If you’ve been reading our Industry Profiles, the history of Baltimore based RESCO Electronics may sound a bit familiar. Their story was recently told by David Copenhaver, President of RESCO.
The company was founded in 1932 by John Bagliani, Sr. as Radio Electric Service Company of Baltimore. Radio Electric’s original business was selling vacuum tubes and other electronic parts to radio repairmen. The counter sales operation eventually expanded to sell parts for TV repair as well, and grew modestly until John Sr.’s sudden passing in 1956. With two sons not yet in the business, John’s wife Edith had no choice but to take the reins. By the late 1950’s, Edith and her sons, by then working for the company, realized that long-term growth could not be sustained by selling to radio and TV repairmen and began selling electronic components directly to OEMs. In 1978, Edith decided it was time to retire and turned the business over to her son, John Jr.
John had always shared his parent’s commitment to growing the business.When presented with an op- portunity from one of their customers to do some value-added assembly in 1990, he jumped at the chance. Overall, the distribution business had a heavy emphasis on electrical connectors which made it easy to segue into assembly work. Harnesses and assemblies gained a solid foothold as
part of RESCO’s business, although it remained a sideline through the 1990’s. Along the way, RESCO secured several barcode scanning lines that were also sold to OEM’s.
In 2003, David came on the scene and purchased RESCO Electronics when John retired. It didn’t take long for him to realize that being a relatively small player in the electronics distribution industry was a losing proposition. The harness business was growing, yet there was no real push to market those capabilities.As David recalled,“We put our focus and resources behind the cable harness and barcode scanning businesses and deemphasized parts distribution.” Fast forward to today, and less than 10% of RESCO’s sales are electronic parts, with those being specialized holdovers from “the good old days,” as David referred. Fifteen percent of their business is in barcode scanning equipment, with the remaining 75% being harnesses and assemblies.
As the assembly business grew, the company made some strategic acqui- sitions, all in the harness assembly arena. “We have actually purchased three companies in the past ten years as part of our effort to expand that part of the business,” Carlo Capizzi, RESCO’s VP of Accounting and Finance explained. In 2008, RESCO acquired Sherman Assembly Systems in San Antonio, Texas. Interestingly, Sherman shares a similar history with RESCO. It began in the 1930’s selling tubes and electronics over the coun- ter, moved into more general elec- tronics distribution, then eventually migrated to assemblies.
In 2012, RESCO made perhaps its most signi cant addition by purchasing MorrCo Enterprises which was located in Del Rio,Texas, but operated a twin plant (maquiladora) in Ciu- dad Acuña, Mexico.“The importance of the MorrCo acquisition is obvious,” advised Carlo, “in that it gave us a manufacturing presence in Mexico.” The most recent “bolt-on” acquisition was made in 2015 when J-RAD Technical Services of Spartanburg, South Carolina was purchased.
About 60 percent of RESCO’s business is to medical equipment manufacturers. The other 40% is to what RESCO categorizes as industrial equipment OEMs. The industrial segment is a fairly eclectic group, but the largest sub-segment within the category is sales to companies making semiconductor equipment. Charles Fisher, RESCO’s VP of Sales commented “Our semiconductor equipment customers have a lot in common with our medical OEMs in that product reliability and consistency of production processes are critical,” adding, “the cost of failure is signi cant which is a common thread that runs throughout our customers.”
The subject turned to RESCO’s uniqueness. David mentioned three areas that quickly came to mind: Their focus on continuous improvement, their ability to produce in the US and Mexico, and the core values they hold deeply.”
The rst area where RESCO really separates itself from other businesses is the focus on continu- ous improvement. At the core of its commitment to continuous improvement are a series of metrics.“As an organi- zation, we collect data and statistics on everything,” Erik Olson, Senior Manager of Baltimore Operations commented,“and we have a funda- mental belief that for continuous im- provement to take place, you have to have a baseline.”Things like on-time delivery, acceptance rates, productivity rates, and quote response times are measured by facility and by cus- tomer. RESCO has broken these met- rics down into four groups. At each week’s staff meeting, RESCO’s lead- ership team concentrates on one of the four groups so that performance against each metric is reviewed and discussed every month.
Over the last few years, RESCO has employed lean manufacturing principles to reinforce its continu- ous improvement efforts. Using tools like value stream mapping to reduce waste or applying 5S concepts to bet- ter organize the shop oor have been impactful. According to Tim Wunder, RESCO’s VP of Information and Quality Systems “We have leveraged a number of methods to support continuous improvement through- out our organization. The use of lean manufacturing principles is a recent and highly effective example.”
The second area that differentiates RESCO is having manufacturing ca- pabilities in both the US and Mexico. Fred Morr, former owner of MorrCo and now RESCO’s VP of Mexican Op- erations shared that RESCO’s ability to manufacture in both the US and in Mexico gives it a unique competitive edge. “That has really turbocharged our growth over the past ve years as it has made us extremely exible and very cost competitive.” RESCO’s Acuña operation is only about a mile from the border crossing at Del Rio, Texas. According to Fred, “The response time from our Acuña facility is essentially no different than if it was located in Texas. We can export customer shipments in the afternoon and have them to UPS or FedEx for domestic shipment that evening.”
The nal area of uniqueness that David described was less obvious to the outsider, but is perhaps the most important.“What has perpetu- ated this company for close to nine decades is our ability to maintain our culture.” RESCO de nes this cul- ture through a set of six core values (Figure 1).“A lot of companies have mission statements and lists of values, but I think what makes us different is that it’s not just a bunch of words; our values de ne the culture of our company,” he said. They use these values when hiring, promoting, and, when necessary, dismissing employees. In fact, the values govern all the decision making at RESCO. “Most decisions become pretty easy when you are able to go back to a reference point like our core values.”
Where to Build?
Asked what determines which fa- cility RESCO will use when quoting an assembly, Kelly Grato, RESCO’s Senior Manager of Procurement and Estimating said they have put a lot of time in developing their quotation template. It’s a fairly complex spread- sheet that allows them to enter de- tailed information about what they are building and outputs the cost to build in both Baltimore and Acuña. “One of the most important attributes of that spreadsheet is that it deter- mines the cost to build in the US and in Mexico,” she explained. Ultimately cost is the primary driver but some- times capacity or speci c equipment or tooling takes precedent.“This will come as no surprise, but the higher the labor content relative to the over- all cost, the more likely it is that Mex- ico will be the cheaper option,” Kelly con rmed.
The Future: Growth
Growth was David’s quick answer when asked about the future. “Our biggest challenge right now is keeping up with the growth of the business.” For the past three years RESCO’s compounded growth has been over 23% per year and the staff has grown by about 50% over that period.They currently lease a 15,000 sq ft facility in Mexico but recently purchased and are in the process of renovating a 40,000 sq ft building in Acuña.And the growth is not limited to Mexico. As David shared,“At the same time we are preparing a new home for our Mexican operations, we have been renovating parts of our Baltimore facility to create more pro- duction area. Our Baltimore produc- tion staff has more than doubled in the last year.”
David and his team are big believ- ers that with growth comes oppor- tunity. ”We also believe that if you’re not growing, you’re dying, so there’s a pretty big emphasis in our organiza- tion on growth.”The company’s long- term goal is to maintain somewhere between 10% and 20% annual growth, with 15% being the sweet spot.“We hope to do that primarily through the organic growth of existing and new customers,”he concluded,“but as you can tell, we are not afraid to make ac- quisitions.”