He worked out mutually beneficial terms. He crunched numbers endlessly to ensure that Aladan would earn a profit even if machines went idle while distributors sold their excess inventory. "I backed off on the amount I supplied to customers and the price, extending their contracts over a longer period of time," he says. He then went to latex suppliers to renegotiate terms with them.
As Danielly forged ahead with the Eufaula factory during the market peak, he was fairly certain that a glut was in the offing and knew that machines might go idle. But as long as customers were willing to bear the risk Aladan incurred in building additional factory capacity, and to buy the gloves it made, Danielly would be happy to oblige them. That goodwill protected Aladan's market territory and profits from the war for market share that loomed on the horizon. "When the shortage was over, distributors would have to keep buying from us, not our competitors," sums up Danielly. He was willing to let factory capacity go idle in order to bank on the long term.
Povlacs stared at the idle machinery and knew condoms were the answer. Although Danielly was reluctant to pursue that business, Povlacs took it upon himself and eventually landed two small contracts in 1990. Condom sales revved up Aladan's idle machines and have grown to represent almost 20% of the company's revenues today.
After a long, strange trip, Aladan reached 100% capacity in November 1991 and closed out the year with almost $50 million in revenues -- after having reached just $27 million the previous year.
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From the outset, Danielly recognized that someday Aladan would be competing with offshore manufacturers because of the labor-intensive nature of making gloves. "Manufacturing moved offshore in a bigger and faster way than I ever thought it would," he says now. To combat the trend that he'd foreseen, Danielly wanted a quantum leap in factory efficiency from the get-go, and Povlacs delivered.
Changes in glove-making machinery played a big role. By redesigning the dipping-machine mounting system to allow it to hold twice as many glove molds, Povlacs doubled machine capacity at negligible cost -- giving Aladan a substantial edge over all its competitors. Each machine holds 8,000 hand forms, which complete a revolution in 17 minutes, resulting in 200 million gloves per machine per year. "A lot of what we've done here is incorporate improvements we had thought of over the years but never had the opportunity to build. Starting from scratch was a real advantage for us from a manufacturing standpoint," says Povlacs.
"Triple-dipping" is Aladan's claim to quality, and it's becoming an industry standard. Typically, molds are dipped once in a vat of latex. A few manufacturers have altered the latex chemistry and machine design to create a better-quality double-dipped glove. But even with that process, Aladan claims, the impenetrability is too low for a glove that is supposed to be an effective barrier to blood-borne disease. Povlacs added another dip to the equation, dramatically increasing the impenetrability. As a result, Aladan can make an examination glove that surpasses not only the Food and Drug Administration standard set for it but also the more stringent standard set for surgical gloves.
Rarely does Aladan go on shopping sprees for equipment. Even the dryers used in the final stages of glove production are built in-house. Povlacs designed one that costs twice as much as a commercial dryer but is six times as efficient. "When it's your own dime, you want to find the cheapest way to achieve something instead of the easiest," he says. High-tech condom-testing equipment is also built in-house. A government inspector was so impressed with the design of Aladan's testing equipment, he bought a machine to inspect condoms at other condom factories.
Aladan has continually striven to improve its products in any way possible. Since 1989 the company has spent $1 million reducing the labor component of its popular and premium-priced "powder-free" glove, which is much more difficult and expensive to make than the standard exam glove, which comes coated in cornstarch. The company is developing proprietary technology to make it feasible to sell the powder-free glove in mass markets. The goal is to automate the finishing steps even more, cutting the labor component of costs from the current 40% to 10%, making it comparable with the labor component for the standard powdered exam glove.
All machines can make either gloves or condoms. But the labor component of condoms is much higher, owing to the intensive product testing necessary to meet FDA quality standards. Today six machines run gloves, and two run condoms. Recently, the company has cut back on glove sales to meet the growing demand for condoms. And as long as the machines are humming, Larry Povlacs is happy.
Since its founding Aladan has poured almost $30 million in working capital into building the company's facilities. That investment has paid off in sales per employee, which totaled $126,000 in 1993, with profit margins of between 10% and 20% -- impressive numbers for a manufacturer.
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The sales relationships Danielly established in Aladan's early days continue to supply him with a solid base. Jim Devlin, president of Veratex Corp., a $100-million dental- and medical-products supplier based in Troy, Mich., has a long-term Aladan contract coming up for renewal in 1994 and is looking forward to doing more business with Aladan in the future. "I have not met many businessmen who are as reasonable as Danielly is," says Devlin. "Besides, Aladan's product quality is superior. Why bother wearing cheap latex gloves that aren't going to be an effective barrier to disease?"
But Danielly always knew he needed more than long-term purchase agreements to see that Aladan was entrenched in the marketplace. He'd need to diversify his product line and sell quality in a commodity environment.
