Reaping Profit In The Heartland
Every spring at planting time, Illinois grain farmer Richard Sies grapplrs with stubborn soil conditions that range from dry and hard to thick and muddy. For the past several years Sies has also been coping with the pressures of skyrocketing production costs and dismally low commodity prices, a vise that has squeezed many of his neighboring farmers to the brink of bankruptcy and, for some, beyond. Last April, determined to get a tougher weapon for his perennial struggle with the land, Sies challenged two farm machinery companies to build a secd drill that would cut his costs and ensure a more successful crop. Sies raises both soybeans and wheat on 1,000 acres. He wanted a drill with enough flexibility and features to accommodate different crops and planting conditions but one that also would eliminate the need for tillage, the process of clearing the land. He first wrote to a manufacturer in Kansas and, while waiting for a response, contacted a competitor of comparable size, Marliss Industries Inc., in Jonesboro, Ark.
Marliss responded to Sies's initial inquiry the same day it was received, and within two weeks invited Sies to Jonesboro twice to discuss his ideas with company president Jake Morse and his engineering team. By the time the Kansas company replied to Sies's initial inquiry, three weeks later, Marliss had already designed, produced, and delivered a 27-foot, no-till drill to Sies's farm.
"The cooperation was tremendous says Sies. "They were just inspirational people. To have the president of the company sit down with you and work out your request is really something."
Morse, a farmer's son with a background in industrial engineering, has been helping farmers like Sies improve their productivity for five years now. By selling several thousand dollars' worth of stock to close friends and community members in Jonesboro and securing a $350,000 loan from a local bank, guaranteed by the Farmer's Home Administration, Morse was able in 1977 to forge his own short-line manufacturer of farm planting equipment. Although no one could have foreseen the events of the next several years, they couldn't have been any grimmer for the fledgling company.
Since 1980, overproduction -- aggravated by the Carter Administration's grain embargo that year -- has severely depressed commodity prices, cutting farm income in the United States by one-third. In the same period, interest rates have soared and farm production costs have doubled, creating the worst slump in agriculture since the Depression. Farmers, debt-ridden and struggling to stay solvent, have been deferring purchases of any farm equipment at all, a trend that has sent farm machinery companies of all sizes into a decline.
Despite this adversity, Marliss has flourished, with sales growing from $127,000 in 1977 to more than $5.1 million in 1981 -- a five-year growth rate of more than 3,900%, placing Marliss 18th on the INC. 500 list of fastest-growing private companies (see INC., December 1982, page 35)"A key factor in our success," says Morse, "is that we build what farmers are buying. Not what we think they should have, not even what we think is necessarily the best thing for them to use. We're manufacturing and selling what they actually want, and we make it from their perspective, rather than our own."
Marliss equipment ranges in price from $3,000 to $30,000 and is designed for farm operations of all sizes. A typical customer plants both soybeans and feed grains and, like Sies, has a cost-efficient, no-till drill in mind. (The no-till planter, one of Marliss's most popular models, is a planting implement, which, like many others, goes under the archaic misnomer of "drill.")
While sales of most Marliss products have been hurt by the recession, steady business in no-till drills has sustained the company. The no-till drill can drop seed and simultaneously cut away stubble and other impediments, allowing the farmer to eliminate cultivation. This means he can plant his crop with fewer trips over the field, resulting in fewer man-hours of work and substantial fuel savings. The no-till is also manufactured by other companies and, understandably, sells well with today's farmers. What separates the Marliss no-till from the rest of the pack is a modular design that allows easy conversion from one use to another by merely pulling a pin and adding a different component. This modular design allows Marliss to build most of its equipment to order.
Another highlight of Marliss drills is extreme accuracy and greater depth control in planting. Planting is such a critical phase of farming that a farmer is irresistibly drawn to a product that promises a better chance of successful germination. "When you plant, it's like putting all your chips on the table and throwing the dice," said Clifton Meador, member and former chairman of the Agriculture Council of America. "If a farmer sees something that will give him a lock on his first stand [crop], he'll buy it."
Marliss hasn't stopped at refining the mechanics of the seed drill. Farmers have been clamoring for wider drills that plant in narrow rows, thereby covering a greater area at once. And Marliss has led the field in developing larger models that have folding wings for easy transport. Last September, the company introduced its 30-foot folding drill, and it has recently created a monster, 40-foot drill that is the largest in the world.
The customized drill built for Sies exemplifies the progressive nature of Marliss engineering. The company had designed the tool in advance and was merely waiting for a request that would demonstrate demand for a no-till drill. Heavier weight needed for a wider drill to function properly in no-till conditions was the thorniest engineering consideration, but Sies said that Morse didn't even flinch when he requested a width of 27 feet. "Morse told his engineers, 'If Mr. Sies wants it heavier, then you're going to have to have it heavier,' " says Sies.
Morse says that Marliss was able to respond quickly to Sies's specific requests because decision making at Marliss is streamlined. One day, for example, while Morse speaks with a visitor in his office, head engineer Ron Jeter walks in unannounced and politely interruptsJeter heads a staff of eight engineers and draftsmen, most of whom have farming experience themselves. Unshaven and dressed in worn blue jeans, Jeter stands in the doorway and suggests a significant engineering change on a planter. Because of tooling problems, he says, it would be more convenient to move the sight-glass nine inches to the left on the metal seed hopper. After listening to Jeter's reasoning, Morse approves the change, and the engineer is gone as quickly as he appeared.
"In a matter of minutes," Morse comments after Jeter leaves, "we can pass decisions from salespeople who have questions, to the marketing manager, and from him to me."
But, marketing manager Andy Morris cautions, "we don't shoot from the hip, either." He says that Marliss eschews radical product concepts and designs only features that are feasible from an engineering standpoint. He points out that customizing through the modular technique usually involves arranging proven components in new combinations, rather than devising unique components.
Morse says his company has turned own some "pretty wild" requests from farmers. Although the margin of profit is less on a customized drill, he notes, the company always makes sure, at least, to cover costs and weighs the long-term implications of its investment. "We probably didn't make more than 5% profit on the Sies no-till," Morse says, "but we believe that drill will make an impression, and we'll sell more of them down the road."
Morse employs five salaried salesmen managed by Morris. Two of them sell to 12 wholesale distributors covering 42 states, and another sells to about 80 retail dealerships within a 200-mile radius of the factory. Two others act as general-purpose salesmen for both networks. Marliss also exports to Canada, Africa, and Central and South America, and it plans to expand distribution on the West Coast.
Marliss's system of selling to retail dealers -- not an uncommon practice among farm-machinery companies of its size -- has advantages in a market where the customer isn't buying. "Farmers and ranchers will continue to buy the things they need," said Mel Woell, assistant director of information for the American Farm Bureau Federation, "but it will take salesmanship. They will only buy what they absolutely need. When farmer Tom Jones saw a tractor that looked pretty, he'd get the urge. Now, that urge has been killed. It's time for super-salesmanship."
Morse urges his salesmen to remain in constant touch with dealers, and sales to retail dealers now account for about 25% of his volume. "Dealers are down in the dumps, and my men have to act like cheerleaders sometimes," he says. Ed Henry, a Marliss salesman, adds that "we work hard at personal attention." Morse says that he prevents problems with cash flow by monitoring the financial health of all dealers and allowing them to stock only what he thinks the market will bear. "I can think of only one dealer who went belly-up on me last year," Morse says. "Most of them are surviving, but they're certainly not making a lot of money."
The same conditions that have left many of Marliss's dealers with brimming inventories and beaten attitudes are finally catching up with Marliss itself. Sales in 1982 were down 10%, a loss that Morse ruefully accepts as inevitable in a year when some competitors in the general area expect revenues to decline by as much as 25%. Morse expects more of the same in 1983, but he says that international sales are picking up as domestic sales decline and could account for as much as 20% of sales in 1983, up from 5% in '82. Recently the company logged in a $65,000 order for 10, 14-foot drills from Saudi Arabia. "We're not that worried about the future," says Morse, "because we don't sit and wait for business to come to us. We hustle."