BY MARK MICHELI

JOURNAL STAFF

BEVERLY – Product Resources Inc., a contract manufacturing company in Beverly, has done the implausible: It won a manufacturing contract from overseas.

“This has got to be a first,” joked Jack Healy, director of the Massachusetts Manufacturing Extension Partnership, a non-profit group that works to make small manufacturers more productive. “(The state has) been losing manufacturing jobs steadily since 1998.”

The decision to relocate the manufacturing work from Singapore to Beverly was made by Photovac Inc. in Waltham. The electronics equipment company purchased a product line of handheld equipment that detects volatile organic compounds, such as natural gas, from Perkin-Elmer Inc., which had its own manufacturing plant in Singapore. Part of that deal required Photovac to find another manufacturing facility within six months. And although there was interest from other Singapore companies, Photovac decided to contract the work here.

“We wanted to bring it home,” said Tom Hennessey, chief operation officer of Photovac, explaining that building their product requires extensive testing and that they can “keep a better eye” on production here. He added that building the products in Singapore would probably not have been any cheaper when factoring in “hidden costs” such as traveling expenses.

Six companies had bid on the work, and, last March, Product Resources of Beverly, a 22 year-old company with 34 employees and less than $10 million in revenue, was chosen. Competition for the contract – which Hennessey estimated is worth about $2 million in the first year came from much larger players, too.

Hennessey said what distinguished Product Resources from its competitors was its ability and experience in making equipment with both complex electronic and mechanical systems as well as its knowledgeable engineering staff. He explained that because these products are often used in perilous environments, they must be designated as “intrinsically safe,” which means they cannot spark an explosion.

“One of the unique thins about Product Resources is they knew exactly what it meant to be intrinsically safe. No other manufacturer we talked to knew this,” he said.

Hennessey said that another benefit of using a local company to build its product is that it allows Photovac to fine-tune its inventories and adjust its orders more easily – something that Healy said is key for local manufacturers to be competitive.

Healy claimed that the only way small manufacturers can survive is to compete on the supply-chain level. He explained they need to keep their inventories low – and points to Dell Computer Corp. as a model.

“Dell turns its inventory seven to 12 times per day. They get cash from their customers before they have to pay their suppliers,” Healy said, adding that this is what makes Dell able to slash its prices to compete so effectively.

According to the latest figures, Massachusetts lost about 20,000 manufacturing jobs from 1999 to 2000, according to Healy. He attributed those losses to increased levels in productivity as well as to the savings attached to doing business in other countries, where the currency is weaker than the dollar.

“The real thing that’s killing manufacturing is our currency valuation,” he said. “making something in China costs about 40 percent less. And that’s not even factoring in cheaper wages.”

Bidding on the contract was pretty straight forward, according to John Erickson, Product Resources’ chief operating officer. He said it’s a little easier winning contracts these days, now that the company is a little larger and had beefed up its engineering talent.

“We tend to go after more complex jobs. It’s what sets us apart and helps us to get contracts,” he said.

“Many of Product Resources’ clients have been steady over the years, some even harking back to the company’s beginnings, when we made replacement parts for capital equipment in the coal-mining industry,” according to David Mendel, the company’s director of marketing and sales. He noted that Huston-based Mitsubishi Caterpillar Forklift America Inc., has been one of the company’s more steady customers.

“Our engineering ability and our attention to detail is what got us this (Photovac) contract,” said Mendel, who describes his company as a “boutique ship.” He added, “Our niche is customers who have a difficult application.” He said that his company does not simply put widgets together but often works with the companies closely to solve problems.

“If it was easy, they’d get someone else to do it,” Erickson said.


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