Westfalia CEO shares experience with trade, automation and technical training
If you can make it in Germany, you can make it in the midstate, or so York County manufacturing executive Dan Labell has discovered.
Thanks to family connections and transatlantic study opportunities, Labell brought a unique perspective to the factory floor when he co-founded Westfalia Technologies Inc. a quarter century ago at the age of 26.
Manchester Township-based Westfalia designs and manufactures automated logistics systems for plants, warehouses and distribution centers, as well as automated vehicle parking systems. Labell is the company’s president and CEO.
American manufacturing advocates frequently praise German educational and apprenticeship programs as a model, but Labell has a leg up on most: He experienced the system firsthand, interning in the central European nation at a company that manufactured automated warehouses.
That experience helped Labell as he and his original partners developed a company
from the ground up. Today, Westfalia employs more than 110 people and has sales of between $30 million and $50 million. Automated warehousing has been Westfalia’s main focus, but — inspired by German precedent — the addition of parking systems in recent years has brought in new customers and added revenue by drawing on concepts and technology developed as part of the company’s core focus. The company’s Sandhurst Drive headquarters includes a 3,600-square-foot testing facility for the parking systems.
There, the company can test upgrades and enhancements to its current design, while customers and service personnel can undergo hands-on training.
Westfalia is a private company with a sister organization in Germany, Westfalia Logistics Solutions, whose majority owner also owns 20 percent of the York County company.
With international trade, automation and the future of tech education perennial topics in the national discussion about manufacturing’s future, Labell tackles each from a position of extensive firsthand knowledge. He sat down with the Business Journal earlier this month to share his perspective. The interview has been edited for length and clarity.
CPBJ: How did Westfalia get its start?
Dan Labell: I started interning for a German company (that made automated warehousing systems), and developed a fairly close relationship, and always thought it would be neat to bring that technology to the United States. That was the impetus for starting Westfalia. We started the firm in 1992 with three founders: A German individual, a York-based individual and myself. The York based partner left in 1994. The (original) German partner recently sold out, but I have another German partner who owns a minority stake. I’ve been president since 1994.
Tell me more about your background, and the internship.
My mother’s side of the family is from Germany, and I had family connections that actually worked in the business. I was able to utilize those connections (for the internship). Undergraduate, I was a logistics major at Syracuse University, and later a finance major at New York University, where I got my master’s.
What was your connection to York?
I grew up in Long Island. But my first job out of Syracuse was with a company called St. Onge, Ruff and Associates. It’s an engineering consulting firm here in York, and I worked there for about two-and-a-half years to get some experience in materials handling.
I got to know them at a trade show, and then I applied there while I was studying overseas, and they accepted me. It happened to be in York, Pa. I had never been to York, but I decided to come. Later, when I left to go back to school, I still had connections and relationships here. And St. Onge was where my other partner came from. He happened to be my boss, and we decided to start Westfalia, along with a German partner.
What was Westfalia's initial focus?
Automated warehousing systems. We purchased a small company here in York, called Thompson Equipment Machine Co. We continued to sell their systems to generate cash flow and sales while we were transitioning the business to move toward automated warehousing. We sold our first system in New Jersey in 1993. So it didn’t take too long to sell the first one.
What are the benefits and challenges of starting and maintaining a manufacturing company in this region?
We really did no analysis work to determine that York was the place for us. We did know that we were getting into manufacturing, so we knew that we weren’t going to have our offices in Manhattan. I think the labor force here is quite skilled when it comes to the type of skills we need, which include welding and fabrication. It’s a fairly technically oriented area.
That said, we do see a difficulty in attracting people to the area — it’s not always that easy, We also see a dearth of degreed electrical engineers, mechanical engineers.
Covering manufacturing, one of the things I often hear from people in the industry is that we in America need to improve our internships, our apprenticeship programs. Two countries are often cited as models: Germany and Switzerland. You’ve experienced the German system. How did it compare with what we do, or don’t do, here in America?
Germany has a vastly different way of educating the workforce than we do here, in my opinion. There’s no doubt that their program of trying to encourage students to choose a path at an earlier age is a benefit for their country. So by the time they get to be 18-, 19-, 20-years-old, they really have some technical skills. They still have the opportunity to go to college if they decide that it’s not for them.
Here in the States, I think everybody believes they should get a college education. That’s true in many respects, but we also need the technical skills that are very much in demand.
Tell me about your products.
We manufacture fully integrated, automated warehousing solutions. We will take an existing building and retrofit the inside with racking and automation to take the labor out of it and increase the density of the system. So a lot of companies that are landlocked will benefit greatly from that. The other thing we do is automated parking, a natural growth from our product line to go after a different industry. We’re trying to leverage our know-how and machinery and use it in a different market. Our sister company has been doing automated parking systems for at least 12 to 15 years. We more recently had success with that, starting about two years ago.
Every new product line starts with an idea or a moment of inspiration. What was was that moment for adopting that product line here?
It had to do with the idea of a diversification strategy. We wanted to find an industry that was different, and didn’t work in the same cyclical ways that other manufacturing industries do. We can’t predict the future, but we think it could insulate us from a downturn.
The inspiration did come from Germany. I looked at all of this technology, and how it would fit. It’s also a very difficult technology. It’s not easy, and the barriers to entry are high. Although there are a lot of players, there are a lot of players that have failed at it. I think we’re in a good position.
Where are you seeing the most demand for the parking products?
In the large cities — Philadelphia, New York, down in Florida along the coastline. Places where real estate is very expensive and population growth is happening.
Land use and availability is a much more critical issue in a smaller country, such as Germany. It’s an issue we Americans sometimes take for granted, except perhaps in the largest cities. Are you seeing any smaller markets express an interest in the parking products?
We do see smaller markets in really growing cities. It wouldn’t surprise me, for example, that downtown Austin, Texas, might have some great opportunities. The problem is that, generally speaking, the investment has to be associated with a real estate play, not a revenue play. Automated parking systems for public parking tends to be more of a revenue play, and that is more difficult to justify than if it is part of a real estate development, where it allows a developer to add significantly more residences or condos or apartments because he gets more parking in the same space. That’s driving the business model.
Back to automated warehousing. How much change in demand have you seen for those systems since you entered the business?
I think it’s been considerable. I think the market is expanding greatly because the automation technology has gotten more reliable. And I think that companies that are growing are beginning to see that you can’t get paybacks that are one or two years when you invest for a 20-year horizon. I think we’re convincing the boardrooms that a four- to five-year payback is OK, especially when an internal rate of return and net present value are very positive. We do a lot of that convincing.
Your customer base is national, and you have a sister company in Germany. To what extent are you trading internationally?
It’s mostly domestic. Our sister company has Europe and the Middle East. We have the Americas.
What are your thoughts on America's trade relationships with the world?
I think America struggles a little bit, because I don’t think America is as aggressive when it comes to exporting products as Europe is. We have here in America the Export-Import Bank (EXIM). We were turned down by them ... on deals in South America — because of, granted, the political situations in some of those countries. Not so in Germany. There the equivalent of EXIM is Hermes — very aggressive, very costly, but willing to do the deal. So we actually financed a deal for a South American customer that we had through our German sister company, by using Hermes. To me that is an opportunity lost for an American bank.
Automation came up, sometimes indirectly, in discussions surrounding the 2016 presidential election. While there was much focus on jobs going overseas, other observers noted that automation has fundamentally changed the way we work. If you’re a factory worker, that may not be a good thing. If you’re a company that invests in automation, it seems like that would be a very good thing. What are your thoughts on that? Are we managing the move to automation correctly in the U.S.?
I think that there’s a huge opportunity, and one that we have to seize, and it is the re-education of our workforce to get them ready for the future economy. We can either be proactive with that, and come out of it looking very good, or we can not do a very good job on that, and ultimately have many positions that are simply filled by automated systems.
Frankly, I do have great hope that we are going to be able to avoid the job losses that many are predicting. The reason I think that is because when you look back at history, especially in the past 20 or 30 years, there have been tremendous productivity-enhancing technologies brought to market, the first of which would be the PC (personal computer). Think about the size of accounting departments before that time. It’s unbelievable how many jobs that displaced. And yet we still have a robust economy, and our unemployment is relatively low, when you look at historic comparisons. And so I think that if we develop the educational aspect of this correctly, we’re going to be just fine.