By Eric Peterson | Jan 12, 2021
Salt Lake City, Utah
Harling co-founded Sterling ATM with Steve Binder with slick design and branding as the big differentiators. "We had worked for a competitor and waited out our two-year non-compete," says Harling. "Then we started our own business with no intention of ever being manufacturers. We were basically going to design our own ATM enclosures and have a company in Canada build them."
The decision to manufacture in Canada was largely based on a favorable currency exchange rate. "It was really cost-effective for us to have a Canadian manufacturer," says Harling. "When the Canadian dollar and U.S. dollar went on par, that basically killed that model for us."
The company opened its first manufacturing plant in about 2006. It was 12,000 square feet. Sterling ATM quadrupled that footprint in 2010 when it bought a 50,000-square-foot manufacturing facility in Salt Lake City.
Harling likens his experience as a manufacturer to The Accidental Tourist. The title character "has to travel, so he writes a book for people who hate traveling but have to travel for business," he laughs. "We were kind of the reluctant manufacturer. . . . We had sales and marketing backgrounds, so we had no intention of ever becoming a manufacturer."
His biggest lesson came with scaling production. "To be honest with you, when you're small, manufacturing can be done relatively efficiently with just common sense. You can common-sense your way through a small manufacturing operation."
Harling continues, "In those early years of manufacturing, it wasn't too difficult. We were successful, we were profitable, and we continued to grow. We've always been great at design and we built a great product. Those things allowed us to really cover up a lot of manufacturing inefficiencies."
"It was like the old sausage factory," he concludes. "Don't ask how the sausage was made."
The dynamic caused problems as the company grew. Lack of inventory control and ERP systems led to issues -- and losses. "The business becomes exponentially more difficult as you grow, and you learn that manufacturing isn't some cute nostalgic thing that happens in a small, 12,000-square-foot plant, it's something that requires professionalism and grit and systems. And that was challenging for us for a lot of years."
At the same time, the ATM industry became increasingly mature and banks reduced their brick-and-mortar footprints and cut ATM enclosure budgets. "The ability to be a design innovator lost some of its market power," says Harling.
The variable nature of the market -- with big orders spurred by bank mergers followed by lulls -- created other issues. "Those guys shake your hand and they're gone," says Harling. "They might be gone for a year, two years until they have another project. . . . In a quarter, we could have as much as 100 percent fluctuation in volume. Think about trying to manage that."
From 2015 to 2017, "We went backwards," he adds. "We kept expecting some kind of unicorn, a perfect lean-thinking plant manager, this savior on a white horse to come in and be the guy who would straighten everything up. We tried. We looked for that unicorn plant manager for years. Finally, we said, 'We're just going to do it ourselves.'"
COO Brian Dyer "took over and just basically through radical candor, common sense, coordination, and just accountability . . . facilitated a significant turnaround on the manufacturing side," says Harling.
There was another key question: "What do we need from a production standpoint? What we need is steady volume, something we don't have to make a ton of money on -- it can be just contribution margin."
Harling's answer to oscillating sales involved launching a second company in line with Sterling ATM's capabilities: Bean Trailer. "It's been good for the entire enterprise," says Harling. "Bean is Sterling ATM's biggest customer."
Revenue has roughly doubled since 2018, and lead times for ATM enclosures have decreased. "The ATM side has grown significantly in the last two years, and it's still a mature market, so it's grown by taking market share," he notes.
"Having an exploding cult brand on our hands, there was something about the energy of that and the overall effort it got to be efficient to take advantage of the market on these trailer sales," says Harling. "We are big believers in making lemonade out of lemons."
Challenges: A variable market. "Our ability to forecast on the Bean side is so much easier than it is to forecast on the ATM side," says Harling. "There isn't a forecast in the ATM world that's more than three months out that's worth the paper it's printed on."
Opportunities: "There are massive efficiency opportunities," says Harling. That goes for both manufacturing ATM enclosures as well as trailers.
Needs: Employees and continued execution, says Harling.