Core principles keep systems integrator AHS Inc. moving forward.
In 1971, Advanced Handling Systems Inc. was formed as part of OKI Systems, a prominent Cincinnati, Ohio-based material handling distributorship owned by Gary Thompson, who would later serve as 1982 MHEDA President. In 1973, Thompson hired Charlie Frank, a Procter & Gamble engineer, to help with the engineered systems side of the business. In 1983, the company acquired a systems distributor in Lakeland, Florida.
Charlie Frank’s son, Chuck, hung around the business during high school and college, eventually buying into the business along with managing partners Jeff Miller and Dave Tavel in 1998. In 2004, the trio purchased the remainder of the business, with Chuck Frank serving as president/CEO. Growth and success have followed, with the company being named one of the fastest-growing 55 businesses in Cincinnati in 2006 and winning an award from the Northern Kentucky Chamber of Commerce as one of the top 30 emerging companies in 2007.
Under Frank’s leadership, AHS has become a national systems integrator from its location in Cincinnati, Ohio. Sixteen employees—six engineers, five salespeople, two technicians and three administrative staff—work as a team to take care of all customers’ needs.
In January 2011, Frank assumed the role of MHEDA President. He sat down with another material handling lifer, 2008 MHEDA President Jack Phelan, president of TriFactor Distribution Solutions (Lakeland, FL). Having both entered the industry working for Charlie Frank, Phelan provides interesting perspective on MHEDA’s new leader.
A Family Business
Jack: I worked for your dad early in my career in this business. I sold lift trucks for Gary Thompson at OKI for about a year, and then moved over to the systems side of the business and reported to your dad, Charlie. He mentored me on the systems end of material handling. After a few years working with your father and Gary, they asked me to run the Florida facility in 1984. I moved to Florida and purchased the operation in 1993.
Chuck: Our backgrounds in this business are actually quite similar. Like you, material handling is really all I’ve ever done.
Jack: Having worked for your father, who by all standards was a great material handling systems engineer, how would you describe your working relationship?
Chuck: Very good. The most important thing was maintaining a father-son relationship. For all fathers and sons, there will be times when you don’t see eye to eye, but be respectful of each other from a business standpoint.
Jack: What other advice would you give to those fathers and sons out there working together?
Chuck: Both people will have different strengths and different personalities. That’s okay, as long as they’re both on the same page as it relates to company culture and philosophy. I also think it’s critical for the generations to understand each other’s roles and responsibilities, complement one another and let each other do what they’re assigned to do. Each must have a belief that the company is going to be a better organization long-term with the two working together.
Jack: You’ve had the fortune of being associated with what I would call some of the industry’s key players like Gary Thompson, Bill Portman, your father and other industry leaders. How has that influenced your role as a leader?
Chuck: I learned to treat employees as I want to be treated. The same things holds true for customers. Those gentlemen you mentioned were nothing but very respectful to and humbled by the customers who chose to do business with them. Seeing that philosophy right from the start has been extremely helpful.
Developing a New Identity
Jack: How has the business changed since your father’s day?
Chuck: We used to be just a traditional conveyor company, doing conveyor jobs and some pick module work. We’ve had to really transform our business and get into other products such as racking, shelving, in-plant offices and the whole storage & handling side of the business. So it’s become a more complex business as it relates to understanding a customer’s entire process rather than just applying hardware.
Jack: What lines do you represent currently?
Chuck: We consider ourselves a non-biased integrator. Our focus is to make sure that we align ourselves with Tier-1 and Tier-2 manufacturers. On the conveyor side, we’re an authorized integrator for Intelligrated, TGW-Ermanco, Automotion, Roach and ACSI. For racking, we have associations with Interlake, Unarco, SpaceRak and Ridg-U-Rak.
Jack: What do you mean when you say that you are a non-biased integrator?
Chuck: We try to be real with our manufacturing partners and make them aware that we can’t just have a single source. What’s been difficult to juggle here in the last couple of years is the volume that they’re deserving of. They understand the downturn, but at the same time we have to make sure that we have the right client base and the right opportunities to be able to feed all of them with a portion of our business to be able to keep them content with the volumes that we bring in.
Jack: What are the primary end-user markets that the company serves?
Chuck: We know that we can’t be all things to all people, so we try to focus on markets where we have the most knowledge and expertise, which for us are wholesaling, retailing, e-commerce, third-party logistics and pharmaceuticals. Some of our associates have even come out of those industries, so that’s where our knowledge base is.
Jack: What is your company culture like there?
Chuck: The saying around here is, “Bad news does not age well.” With every job comes something that doesn’t go perfectly. The most important thing is to communicate with our customers and let them know what happened and provide a solution to rectify it. Another thing we tell our customers is, “All we have in life are trust and faith.” If you’ve never worked with us, and you’re going to give us a million-dollar order, then you’re giving it to us on trust and faith. All we can do is look you in the eyes and give our best effort.
Jack: What do you do to instill that philosophy in your employees?
Chuck: We tell them up front that we have zero tolerance when it comes to immoral or unethical behavior. There is no second chance. We don’t give you the opportunity to tell us why you made that bad decision. It’s termination. That’s who we are and how we conduct business.
Jack: Do you have a formal mission statement?
Chuck: Yes. It says, “AHS complements our clients’ team by assisting them with continuous net gains, utilizing our professional resources and talents. We pride ourselves in providing best-in-class supply chain solutions, with a focus on supporting our shareholders’ culture of being a moral and ethical company.”
Jack: How do customers respond to that?
Chuck: We do share it with our customers on the back of our business cards, and it goes back to the whole trust and faith thing. We want our legacy to be that of a professional organization that always did everything that we could to make sure that we adhered to our contractual agreements and that we lived up to the expectations set by both our customers and us.
The Future for AHS
Jack: I’m sure you’ve heard the axiom, what doesn’t kill you makes you stronger. Given the challenges associated with running a business in the recent economy, how is AHS stronger than it was three years ago?
Chuck: I’ve been very humbled over the last three years as it relates to how good things were. One thing I learned from my father was to know what to do if a small number of customers generates 90 percent of our revenue and one leaves. Over the previous 20 years, we asked that question every three months and the answer was always, “They haven’t left us.” Over the last three years, we should have looked a little bit more at acquisition of new business and finding new opportunities.
Jack: Can you give any specific examples of things you’ve done to try to cut costs, when you’re talking about getting through the downturn?
Chuck: We have a budget and we hold ourselves accountable for that budget. We went through some right-sizing of people, which is never easy to do. Then we looked at every line on our P&L to figure out some places to cut back: the phone bill, the postage meter bill, the overnight package bill and office supplies. Our team was great at working with our business partners and explaining our situation to them. We just kept climbing the management ladder within those companies to get to the right person and said, we need your help. Some of those partners were really understanding. Some, unfortunately, chose to live by the contractual agreement and we may not have partnerships with them anymore. A lot of little things, things that we didn’t normally look at during good times, added up to help us keep expenses down.
Jack: What does the future hold for your company?
Chuck: We’re going to be a stronger, better company coming out of this, provided we stay focused on the most important thing, which is the customer. The key will be not to revert to those bad habits when it picks up again. Concentrate on being lean and mean because you never know when the next downturn might occur and you want to be well-positioned for it.
Jack: How do you do that?
Chuck: We’re looking to provide the service levels our existing clients have become accustomed to, which will hopefully position us for sustainability and continued profitable growth. It will require working really hard today, tomorrow and the next day. Are you seeing some recovery in your area among your customers?
Jack: Well, in any economic cycle, there are companies that are growing. So far we’ve been fortunate to find a few. The unfortunate thing is, there’s a hesitancy on their part to pull the trigger on projects even though they know they need to.
Chuck: The sales cycle for us is extremely long. We might have a half-million dollar proposal that sits out there for six to eight months, and then it takes another couple months to get approved and signed by the right people. The other thing is that there is far more conversation from our customers about projects that they’re thinking about.
Jack: So people at least are trying to get positioned to be ready for the uptick in the economy.
Chuck: Of course, the flip side of that is that those projects won’t come through until later this year. So we have to be able to get through the next six to eight months before some of these nicer projects break through.
Jack: And those who actually do go forward on projects demand a better return on investment. Before, lots of projects were still justifiable with a five-year ROI. Nowadays, it’s down to two or three years.
Chuck: Even 18 months.
|Click here for more information about new MHEDA President Chuck Frank and his goals for MHEDA in 2011.|
Jack: People were tolerating huge problems in their facilities. Now they can’t tolerate them because they’ve got to get the job done and they want to do it with fewer people and better productivity.
Chuck: The good news is that they are recognizing this, and the potential for material handling businesses is starting to increase.
Jack: Hopefully that will mean good things for MHEDA and its members in 2011. I want to wish you a lot of luck in this next year. I think you’ll do a great job as president.
Chuck: I appreciate it. I’m looking forward to it.