Behind the list with Louis Paioletti
director of logistics at Phoenix Contact
Q: Tell me about Phoenix Contact.
A: Phoenix Contact is a German company. Here in the states, the operation started back in 1981. Around 1984, the operation was built here in Middletown on Fulling Mill Road. We've had multiple expansions, most notably in 1998 (when) we built a four-story tower. In 2008, we built a state-of-the-art logistics center.
Has the company had any recent expansions or other changes? How is business going?
In 2008, we completed a fully automated logistics center for the Americas. In addition to that, we've renovated what used to be our old warehouse, which is now a state-of-the-art production facility. In recent years, we've effectively been a regional hub for not only the U.S. market, but in some cases beyond, by implementing this new logistics center and by the new factory we just put in place here. We're doing a lot of our own development and manufacturing. We've basically firmed up our position as a leader in the industry and our role within the Phoenix Contact global operation.
There are a lot of companies that have downsized. A lot of companies have outsourced. We've never done that. We've never had a layoff. We moved some production from our headquarters in Germany to Central Pennsylvania. We've hired numerous development and manufacturing people who have designed our own products here, global products we're exporting to Germany and other countries. From the logistics side, building this automated facility has allowed us to increase our productivity by well over 50 percent. It has allowed us to far, far better serve the U.S. market and our Phoenix Contact subsidiaries in Canada and Mexico and, to a lesser degree, Argentina. I would guess that in the next few years, we'll be shipping to Phoenix Contact Argentina. We did all this without laying anybody off.
What are some challenges the business has had to overcome?
Getting through the big global downturn. We did everything we could not to have any layoffs and continue the same level of service we've always given our customers.
Another challenge: We were given the task by corporate headquarters some years ago to be the "regional hub" for the Americas. Before, we were only concerned with the U.S. market. That was a big challenge. That's why we thought the best course of action was the automated service center.
I teach my students at Penn State that the global business environment is getting smaller, not in terms of dollars, but the environment is getting smaller. Borders are disappearing. There's so much more international business being done. We have to ship product to Germany, China and be very aware of us filling the frame conditions (conditions in the business environment) of the local operation. With that, we've been learning the complexities of exporting. With the events of Sept. 11, 2011, security has gotten tighter, and we have to be aware of more legalities. We're much more concerned with importing and exporting controls than 10 years ago.
What are some trends in the industry right now?
I think a big trend is supply chain excellence and trust. Trust is a big word right now within our own company. Our goal is to be the most trusted brand in the industry. We are striving for a theoretically perfect order that ships on time, is error free, and we can achieve a desired fill rate. If the customer wants 100, and we have 100 in stock, we can ship on time. If we only have 50, we can say we'll have them next week, and that's still shipping on time. But we want to take it to the next level.
Has the price of gas, the slow economy or other negative factors affected your business? How so?
We had a couple of tough years there. Our products are industrial electronics. We provide solutions for industry. We make everything from a little connector that might cost a penny to industrial computers that might cost $10,000. We help co-operate their factory floors. With the economy, the manufacturing sector in 2008 and 2009, rather than cutting back during those years, we had to cut our budget a little bit. But we continued on with investing money in this operation. We're talking millions upon millions upon millions of dollars. What we did has helped us in tough times and will help in future tough times because it has improved our efficiency. Everybody wants to keep their inventories at an optimal level.
One of the huge benefits we got from automating our logistics center is it reduced our lead times from our parent company in Germany. Reducing lead times allowed us to greatly optimize our inventory levels. We could keep less inventory on the shelves and still serve customers.
What are some positive things that have come out of our recent down economy for Phoenix?
We've been doing quite well. We experienced very, very nice growth last year and this year. Every time something negative happens, it's an opportunity for growth. It made us operate smarter. How the company handled it made us very appreciative.
I've been with the company 23 years. I'm a director of logistics. I'm one step away from the executive level. I was most impressed with how the executive staff handled and provided leadership during the downturn. Any other company would have laid off. Our executive staff had regular meetings; everybody had to make some sacrifices. We all revisited the budget and made adjustments.
The key thing was frequent communication, whether with an executive or the guy cleaning floors or driving a truck. Everybody received the same frequent communication on how we were doing. A plan was put together on how we would handle the downturn and minimize the impact. Do we keep investing? We had just built the logistics center, which had been under way before the downturn. That will make us a strong competitor for years to come.
What does the future look like for the company?
We've been growing since day one. There have been minimal years where we had a bad year. We are a success globally. We have a super-supportive corporate staff in Germany. Our German headquarters are 110 percent committed to this operation here. We expect nothing but growth and success in the future.
We have a preliminary blueprint to expand the logistics center and automation. We have a lot of land on our property. We did it with a modular framework to add on because we are expecting more growth. In 2011, we expanded by three more robotic aisles.
About Louis Paioletti
Louis Paioletti got a referral to work at Phoenix Contact 23 years ago and never looked back.
The Hershey native graduated from Penn State Harrisburg in 1988 and not long after went to work in marketing at the company's facility on Fulling Mill Road in Lower Swatara Township, Dauphin County.
In 1997, he moved over to the operations side and became materials manager, a position that grew along with the company. He is now director of logistics.
He also is an adjunct professor at Penn State York.
Editor's note: This story was modified from its previous version to correct two sentences in separate answers that Louis Paioletti gave.