they could buy the printer Chuck Raymond had built to demonstrate what the components can do.

The expert says: Dan McNamara, associate professor of decision science at the University of St. Thomas Opus College of Business, said PPSI appears to be able to compete by creating value for customers in a manner that competitors cannot easily or cheaply copy.

"This should enable them to command a premium price and to build brand loyalty in today's turbulent marketplace," McNamara said.

PPSI's best choices for building and sustaining a long-lasting and competitive edge, McNamara said, appear to include creating new innovations for customers, maintaining technical superiority and providing comprehensive customer service.

To gain repeat sales from customers in today's faltering economy, PPSI should emphasize its ability to customize plus superior service, speed of delivery and superior engineering design and performance.

Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com.

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