News

TECO Pneumatic Inc.'s flat organizational structure and empowered sales force build strong relationships that enhance technical sales

By Richard Trombly, Associate Editor

Source: Industrial Distribution, February 2002

TECO Pneumatic, Inc. witnessed the birth of Silicon Valley and has grown with the high tech industries it serves. Founded as a manufacturer rep agency in 1937, the Pleasanton, Calif.-based company became a fluid power distributor in the '50's.

"We're pretty far down the food chain, however," says president Jon A. Dickson. "We don't sell to the high-tech manufacturers, we sell to the companies that make the machines which make semiconductors."

Dickson says it's difficult to survive the peaks and troughs of the tech industry. Sales have dropped 45 percent from year 2000, he says. A few customers have gone bankrupt, leaving TECO with the specialized inventory it held for them.

"It's nothing new," adds Dickson. "Tech bubbles burst, and we've seen that continually. Then the next level of technology is developed and new semiconductors are sold."

Dickson has seen many of these cycles in his tenure at the firm. He joined the company in 1972 and has been president since 1986. He says TECO helps design the machines that make integrated circuit and computer chips. When the economy is down for high tech, there is little demand for TECO's products.

"It takes about six months of good economic growth before we see demand pick up," says Dickson. "There is a six- to 18-month sales cycle to design, produce, and market a product."

Vice president Karl Anderson, a salesman with the company since 1982, says TECO shares in its customers' risks. Most of the sales involve technical consultation with engineers through the entire design and production process.

"Through much of the sales cycle, we don't know what our return will be," says Anderson. "Sometimes, by the time a machine gets to market, it is obsolete."

Dickson says in some companies, entire design teams have seen recent layoffs.

"That makes it challenging for salesmen," he says. "The group designing one machine is gone and so are those potential sales."

The third member of TECO's management team, Scott A. Dickson, joined the company in 1995 after completing his engineering degree. The speed of change in the technology field has become a great challenge, he adds.

"We make profit in the good times and try to stay in the black in the downturns," he says. "That has become more difficult as the cycles of the economy become shorter."

The human equation

"One way that TECO faces the challenges of the market is to stay as lean as possible," says Scott Dickson. "But that doesn't mean layoffs, even in the economic climate of the past year."

It takes time for people to get with the program, because TECO has a flat organizational structure, he says. TECO works well without a managerial layer, he says. It allows the company to be more flexible and react quickly.

"The biggest cost is people, but we try to retain our employee base," he adds. "It is so hard to find and train staff."

He says that the technical engineering nature of the sales is one of the reasons to maintain the headcount. Many of the outside sales force have developed relationships with mechanical designers.

"It is as if each salesman is his own sales manager," says Anderson. "They are responsible for how they go to market."

He says there is no point to activities like call reports. Instead, the sales team meets regularly to ensure communication.

"We try not to micromanage," says Jon Dickson. "We just give them a job and they do it."

He says all of the staff share in the profits of the company as part of the comprehensive benefit plan.

"The employees are self-motivated and are involved in the business beyond simply performing their day-to-day roles. If it makes sense, they do it," says Jon Dickson.

One example is the warehouse manager, Steven Barker. Jon Dickson says his order fill rate is better than some automated systems.

"Barker takes pride in his warehouse," he says. "He likes the human influence and resists any program designed to let the lowest common denominator do the job."

Barker has been with TECO for 20 years. He says he once worked in inside sales but there was not enough challenge to hold his interest.

"I can move well over one hundred orders a day and my inspiration is to be the best at it," says Barker.

The warehouse is also immaculately clean and organized.

"I like it clean," says Barker. "I have received great comments from manufacturers. They want to know why their warehouse doesn't look like ours."

He says every employee is trained in how the warehouse is organized and how TECO ships products. The Dicksons and Anderson are committed to teaching and it's just part of the ongoing training throughout the organization, he adds.

"It is amazing how many people are talented beyond their own sphere," says Anderson. "The whole company was involved in developing and proofing our recent catalog on CD-ROM."

The company also has a Web site and a quarterly newsletter. Anderson says TECO brings in experts when necessary, but much of the talent is found in-house. The company doesn't have dedicated marketing or advertising personnel. These tasks, and many others, are shared cooperatively.

"When we were looking into Web design, one of our employees asked if we wanted him to do it," says Scott Dickson. "We also maintain our newsletter and catalog without a graphic artist on staff."

Vendors like the marketing support they get from TECO, says Scott Dickson. For example, each of the newsletters focuses on a specific product group and educates the customer, he says.

Manufacturing relationships

"By developing close relationships with our customers' engineers and designers, we are there when the design is fresh. We help them to specify the best components for their product," says Jon Dickson. "If it can be supplied through one of our vendors, we will get the sale."

He says purchasing departments tend to purchase what is on the design specification.

"We stay involved through the design process to perfect the design," says Jon Dickson. "That can lead to more sales."

That is not always the case, however. In one instance, a competitive valve was failing in 20,000 cycles which was unacceptable for the application. TECO, in conjunction with a manufacturer, custom designed a valve to the same small footprint that could handle much more wear. It pleased the customer, but has reduced sales of replacement valves.

In another case, a customer needed a valve like the aluminum one they were using that could handle corrosives. The manufacturer didn't make it in stainless steel. TECO had the wetted parts fabricated from stainless steel and used the manufacturer's components for the rest.

"TECO is a unique operation," says Bill Pabst, president of Murfreesboro, Tenn.-based Convum, LLC. "They are self motivated and efficient."

Pabst says TECO has a unique blend of personality, technical knowledge and discipline.

"I attribute it to their management style," he says. "They need little support. When we have new products they learn it on their own and then sell it. Their focus and direction leads to quality."

He says TECO specializes in getting 100 percent penetration with the lines they carry rather than trying to carry more products.

Customer connections

One of TECO's offerings is small pneumatic assemblies. These combine components like valves, manifolds and compressors with electronic controls made to customer specifications.

"All of the components are on board, it just needs to be plugged in," says Anderson. "Hydraulic distributors have always offered fabrication services."

To compete, some pneumatics distributors are moving to high-tech electronic controls and stepper motors or servo motors, says Anderson, but TECO remains focused on pneumatics.

Dallas, Texas-based Integrated Designs L.P. is one customer that appreciates the service, says West Coast sales engineer Carl Martin.

"They know the components, are good at innovative designs and provide great technical support," he says. "It is also important that they understand the exacting standards of cleanliness in the semiconductor industry and know how to eliminate particles."

He says TECO provides semi-custom components as well as components fully assembled in custom configurations.

Clovis, Calif.-based Apollo Dental Products by Midmark is another high-tech customer using TECO in the design process. Buyer Glen Lewis says engineers work closely with TECO and manufacturers, and TECO provides assistance when there are technical problems.

"The salesmen are helpful with getting information from manufacturers and creating new specifications when necessary to modify a design," says Lewis. "We are hoping to approve more R&D funding for new products."

He says Apollo will work with TECO on new designs. Even though some larger volume items are purchased direct from the manufacturer, pricing and service at TECO are attractive for smaller quantities, he adds.

Another customer, Norfield Industries of Chico, Calif., manufactures machinery for the door industry.

"We buy from TECO on the OEM and MRO sides of our business," says purchasing supervisor Michael Barney. "As just-in-time inventory has become more critical, we rely on distributors more. With TECO, deliveries are like clockwork. We are still learning what we need to operate with the most efficient inventory level. TECO has been a great assistance."

Another manufacturer of carpentry machines is Petaluma, Calif.-based Castle, Inc. Vice president of operations Anthony Lynn says Castle is a long time customer of TECO.

"Our philosophy is to remain loyal to our suppliers that perform well," says Lynn. "We don't change lightly or shop for price. With TECO we enjoy a buying relationship."

He says Castle purchases a wide variety of valves and cylinders to make assemblies.

"A measure of their service is that though we are a small customer, TECO has always made frequent visits," says Lynn. "The people on board is one way to judge the value of a relationship and all of their people are excellent."

Success and succession

Even in the most successful of businesses, there is a time to move on, says Jon Dickson. He is currently preparing for his own succession.

"The day I took over as the fourth owner, I was told to plan for ten years and then get out," says Dickson. "Anderson and my son Scott both own stock and are planning to take over the ownership."

He says manufacturers are pleased when there is a succession plan, especially when the product requires technical sales.

"We can't just bring in a skilled manager," says Jon Dickson. "It is important that the company have a technically skilled leader. Without that, our flat, lean model would not work."

Jon Dickson says he has always worked closely with the Fluid Power Distributors Assn. It is a tradition that Anderson and Scott Dickson plan to continue.

"The FPDA is important in the face of so many emerging technologies," he says. "Their assistance in interpreting and incorporating new technology helps pneumatic distributors face the competition of electronic controls."

Scott Dickson says his plans for the future involve continuing the commitment to pneumatic power and to serving customers.

"Even though more and more electronics are involved, we are committed to pneumatics," he says. "Though with our model, we could sell anything technical."

Anderson says the company will grow and acquire as it makes sense, but not grow for growth's sake.

"Both our growth and product mix will depend upon our customers and manufacturers," says Anderson. "We communicate with and listen to their concerns and decide what is best in terms of the current economy."

One thing is clear, says Jon Dickson. Despite tough economic times, entrepreneurs are always developing the next generation of products.

"There will always be new designs going into production," says Jon Dickson. "Two customers are producing prototypes even now."

Back to Top