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New Ownership Transition Insights -- BC Wood Products Changes Hands
BC Wood Products: New father-son owners use their manufacturing experience to build on and expand Virginia-based pallet manufacturing company; they offer a former outsiders perspective on the pallet business.

By Chaille Brindley
Date Posted: 12/1/2008

            A few years ago, Gordon Murdock was managing a subsidiary for a major international tire company in South Africa. Today, he is the proud new owner of BC Wood Products of Ashland, Va. Although the scale of the companies is vastly different, Gordon insists there  are many similarities when it comes to running an efficient operation. He, and his son, Alex, also provided insight into the process of buying a pallet company and transitioning the ownership of the business.

            Gordon and Alex Murdock bought BC Wood Products from Richard “Dick” Barrett, the company’s founder, in 2007. Alex said, “We were attracted to BC Wood because it was a really well run business, and it looked like a good place to be home for the next 30 years.”

            Dick Barrett sold his business because there was no family member to take over the operation, and he wanted to find a good management team to continue the legacy he had built. Both Gordon and Alex have years of experience in manufacturing. Gordon spent 27 years running assembly line plants around the globe. Alex most recently was involved with overseeing the day-to-day operations of a custom food manufacturing operation in Denver, Colo. After years of being on different continents, Gordon and Alex decided to work together on some kind of manufacturing business venture.

            Alex said they used a business broker to make the connection with prospective business owners. They had a number of criteria that fit perfectly with BC Wood Products. They were looking for a well-run, manufacturing business that had around $5 million in sales with 30-50 employees and was located in the Richmond, Va. area.

            Gordon said, “B.C. Wood Products was a well run business. It had a healthy balance sheet and a balanced, diverse customer base.”

            No customer was more than 15% of the company’s total business, and there was room for growth. Although existing customer business is down somewhat with the sour economy, total sales is up due to new customer acquisitions. The Murdocks hired a salesman to go after new business and have worked to be more creative in attracting new customers.

            Besides BC’s existing customer base, the Murdocks also liked the company’s reputation. “In my career, I have seen lots of managers disparage their predecessors. I believe you build on what they did,” said Gordon. “Dick Barrett had a reputation for running a good operation.”

            The Murdocks have made some changes although the plant layout is still the same as it was under Barrett. The new owners have added a dry kiln to improve inventory management and customer service. Previously, BC Wood sent pallets to a third party to be heat treated, which added 2-3 days to the process. BC Wood tried to accommodate for this by having extra inventory on hand at any given time. Alex said, “Our turn around is much better now with less inventory.”

            They chose kilndirect.com as their supplier. Alex said, “I highly recommend kilndirect.com. Niels Jorgensen and his staff are fantastic.” He remembered having a problem when a lightening strike knocked out the CPU in the unit. He said that kilndirect.com came and quickly fixed the problem with minimal down time.

            The Murdocks made minimal changes to improve the efficiency and facilitate better communication. Material coming out of the planer mill previously had never been tagged. Everything had been done by memory. Gordon instituted steps to tag loads.

            Gordon said, “Quality is free. You build quality into a product. You don’t inspect it in. People will do what is easiest to do. If it is easy to do what is correct, people will do the best thing. If is it easiest to do the wrong thing, that is what people will do.”

            Taking lessons learned from their previous experience, the new owners implemented more cross training on equipment, systems that were less dependent on specific employees, and more written instructions for processes. They have tried to improve material flow and scheduling practices. For example, employees used to stack deck boards so high that it required three people to move the load. Now, they don’t stack the load as high so it can be moved efficiently by one person with a pallet jack.

            Gordon said, “The biggest challenge is that people get used to doing something one way, and it is hard for them to change. You can’t tell an employee once and expect the new approach to stick. Changes require lots of explanation and follow-up to ensure that things are being done right.”

            Alex said, “We have really pushed for our supervisors to supervise more and work less.” By improving delegation, Alex insists it frees up the manager to ensure quality control. He said, “When a supervisor has a head down doing a specific project, they are saving one mistake and not catching a number of other things that may be going wrong on the production floor.”

            Working in food manufacturing convinced Alex that even the bottom rung employee is very capable if shown properly how to do various tasks.

            Unlike his previous experience working for a Fortune 500 company, Gordon finds himself doing a lot more things than he did in the past. In a small family-run business, managers do a little bit of everything. But Gordon insists there are fewer differences than you might first expect. He said, “The basics of manufacturing are the same if it is a big company or little company, even big companies break down tasks into small departments. When you get right down to it, manufacturing is about getting the right amount done in the right way and delivered to the right place.”

            Gordon explained, “People sometimes use smallness as an excuse for a lack of manufacturing discipline. Small companies can have systems and processes too.”

            When Gordon first looks at a manufacturing environment, he said that he asks these two questions, “How do we need to do this?” and “What would make this easier for you to do correctly?” These questions have driven the plant efficiency improvements under the new owners.

            Continued involvement by Dick Barrett has been a key to the successful transition, according to Gordon. When he sold the company, he agreed to stay on as a consultant for three years. The company also has a layer of middle managers, and a number of them agreed to continue working for the new owners. BC currently has six managers and only two of them are new. Barrett knows the local market, such as lumber suppliers, competitors, etc. Even more important, Dick’s presence has comforted both customers and suppliers, letting them know that everything will continue to work fine. Gordon said, “I would never buy a business if the previous owner refuses to stay on as a consultant.”

            BC Wood manufactures about 8,000 pallets a week. BC Wood does some recycling although the majority of its pallets are new. Most of the pallets are custom jobs manufactured by hand. BC Wood uses a Viking 505 to produce longer runs. Also, the company operates its own planing mill using a 50/50 mix of hardwood and softwood material. It offers a wide variety of products from electrical poles to wood stakes to crates and treated lumber. Gordon said, “It’s not the equipment. It’s the people and social systems in a manufacturing facility that decide a company’s success.”

            Working together as a family has been both a joy and a challenge for the Murdocks. Alex said, “Working with dad, it’s fantastic because for years we have been living in different countries. Now, I see him every day. It has been great to have that father and son connection as we work together.”

            Gordon agreed. He said, “I feel Alex has done an excellent job in the transition of the business. He has exceeded all of my expectations. Our goal has been from the beginning that Alex would run the company. That evolution is right on track. He is the face of the business to the industry and our customers.”

            BC Wood is now truly a family business. Alex’s sister, Leslie Ann, is the office manager, and his mother, Randi, works part time as the receptionist. Gordon and Alex share the operational duties. Gordon works more on special projects and machinery issues. Alex also oversees sales and purchasing activities. The long term plan is for Gordon to phase out and Alex to take more of a general manager role with sales being taken over completely by the existing salesman in the future.

            Alex admitted that some people have been curious why anyone would want to buy into the pallet market. Alex said, “One of our biggest assets is that we are in the niche custom wood packaging industry.” BC Wood stays out of the GMA market because it is primarily a lower margin business. Alex reported that sales are up since the acquisition thanks primarily to a rise in U.S. exports.

            Gordon said, “We have not felt the economic downturn to the extent that I initially expected. The weakening U.S. dollar has made America more attractive again as a manufacturing location.”

            Having run operations all over the world, Gordon said that he doesn’t generally subscribe to the theory that the U.S. has lost its manufacturing efficiency compared to other countries. He claimed that when you look at cost compared to productivity and quality, America remains a highly favorable manufacturing location.

            Businesses can change overnight. When I first talked to Gordon, he said, “BC Wood Products will continue to introduce new shipping platforms as our customers want them. But I don’t see any need to go into new lines of work right now. We don’t want to complicate things.”

Then I talked with Alex a while later and he said, “If anything we were considering scaling back our product line until the most recent economic downturn. Now our thought is to diversify more.”

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