Entrepreneurial spirit keeps Portland manufacturer fired up

PORTLAND — On the walls of Esco headquarters, opposite large photos of mining buckets, hang three rows of framed patents.

Each patent lists the inventor's name and a diagram of the part it covers. Numbering nearly 300, they snake up a stairwell into the second floor where many of the company's design engineers work.

Such decor might not be expected of a 94-year-old company that makes metal parts built to withstand the wear and tear of earthmovers, mining buckets and jet engines. But the Portland-based manufacturer says its ethic of innovation sets it apart from foreign competitors flooding the market with cheaper imports.

Now the privately held global manufacturer is hanging more of its future on that ethic, refocusing on its core mining and construction-parts businesses with a goal of generating at least 5 percent of its revenue from newly invented products by 2011.

The shift comes as world demand for commodities is skyrocketing and mining companies are chewing into more abrasive surfaces to extract oil, iron and gold, making the company's durable "wear parts" more valuable.

Lesson in innovation

As a heavy-manufacturing employer, Esco's emphasis on innovation offers a lesson for smaller firms desperately trying to keep a foothold in their markets in the face of imports, experts say.

After work recently the company celebrated its nine most recent patents with a private ceremony in a second-floor conference room lined with its parts. Among the 21 engineers honored with silver plaques was Terry Briscoe, who received his 23rd through 26th patents since joining the company nearly 37 years ago.

"As an engineer, I wouldn't want to work for a company that's a 'me, too' or a copycat," Briscoe said. "Our mantra is to be a leader. That's a challenge all engineers love."

Esco has long lived off that kind of rep.

The company was founded in 1913 as the Electric Steel Foundry by Charles Swigert and got its first patent three years later.

Its lobby reveals a surge of patents in the 1930s, with inventions for drag buckets, excavating teeth and shackles.

The company's entrepreneurial spirit spilled out in spinoffs, as well. Lift-truck maker Hyster, lift-truck-attachment maker Cascade and software consultant ECS Integrated Technology Solutions all had roots in Esco.

Parts for everything

Today, Esco employs more than 3,600 people in six countries and seven states, earning a reputation for high-quality parts that work on a wide variety of mining, construction and industrial machines.

"Esco's always come to the table with a good game," said Phillip Hurd, sales manager for Northwest Parts and Rigging in Montana, a mining and construction supplier. "They've got parts that fit everything versus a competitor that might only have parts that fit this or that."

In the 1980s, one southwestern Montana gold mine tested several brands of teeth on its shovels, which routinely hoist 17-ton loads of rock. Esco's came out on top, said Howard Sant, purchasing manager for Golden Sunlight Mines, and the mine has used them ever since.

Durability is important at Golden, where workers replace teeth every five days, he said. Esco's attachment system uses pins to lock the teeth to a bucket, which makes for easier and safer removal and keeps machines running longer.

Sant said he can find cheaper teeth from foreign producers — Esco's cost $400 apiece. "But you may change them every day, instead of every fifth day," he said.

Timing the boom

Though the Swigert family still controls Esco, longtime Chairman Hank Swigert, Charles' grandson, retired in 2003 and passed the board chairmanship to Chief Executive Steve Pratt. About the same time, prices for gold, iron and other commodities started increasing, and mining and construction boomed worldwide.

Now Pratt is steering Esco back toward its roots serving those industries.

"When the market starts to go soft and the mine operators and construction companies are not buying new equipment, they're still running their existing equipment and still wearing out parts," Pratt said. "That's where we want to be."

But much of its expansion is occurring globally. About one-quarter of Esco's revenue now comes from outside North America, Pratt has said. Late last year, the company opened a foundry in eastern China that will employ up to 250 people making teeth and adapters for excavators, wheel loaders and other heavy machinery.

The world's ore and oil deposits have become more difficult to reach, company officials say, which they hope will give Esco's wear products more value in the marketplace. The company is now angling to supply firms mining Alberta's massive oil-sands deposits, where the world's largest trucks and shovels dig up two tons of sand to extract a barrel of oil.

Lean manufacturing

The company's foundries have for the past decade been adopting "lean manufacturing" practices, popularized by Toyota, to reduce waste and speed manufacturing.

Its small-parts foundry, which casts 7,000 parts a day, has reduced the time from when it gets an order to the time it produces a part — from several weeks to about two days, company officials said.

Now the company is applying similar streamlining to capture new-product ideas from its white-collar workers.

Dubbed Esco Innovates, the program provides a pipeline for new product ideas. Company representatives can e-mail their product concepts to a central location, where they are prioritized and reviewed by the company's strategic-planning team. The top ideas get a closer review before a division vice president gives a final green light for development.

"We currently have over 100 ideas out there," said Dan Pizzuto, Esco's marketing director.