Growing Through Geographic Expansion
Note: The interview included below was conducted just prior to the Covid-19 crisis. While the short-term priorities of the company featured have changed, the content in this article speaks strongly to business growth strategies.
While some companies grow in one spot, perhaps expanding or building on, or moving to a larger building in the same area, others choose to grow their businesses by opening “branch operations” in other locations. Olympus Group, a company that focuses primarily on digitally-printed fabrics for display/exhibit applications, has taken this latter path, carefully positioning itself with new locations or partnerships that place their printing closer to the events they serve. For more on this, I spoke with Brian Adam, President of Olympus Group.
Olympus Group now has locations in five US cities. Was there a specific driver or motivation that led the company toward the decision to expand geographically?
Adam: The initial driver for expanding geographically was the reduction in lead-times. When I first joined Olympus in 2005, we quoted our lead-times in weeks. By 2010, lead-times were quoted in days and we were overnighting a considerable amount of graphics to key customers. Today, we often quote our lead-times in hours. We view speed as a competitive advantage, and if we want the ability to produce graphics same day, a local production facility is essential.
Another driving factor in geographic expansion was an attempt to avoid some of the more commoditized print segments. We are, and have been- a large fabric dye sublimation printer where a large portion of the product cost is sewing labor. We used to produce thousands of standard 3’ x 5’ flags for NFL teams, universities and large corporations. As a domestic manufacturer, we could not compete with overseas sewing labor rates, and began losing large flag projects to Asian suppliers who could sell flags at a lower price point. We determined that we could add value and avoid competing with overseas sources if we focused on quick-turn, small run, and unique event and tradeshow graphics. These market segments often require a local production facility to manage complexity and turn-times. It drove us to open multiple production facilities in other locations.
Once you got started, what was a significant indicator that you were onto something good?
Adam: When we opened our facility in Orlando in 2011, it was opportunistic. We took a chance and were a bit naïve as to whether multiple production facilities would work and add value for our customers. There are a lot of redundant costs in having multiple facilities (print and finishing equipment, inventory, the building, IT systems, etc.). We also had capacity for more off-shift work in our Milwaukee headquarters on our current equipment, so opening a new production facility was a bit of a gamble. The initial indicator that we were on to something good was customer response. We installed a UV press and a cutter, and felt we could ship fabric and rolled goods from Milwaukee to the Orlando market. Within the first 12 months- demand and requests for same day fabric were so great, that we decided to expand our production facility and added dye sub printing equipment and a sewing/finishing team to Orlando. Our sales doubled every year for the first three years in Orlando and have grown every year since we opened the facility. We felt Orlando might be a bit of an anomaly, given the amount of tradeshows and events that take place in the city. However, last year we opened our Denver location with our partner Color Gamut Digital Imaging (out of Las Vegas). While it’s still early, we have experienced similar results in the Denver-market, as the team doubled our initial sales projections in year one and are well ahead of our projections in year two.
Surely, careful research goes into selecting locations in which to expand. How does Olympus Group conduct that research, and what are some of the key factors you look for once you’ve targeted a specific city or metropolitan area? Does it get easier each time you open a new location?
Adam: As a small, entrepreneurial organization, I wouldn’t say we’ve done careful research. We tend to be opportunistic and in Orlando it was more gut-feel than thorough research. Today, as we look to scale and add more locations, we have been more deliberate in analyzing the potential of each market. To determine the potential of a market for our specific business, we pulled data on the top 50 markets in the United States, analyzing demographics and market opportunities specific to our industry. We looked at the market size, growth rates, business climate, labor supply, regulatory environment and economic supply. For market opportunities, we looked at the competitive landscape, key customers’ physical locations, the number of tradeshows and events the city hosts, and the number of professional sports franchises. We weighted the importance of each of these attributes to our business and came up with a score for every metro area, ranking them from 1 to 50. We use this data to analyzing potential opportunities for expansion through acquisitions or green-fielding, focusing on markets that fit our business model. I believe we are always learning, and while each location provides a new set of challenges, we have certainly learned from our past mistakes.
It would seem to me that each new location adds a sort of multiplier to the complexity of the larger business. Using production as an example, can you describe how Olympus Group works to minimize unnecessary complexity that could, if not addressed, cause problems?
Adam: Our facilities vary in size from 10 employees to 150 employees. It doesn’t make sense to have identical procedures for facilities that vary in size greatly. That said, we try to use the same systems and processes wherever possible. We have nearly identical equipment at all locations, use the same ERP systems and workflows, leverage identical IT systems, and have common work orders and training. This allows us to share work seamlessly between facilities, better manage both workload, and deal with emergencies like a press going down. If we know a big event is coming up, we can share employees, literally flying them to another facility to help manage the workload.
Each state has its own set of regulations, laws and tax codes that add complexity. In general, there are many similarities, allowing us to leverage our current systems and teams across locations. We try to centralize support functions out of Milwaukee (accounting, HR, purchasing, IT), thus allowing consistency across these functions.
Running multiple facilities is not easy, and it requires a fair amount of travel and coordination. While this requires frequent communication, we feel the effort has helped us grow and add value for our key customers.