Machine Tool Builder Rallies Back from Import Competition

Todd Herzog, founder of Accu-Router, shows SETAAC Director Marla Gorges some of the machine parts inside a CNC router.

When Todd Herzog founded Accu-Router in 1992, his single biggest market was manufacturers of upholstered furniture. The Morrison, Tenn.-based company assembles high performance computer numerical control (CNC) routing systems and premium high-speed spindles used to cut materials for industries as varied as upholstered furniture, power boating, aerospace, automotive plastics machining and office furniture.

But between 1994 and 2001, the Chinese furniture industry increased exports by a staggering 335 percent, replacing Italy as the world’s largest furniture exporting country. In 2001, China’s furniture industry reported $2.8 billion in exports, 50,000 manufacturers and 50 million workers. Between 2000 and 2003, the value of domestically produced furniture declined by more than $5 billion.

“Even dependable names in upholstered furniture aren’t as prosperous as they were. If you’re not importing from China or Vietnam, you better have your costs in line with those who are, or you’re going to get beaten up,” Herzog warned. “Accu-Router went through a difficult financial period between 2002 and 2005, and we documented substantial losses in business as a result of deep price cutting from Japanese and Chinese competitors.”

That’s when Herzog learned about the Southeastern Trade Adjustment Assistance Center (SETAAC), based at Georgia Tech’s Enterprise Innovation Institute in Atlanta. Serving the eight-state region of Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee, SETAAC helps manufacturers develop and implement turn-around strategies to better compete with imports.

Marla Gorges, director of SETAAC, conducted an initial review of Accu-Router and helped the company prepare an application for the U.S. Department of Commerce. Once the company was accepted for the first level of funding, SETAAC Project Manager Mark Hannah developed an adjustment plan that included projects to receive funding support. He and Gorges also answered questions, provided advice and handled the paperwork flow.

“In the case of Accu-Router, we checked the plan for soundness and helped Todd push his agenda through,” she recalled. “Todd really knew marketing-wise what he wanted to do – he knew he had to diversify.”

Accu-Router has now realigned its target markets to focus on the boating industry and the remanufacturing market. Boat manufacturing does not have the foreign competition that the furniture industry does, and no one else in the routing business is focusing on remanufactured machines, according to Herzog.

“Remanufacturing for us has created a whole new market – either for existing customers or for customers who want to reach our product but don’t have the money to reach all the way to a new product,” he noted. “We can tell a customer that they can buy a machine and as we develop new technology, we can add that or we’ll take it back in a trade. We’ll have a business relationship the whole way rather than them just buying a machine, and we like that.”

Herzog said that it makes sense to focus on the boating industry due to the sheer number of manufacturers. According to the National Marine Manufacturing Association, there are 440 boating-related manufacturers in the United States. Accu-Router, which has a total of 17 employees, has sales representatives designated specifically for the boating industry.

Typically, companies that are involved in the SETAAC program receive assistance in marketing consulting, manufacturing improvements, information systems improvements, employee training and maintenance and quality systems improvements. Over the past two years, SETAAC has helped Accu-Router revamp its marketing materials, both in print and online.

“We have replaced and added to our printed sales literature, created new national ads, updated and expanded our company Web site and participated in national trade shows. We have a new spindle catalog that did not exist before, and we also developed video-on-demand for our Web site – a major company strength from a competitive point of view,” Herzog said. “We could not have tackled this large an undertaking on our own.”

Herzog also said that the arsenal of new marketing services is helping Accu-Router to rebound, noting that the Web site is generating meaningful new prospect leads. The company’s number of inquiries has dramatically increased over the past four months compared to prior sales periods.

“We’ve been able to magnify everything we’ve done through this grant program, and to survive you have to beat everyone else to the customer,” Herzog remarked. “Those who can’t play that progressively are going to be left by the wayside. There’s no room for mediocrity and there’s no room for non-competitiveness.”

Firms that are accepted into the SETAAC program pay for 25 percent of the diagnostic visit and report. The government generally pays half of the cost of project implementation for activities to benefit the company. Private sector consultants submit quotes for implementing the identified projects and are chosen by the company to execute the outlined changes.

Last year, SETAAC helped more than 30 companies. On average, these companies received $42,000 in matching funds. In the last three years, SETAAC’s overall client base has increased sales by 26 percent and improved productivity by 28 percent.

About the Enterprise Innovation Institute:
The Georgia Tech Enterprise Innovation Institute helps companies, entrepreneurs, economic developers and communities improve their competitiveness through the application of science, technology and innovation. It is one of the most comprehensive university-based programs of business and industry assistance, technology commercialization and economic development in the nation.

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Writer: Nancy Fullbright