Tennant Company

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Tennant Company

701 North Lilac Drive
P.O. Box 1452
Minneapolis, Minnesota 55440
U.S.A.
(612) 540-1200
Fax: (612) 540-1437

Public Company
Incorporated: 1969
Employees: 1,750
Sales: $281 million
Stock Exchanges: NASDAQ
SICs: 3589 Service Industry Machinery Nee

Tennant Company is the world’s foremost manufacturer of floor maintenance equipment, including sweepers, scrubbers, and burnishers, in a variety of ride-on and walk-behind models. Tennant dominates the U.S. market with an estimated 65 percent of market share and holds 25 percent of the market worldwide. Tennant produces heavy duty floor cleaning machines that are used to maintain indoor and outdoor surfaces in factories, shopping malls, stadiums, and airports. Over half of the company’s total sales are placed by U.S. heavy industry, although products are distributed in 60 countries. The biggest single users of Tennant’s products are auto and aerospace companies, along with federal and local governments.

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 innovation that would shape Tennant’s business and revolutionize floor care was a classic example of ingenuity born of frustration. In 1932 a local high school janitor weary of laboring over floors on his hands and knees discovered a way to “dry clean” his floors. He 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. Tennant continues to manufacture floor coatings, which make up approximately seven percent of its sales, although the waxes and varnishes of the 1930s have long since given way to a sophisticated array of urethane and epoxy finishes.

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. 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. Since that time, Tennant has 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 maintains its own direct sales force, which actively seeks out new markets and customer feedback. In this way, the sales force not only sells Tennant’s products and services, but also serves as a sounding board for customer concerns. Tennant’s sales force promotes the company’s complete product line out of three regions (western, central, and eastern), and works in tandem with service representatives in these areas.

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 hadn’t 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 Places to Work 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 topnotch 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 de-icing fluids sprayed on planes before take-off.

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 1994 of Castex, the world leader in carpet maintenance equipment. 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 was acquired in 1989, and these operations were consolidated in a new manufacturing facility in 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.

1994 was a banner year 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 include 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. This type of recognition signaled that Tennant Company was well on its way to its goal of being the preeminent company in non-residential floor maintenance products by the year 2000.