701 North Lilac Drive
Tennant's mission is to become the preeminent company in nonresidential floor maintenance equipment, floor coatings and related products. We will achieve this by continuing to implement strategies that leverage our strengths: Making an industry-leading R & D investment, plus acquisitions, which allow us to regularly introduce new or significantly upgraded products, and enter new markets; Using technology to create more efficient and effective operations, to better serve customers and support growth; Using multichannel product distribution to increase market penetration; Building upon our international market penetration, which generated 27% of our 1998 revenues; Reaching growth niche markets, which helps counter cyclicality in other areas; Using our strong financial condition to fund continued expansion.
Tennant Company is the world's foremost manufacturer of industrial floor maintenance equipment, including sweepers, scrubbers, and combination sweeper/scrubbers, in a variety of ride-on and walk-behind models. These heavy-duty floor cleaning machines, which are priced between $7,500 and $90,000, are used to maintain indoor and outdoor surfaces in factories, warehouses, stadiums, parking garages, and airports. Tennant dominates the U.S. market with an estimated 60 percent market share and holds about one-third of the world market. The company also makes smaller, less expensive ($3,000 to $8,000) machines--including sweepers, scrubbers, carpet extractors, buffers, and polishers--for commercial markets, including schools, hospitals, office buildings, and retail outlets; as well as coatings for concrete and wood floors. The company maintains manufacturing facilities in Minneapolis; Holland, Michigan; Uden, the Netherlands; and Waldhausen, Germany. It sells its products directly in eight countries and through distributors in an additional 45.
Tennant Company was founded in Minneapolis in 1870 by an Irish immigrant named George Henry Tennant. Tennant had opened a sawmill and woodshop to supply the growing number of houses with hardwood floors, wooden downspouts, and rain gutters. Over the next 30 years the woodworking shop expanded, surviving several fires, and by the turn of the century had become one of the leading manufacturers of hardwood flooring in the Upper Midwest. Many of the original G.H. Tennant hardwood floors can still be found in the stately homes along the main streets of Minneapolis and St. Paul. The company was incorporated in 1909.
The innovation that would shape Tennant's business and revolutionize floor care was a classic example of ingenuity born of frustration. In 1932 Ben Casper, a local junior high school janitor weary of laboring over floors on his hands and knees, discovered a way to dry clean his floors. Casper fashioned a scouring contraption from a coffee can wrapped in steel wool that he hooked up to an old washing machine motor. The janitor demonstrated his idea to a neighbor, who just happened to be a shop foreman at Tennant. Tennant acquired the rights to manufacture the machine, and within a few years, a variation of the janitor's model formed the backbone of the company's business.
Tennant had developed a floor finishing and treating system based on oils and sealers to be applied with a buffer. Along with the floor-care machine, the Tennant Floor Maintenance System flourished, and by 1940, over 100,00 square feet of wooden floors in bakeries, schools, and factories were maintained with its products. In the 1940s, treatment products were developed for concrete floors.
The outbreak of World War II ushered in a new era for Tennant. As defense plants sprang up, heavy-duty machines were required to keep those installations immaculate. Tennant responded with the production of the Model K, a much larger machine with a wider cleaning path. The product line was expanded to include scarifiers, a series of outdoor machines that could be used to route and loosen up the surfaces of airport ramps, bridges, and highways. Tennant also participated in the war effort by subcontracting parts for the Norden bombsight manufactured by Honeywell. During this period, sales went from $330,000 in 1938 to $1 million in 1945.
The postwar period witnessed a continuation of Tennant's explosive growth. Ongoing innovations in equipment created increased demand, and the market for scrubbers and sweepers rapidly expanded. A landmark event was the invention of the first vacuumized power sweeper in 1947 by Ralph Peabody, a Tennant Company engineer. The sweeper revolutionized industrial floor maintenance by controlling dust dispersion during sweeping. The Model 36, as it was called, formed the prototype of a long line of sweepers, scarifiers, and scrubbers. The year 1950 marked the introduction of sweepers with front wheel steering, and in 1953 Tennant launched the first mechanically raised hopper, followed by the first hydraulically driven sweeper in 1961.
As a result of Tennant's rapid expansion in the 1950s, the company outgrew its plant in Minneapolis and relocated to a larger headquarters in suburban Minneapolis in 1957. Tennant later added five other facilities in the greater suburban area of the Twin Cities. In 1969 Tennant went public with its first stock offering and made its first major acquisition with the purchase of Taylor Material Handling in Michigan.
The 1960s and 1970s were decades of prosperous growth for Tennant. In the early 1960s, Tennant took the first steps to carve out a stronger niche for the company's products in Europe by granting a license to its importer, R.S. Stokvis Company, to manufacture the company's products in Holland. By 1970, Tennant had bought out the license agreement from Stokvis in a takeover of Stokvis/De Nederlandsche Kroon Rijwiefabrieken and formed a wholly owned subsidiary, Tennant NV, based in Uden, the Netherlands.
Looking toward expansion in the Pacific, Tennant embarked upon a joint venture with Fuji Heavy Industries in Japan in 1964. In the long term, this relationship did not live up to its initial promise as Fuji was less than aggressive in promoting and distributing Tennant's products. In Australia, too, during this same period, sales failed to advance as expected under Tennant's national distributor, Clark Equipment. In the mid-1970s, Tennant phased out Clark and began selling directly. Sales increased from $750,000 in 1976 to $11 million by 1994.
In the United States, Tennant further solidified its position as an industry leader by introducing service and parts through authorized service dealers around the country. Unlike its major competitors, Tennant also maintained its own direct sales force, which actively sought out new markets and customer feedback. In this way, the sales force not only sold Tennant's products and services, but also served as a sounding board for customer concerns. Tennant's sales force promoted the company's complete product line out of three regions (western, central, and eastern), and worked in tandem with service representatives in these areas.
1979-89: Quality Improvement Campaign
A major turning point for Tennant Company took place in 1979, when the company launched an all-out quality improvement campaign after a thorough evaluation of the company's operations by quality expert Philip Crosby. While Tennant's sales were booming at the time, CEO Roger Hale and other senior managers were keenly aware that American companies were quickly losing their competitive edge in the global marketplace. At the same time, Hale was detecting warning signs about Tennant's quality as complaints came in from Japanese customers about sweepers leaking hydraulic oil. Strangely enough, U.S. customers had not bothered to protest the same leaks, which Hale took as an indication of American complacency to issues of quality. Then came the news that Toyota's lift-truck division was planning to enter the floor sweeper business. With a formidable Japanese competitor looming on Tennant's horizon, Hale and other Tennant executives moved quickly to explore dramatic quality improvements.
Tennant's extensive rework stations were the first target. These areas, where 20 of the company's top mechanics worked overtime to get faulty machines ready for shipping, took up 15 percent of assembly space, and an average of 33,000 hours was spent annually on manufacturing rework, a practice that was considered standard across U.S. industry. Resolving to do it right the first time, Hale transferred rework mechanics to assembly to catch mistakes on the line from the beginning.
Tennant's vast number of suppliers posed another problem. Supplied parts represented 65 percent of the average cost of a sweeper or scrubber, and with so many suppliers, there were inevitable inconsistencies in parts and inadequate training for assemblers. Tennant carefully weeded out its suppliers and reduced their numbers from 1,100 in 1980 to 250 in 1992. The number of defects dropped dramatically. Employees were also trained in statistical process control (SPC), a method of monitoring defects and setting goals to reduce them. According to Training in 1990, SPC allowed the company to cut by half the number of inspectors of parts manufacturing.
In a further effort to reduce errors, small teams of managers and workers were formed to focus on how procedures could be improved. These small groups became a way of life at Tennant and encouraged regular employee feedback in all areas of the business. Management also relied on the team process to stay in touch with day-to-day operations. The 1993 edition of The 100 Best Companies to Work for in America gave Tennant high marks for management responsiveness and general working conditions. The report also highlighted the incentive programs and recognition program that have helped prompt greater employee participation in the quality improvement campaign.
Roger Hale, a great-grandson of Tennant's founder, who had led the company since 1976, embraced the quality philosophy with the fervor of a missionary. His account of how the company transformed itself, Quest for Quality: How One Company Put Theory to Work, published in 1989, became required reading for other companies interested in quality management. Tennant also sponsored an annual conference on quality. In addition to the extensive training introduced for company employees, a department was created to run external training programs for companies eager to emulate Tennant's approach.
Tennant's quality campaign not only produced savings for the company, but also translated into tangible benefits for its customers. Tennant's products were more reliable, and during the 1980s prices on some machines actually went down. Warranty coverage was extended. Tennant's sweepers and scrubbers were featured in Fortune's 1988 roundup of top-notch U.S. products in an article entitled 'What America Makes Best.' According to Management Accounting in 1992, Tennant significantly improved product quality and reduced total quality costs from 17 percent of sales in 1980 to 2.5 percent of sales in 1988.
As part of its ongoing quality improvement campaign, Tennant was investing what Barron's called an incredibly high level of revenues, close to five percent, in new product research and development. By the mid-1990s, the company had cut its product development cycle in half, from four to two years. Some of the more innovative products to emerge in this period were environmentally safe resurfacing coatings and a heavy-duty machine for use in airports to pick up and recycle the deicing fluids sprayed on planes before takeoff.
1990s and Beyond
Tennant weathered the recession of the early 1990s with minor layoffs and a slump in sales of its floor coatings products. Overall sales in 1991 dropped six percent to $144 million and earnings were off by approximately 25 percent. As a way to invigorate its quality efforts, Tennant launched a Preeminence 2000 campaign in 1992 to define a strategy to propel the company into the next century. The company's mission was to be the preeminent company in the industry with the goal of doubling sales by the millennium. Continued diversification and expansion of overseas sales seemed to be the key to prosperity despite a stagnant market at home.
Under Hale's leadership, Tennant had moved to expand international sales, initially concentrating on Europe. Using its base in the Netherlands as a springboard, Tennant had gradually assumed ownership of the Stokvis organizations in Germany (1978), the United Kingdom (1982), and France (1994), establishing direct sales and service operations in all four countries. A fifth direct sales office in Spain got its start in 1991 and had more than doubled in size four years later.
Tennant Australia, a wholly owned subsidiary, became a full sales, marketing, and service organization and the first to offer service 24 hours a day, seven days a week. In 1989, after ending its 25-year joint venture with Fuji Heavy Industries, Tennant formed Tennant Japan K.K. and with its master distributor, Nippon Yusoki Company, Ltd., initiated direct imports from the United States to Japan. In 1992 Tennant formed Tennant Company Japan Branch to sell commercial floor care equipment. In 1994 overseas sales accounted for $72 million, or 25 percent of revenues.
Tennant's significant inroads into the commercial market were enhanced by the acquisition in February 1994 of Castex Industries, Inc., the world leader in carpet maintenance equipment, for $26.8 million. Castex itself had widened its scope in 1989 by taking over Nobles Industries, which offered much broader established distribution channels for its line of hard floor maintenance equipment. Castex/Nobles was integrated with Tennant Trend, which had been formed in 1982, and these operations were consolidated in a new manufacturing facility in Holland, Michigan. Castex complemented Tennant's product line with a wide range of walk-behind scrubbers, sweepers, and wet/dry vacuums, as well as carpet extractors and floor polishers, appropriate for use in commercial settings such as office buildings, hospitals, and supermarkets.
Tennant's ambitious program to dominate the commercial floor equipment market was further bolstered with the purchase of Eagle Floor Care, Inc., a manufacturer of propane burnishers that same year. By the end of 1994, commercial floor maintenance equipment sales had more than tripled since the year before due to marketplace acceptance of the new acquisitions.
The year 1994 was a high point for Tennant in more ways than one. Sales of $281 million were up 27 percent over 1993, with sales in North America registering a 33 percent increase. That same year, Tennant was the first non-Fortune 500 company to receive Purchasing magazine's Medal of Professional Excellence. Other recipients of the award included Motorola, Hewlett Packard, Chrysler, and General Electric. Purchasing made special note of the company's outstanding performance in the areas of supplier relations, product teams, and quality.
The late 1990s were a period of steady growth in sales and profits for Tennant; growth fueled both by the expansion into the commercial sector and heightened new product development. In 1998 alone, the company introduced three new commercial products and five industrial products. Among the latter were two products designed for outdoor cleaning: the Model 830-II street sweeper and the 4300 All-Terrain Litter Vacuum, a riding vehicle used to pick up small pieces of garbage. Tennant products had long been used outdoors, but these models were among the company's first to be designed specifically for such use. In addition to pursuing the outdoor niche, Tennant also identified a second niche market as a key growth opportunity, that of contract cleaners. Businesses everywhere were increasingly outsourcing their floor maintenance, and Tennant aimed to supply contract cleaners with the equipment they needed.
By the late 1990s Tennant had also completed a total overhaul of its worldwide computer systems, an initiative that began in 1994. By linking all operations and customer information, the company hoped to improve customer service, sell more efficiency to its customers, and design products and services that better meet customer needs.
In April 1998 Janet M. Dolan was named president and chief operating officer at Tennant, having previously served as general counsel, head of the floor coatings division, and then head of the company's entire North American operations. One year later, Dolan became the first company CEO not descended from the founder when Roger Hale stepped down from that position after 23 years at the helm. In January 1999 Tennant made an important European acquisition when it paid almost $7 million for Paul Andra KG, a German, privately owned maker of commercial floor maintenance equipment, including single-disk machines, wet/dry vacuum cleaners, and vacuumized scrubbers. The company sold about $27 million in products on an annual basis, mainly under the Sorma brand name, with 75 percent of sales occurring in Germany and Austria. This acquisition not only provided Tennant with a strong position in the key country of Germany, it also provided a base for extending the Sorma and Tennant commercial product lines into other countries.
In October 1999 Tennant announced a restructuring intended to position the company for greater growth and profitability in the 21st century. Aiming to reduce operating costs by $5 million per year, Tennant consolidated some operations and facilities and divested certain units, including the Eagle Floor Care line of burnishing equipment. About 150 jobs were trimmed from the workforce. Tennant also began moving from a 'build-to-stock' manufacturing system to a 'build-to-order' manufacturing capacity&mdashcording to the company, the first in the industry to take this ambitious step. Longer term, Tennant set financial goals for itself of annual sales increases of ten to 12 percent and an increase in its operating margin to more than ten percent. (This margin had ranged from 9.2 percent to 9.7 percent from 1995 to 1998.) In the press release announcing this restructuring, Dolan neatly summed up the history of a consistently successful firm when she said that Tennant 'has prospered for 130 years by adapting to a changing world and will continue to do so.'
Principal Subsidiaries: Castex Incorporated; Paul Andra KG (Germany); Tennant Holding B.V. (Netherlands); Tennant UK Limited.
Principal Competitors: Athey Corporation; Federal Signal Corporation; Minuteman International, Inc.; Nilfisk-Advance Inc.; RPM, Inc.; Toyota Motor Corporation.