positivelysuperior.com

August/September 2013

By Andy Greder

The Startup and the Stalwart

An Alliance Between Exodus Machines and Caterpillar Inc. Paves the Way for Superior Growth and Global Markets

When Exodus Machines visited Simko Superior LTD to conduct a show-and-tell of its new material-handling machine, owner Steve Kenigsberg said at first he wasn’t going to bite.

“I thought it would be nice to have a new machine,” said Kenigsberg. “But it wasn’t a necessity.”

Yet Kenigsberg couldn’t resist. He purchased a versatile Exodus MX 447 for his scrap-recycling center.

About a year later in 2011, Caterpillar traveled from its Peoria, Ill., headquarters to visit Simko for a different kind of show-and-tell. Caterpillar leaders were conducting field research and interviews of businesses where Exodus Machines equipment was used.

Caterpillar heard Kenigsberg say things such as, “What we found through the experience of buying one is that it became our primary piece of equipment. It saved us huge amounts of money in fuel costs. Efficiency is equal or better than all the previous pieces of equipment that we had.”

Incorporating that feedback, Caterpillar “determined, based on their interviews, that they wanted to be involved with a small company in Superior, Wisconsin, that put out a fantastic product,” said Kenigsberg.

In January 2012, Caterpillar – a $65 billion company with 130,000 employees and the No. 42 spot on the Fortune 500 list – signed an alliance agreement with Exodus Machines, a small, four-year-old startup with a few dozen employees and a respected, yet new, product.

“We had a very distinct need to establish a relationship with an innovative manufacturer of material-handling equipment,” said Neil LeBlanc, commercial manager for the Caterpillar Industrial Waste Group.

Through the agreement, Exodus manufactures and supplies two models of large, wheeled material-handling machines to be sold around the world under the Cat brand.

“Certainly, I take a lot of pride [in the alliance],” said President Bruce Bacon, who also founded Exodus Machines, “and the people of this company take a lot of pride in that. Caterpillar is the name in construction equipment; there is no question about it. We are proud that it’s an American company and excited about what the future holds for us.”

Signs of a bright future are evident in a 60,000-square-foot expansion to Exodus’ facilities in Superior, and in the hiring of about 20 new workers as it prepares for the prospect of creating thousands of material handlers over a long-term alliance. The Exodus-made, Cat-branded machines were unveiled at a trade show in April and the first ones were shipped in June.

If Cat achieves the market share it projects, another expansion and many more employees are possible. But first, here’s the story of how Exodus began and how the alliance was formed.

 

A New startup Challenge

The success of Exodus started with a lesson Bacon learned decades ago as an employee at LaBounty, the Two Harbors, Minn., producer of attachments for the scrap recycling industry. It would be the invaluable lesson that would lead him on his entrepreneurial path.

“I learned to really understand the value of listening to customers and what they need,” he said. “And keep working on that – through research and development and building products that fit what they need for performance, safety, ease of operation, operator comfort.”

“It became our primary piece of equipment. It saved us huge amounts of money in fuel costs.”
– Steve Kenigsberg, Simko Superior LTD

With that customer-centric approach, Bacon founded Genesis Attachments in 1997, and he said, “that company, after the startup phase, grew dramatically.” Genesis was sold in 2004. Bacon remained on board until 2009, but was already planning his next move.

“I wanted another challenge with another startup company,” he said. “I wanted it to be something that would build products for the recycling industry. primarily. I wanted to build a world-class material handler, and there weren’t any major players in the United States.”

The three primary builders of the industrial swing machine Bacon envisioned were based in Germany.

“I was driven by patriotism and really wanted to build a product like that in North America and still retain the affiliation and relationships within the scrap industry that I’ve developed over the previous 20 years,” he said.

Bacon hired a group of engineers in 2008 and set up an advisory committee of people in the scrap recycling industry to determine ideal attributes of their product.

“We took all those ideas and started with a clean sheet and not a single engineering drawing,” Bacon said. “Our team of engineers took all of those comments and advice and designed the machine.”

 

“Extraordinarily Fast”

Exodus benefits from a “small, focused group” of decision makers that created an “extraordinarily fast” time to market, Bacon says.

“You don’t have a lot of committee meetings. You don’t have a lot of departments that check back and forth between marketing and a commercial division and engineers,” he said. “You just focus on what is the goal you have in mind – if you have passion and focus and people that are excited about a project, willing to work an extraordinary amount of hours and really be extremely productive.”

“When Cat came in, with the best dealer organization in the world, it gave us a great
opportunity to accelerate our growth and make this a global company.”
– Bruce Bacon, Exodus Machines

Exodus also tapped into the wealth of heavy industrial design experience in Superior and the Northland.

“We were fortunate to be able to recruit some of the best and the brightest and put them together as a team,” Bacon said. “If you are an engineer, and are able to do a machine like this, this is a dream career goal.”

Those 30 employees then practiced the approach Bacon learned at LaBounty: customers, customers, customers.

At Caterpillar, they use the phrase “voice of customer,” or integrating your customers’ views into products, and Exodus has exemplified that same ethos.

“They had a great deal of information from the customers,” LeBlanc said. “They went and drove that down to customer requirements when they designed their equipment initially. We and several of our competitors do the same thing, but I would say the depth of capturing [the] voice of customer that Exodus went to was much, much deeper than most people in the market.”

Kenigsberg recalls one visit to Exodus that was supposed to be a “quick conversation,” but it lasted five hours as they discussed the new machine.

“Before they welded together the first piece of steel, it was a well thought out machine, because Exodus took the time to go to its client base and interview them as to what concerns they have with their current equipment and what would be a feature that they would be willing to pay for in a new machine,” Kenigsberg said.

The Canadian company Tervita was willing to pay for two Exodus machines.

“Our primary reason we went with the first Exodus in Canada was that we have a lot of faith in the engineering process in the Exodus machines,” said Wade Englesby, director of operations for metals recycling at Tervita.

 

Full of Features

The versatility of the Exodus machine suits the varying tasks Tervita makes it do.

The environmental and energy services company uses it in its metals recycling yard in Red Deer, Alberta, and also to serve the oil industry in Fort McMurray, Alberta, as well as on-site for emergency work with train derailments.

Being wheeled, while still large enough at more than 110,000 pounds, Exodus could be loaded onto a trailer and could handle the load on-site.

“We had a very distinct need to establish a relationship with an innovative
manufacturer of material-handling equipment.”
– Neil LeBlanc, Caterpillar Industrial Waste Group

“With the Exodus machine and how it’s designed, we can get it on a trailer and take off with it and have enough power to do the job,” Englesby said, “instead of smaller material handlers; they aren’t big enough to handle some of the work that we are doing.”

And the Exodus machine fits in with Tervita’s environmental focus.

“We are a very green company and our motto is ‘Earth matters,’” Englesby said. “The machine consumes far less fuel than our tracked machines and it’s about two-thirds less. So there are huge savings in terms of our fuel costs and the environmental benefit and greenhouse emissions as well. That is something that we are very proud of here.”

Kenigsberg at Simko also values safety features. The cab of the Exodus machines is at ground level, unlike competitors’ models where operators have to climb stairs some 20-plus feet. And in Superior, that can mean climbing in the snow and ice of winter.

LeBlanc at Cat calls this “one of the biggest challenges at any job site.”

The new Cat product provides off-the-ground entry and options to bring the cab to a neutral position for driving and a higher vantage point once it’s working, LeBlanc said.

“It gave a lot of safety issues that, well, don’t exist anymore,” said Kenigsberg.

Kenigsberg also cited cooling for hydraulics and no engine heating problems. “They have a lot of features,” he noted.

LeBlanc says the design promotes “up-time” (operational time) and ease in serviceability. The time these machines are working is crucial, so design that incorporates access to critical components is necessary for preventative maintenance and failure repairs, LeBlanc explained.

“The general layout of all the critical components on the machines are very easily accessible, so when there is something that breaks  – there always is, no matter who builds it, even Cat Inc. – the ability to service the equipment is almost easy around ground access service points,” LeBlanc said. “That is key to driving up-time for the customers.”

 

Swift Service

The alliance between Cat and Exodus is mutually beneficial because each provides value to the other, yet one thing that both do well is service.

When Tervita has had an issue, Exodus has been exemplary, says Englesby. “We can put in a call to them and they jump immediately whenever we have had service issues,” he said. “That has been phenomenal from them.”

Now Exodus’ service is aided by Caterpillar’s network.

“Our primary reason we went with the first Exodus in Canada was that
we have a lot of faith in the engineering process in the Exodus machines.”
– Wade Englesby, Tervita

“Caterpillar’s operation is going to be a huge benefit in making the Exodus machine something of even more value,” Kenigsberg said.

This network will make customers in places farther away from Superior comfortable with the prospect of swift service.

“Now, with Cat technicians – and their literally 200,000 or 250,000 trucks – that can pull up within the hour or two of the problem, that is going to be a cure of the issue of the company just located in Superior, Wisconsin,” Kenigsberg said.

Exodus CEO Kevin Boreen lauds Cat’s choreography. “It’s a very complex and detailed process that Cat goes through in order to provide appropriate service for its machines,” he said.

 

All-In Alliance

The startup and the stalwart have seen synergies.

“We are quick and nimble,” said Boreen. “We’ve brought a lot of a young-buck startup mentality to the game. They’ve brought some corporate discipline type things that are just inherent in an organization that size, and yet we also have brought certain freshness to their organization.”

Caterpillar had suspended product development programs for material handlers over the last five years, LeBlanc said. When Cat decided to reenergize those programs, consideration was given to the multi-year process needed to bring new products to market. With that lag in mind, an alliance with an existing product was sought to bring the time to market down to about one year, LeBlanc said.

“They are a good group of local guys and good businesspeople
that take care of local businesses and suppliers.”
– Dan Swenson, Total Tool Supply

“Creating an alliance with Exodus Machines gave us the opportunity to utilize their base machines – and frankly improve upon it – through a collaboration with the Exodus people, and then bring that innovative product to market as a Cat-branded solution,” LeBlanc said.

For Exodus, Cat provided an answer to some challenges in distribution and access to its expertise in manufacturing and quality control, Bacon says.

“When Cat came in, with the best dealer organization in the world, it gave us a great opportunity to accelerate our growth and make this a global company,” he said. “They had a gap in their product offerings in a market they really wanted to be present in and excel in, and that was the scrap and recycling industries. We had a product that filled that niche.”

The long-term alliance agreement also allows the Exodus brand to continue to pursue other new products.

“Those can be launched in the Exodus brand,” Bacon said. “So Exodus, with our engineering team and product people, can continue to look at whatever products we may choose to enter the market with. It can continue to be alive and well and that was one of the key components we wanted to maintain – the ability of Exodus to be a brand. That keeps our entrepreneurial and design juices flowing.”

 

“Stability and Ability”

Another source of that flow is the City of Superior, Douglas County and Wisconsin, Bacon says.

“When we decided to launch this company, that held a lot of weight and value for us,” he explained. “It’s loyalty. We are loyal to the city and the state and we want to be here – and that couples with the fact that Wisconsin has a rich heritage of heavy industrial design and manufacturing.”

Bacon says Exodus considers local sources for its tubes, electronics, wiring and bodies and estimates there are 20 suppliers.

“Manufacturing is needed in our area, and they are providing some good, long-term jobs.”
– John Anderson, WorldWide Machining & Welding Inc.

“Manufacturing is needed in our area, and they are providing some good, long-term jobs,” said John Anderson, president of WorldWide Machining & Welding Inc. in Superior, which provided bending services for some of Exodus’ manufacturing systems.

Anderson says that Exodus’ engineers were “good communicators on what they needed. Exodus makes a great product and they want to do things right.”

Total Tool Supply Inc. supplied Exodus with items big and small – from six overhead cranes to screwdrivers and safety glasses – totaling hundreds of thousands of dollars.

“It’s been a big shot in the arm,” said Dan Swenson, Total Tool Supply’s
manager. “They are a good group of local guys and good businesspeople that take care of local businesses and suppliers. With that backing, it gives us stability and ability to grow. Nothing but positive for us.”

 

The Future

Before May, Exodus created its machines in building bays in a 23,000-square-foot building.

“When you are building that big of a machine, that space was definitely a constraint,” Boreen said.

With a new 60,000-square-foot expansion on line, machines are now constructed in a process similar to an automotive assembly line as they move through four stations, he explained.

“We have expanded significantly. That has been huge, just getting that set up,” Boreen said. “The expansion was built with it in mind – that we could expand this again – so actually two of the three walls can be moved again. The footings were designed so we could pick up the concrete panels and move them out and reuse them. A future expansion was kept in mind when the building was being built.”

“If forecasts hold true, we do see being an employer
of 250-plus employees over the next five years.”
– Kevin Boreen, Exodus Machines

Employment went from 60 employees at the start of the alliance and is now near 80, with the biggest anticipated demand coming in welding and assembly.

“As far as employee numbers in the future, that all is contingent on forecasts. If forecasts hold true, we do see being an employer of 250-plus employees over the next five years,” Boreen said.

The global market is estimated at between 5,000 and 6,000 machines each year, and the goal is to be the primary producer of these machines, say LeBlanc and Boreen.

“We want to be the dominant player in that marketplace,” LeBlanc said. “We look at the introduction of the Cat-branded product now and the new version of what was originally designed by Exodus as giving us a real boost.”  P.S.

Andy Greder is a freelance writer.

 

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