By Eric Peterson | Dec 12, 2021
Printed circuit board assemblies (PCBAs)
New ownership led by Dokter acquired Vergent Products, founded by Terry and Diana Precht, in 2019.
"I've known Terry and Diana for almost 20 years, and watched this company grow up," says Dokter, whose background is in electronics and manufacturing. "The bones of this company are amazing -- the infrastructure, paperless manufacturing, everything -- so it was kind of an easy step to acquire the company when Terry and Diana wanted to exit."
Historically rooted in the design and manufacturing of printed circuit board assemblies (PCBAs) for medical products, instrumentation, and industrial controls, Vergent Products has moved into aerospace and defense with AS9100 certification in 2019.
"We've been successful securing aerospace and defense companies," says Dokter. "They take a little while to find and build a relationship, but we're growing that segment most extensively."
Aerospace and defense specifications are "a small step up from doing medical," he adds. "Our ISO 13845, building on that to get to AS9100 was not a big step. Aerospace and defense just fits us so well."
The company's defect rate -- a mere 0.03 percent -- aligns with the need for precision. "We just don't build bad product or defective product," says Dokter. "High quality and on-time delivery is what is needed in that market space, and it's more profitable, it's lucrative, and it's a strong market here in Colorado."
"On-time delivery and zero defect -- that's really our driver," says Dokter. "Our quality is outstanding. The performance of the product that we make is outstanding."
Vergent Products Chief Sales Officer John Sage notes that military work typically involves a longer sales cycle, but pays off in the form of multiyear contracts.
"The consumer business is very short-lived," says Sage. "You start building a consumer product, and before you really ramp up and get into full production, they're ramping down and moving on to the next generation of that consumer product. That makes contract manufacturing more challenging, because the work and the amount of investment that goes into getting that product ramped up. So we love defense and aerospace, because a lot of the business we're pursuing is five-year, seven-year type of contracts."
Aerospace and defense now account for about 20 percent of sales, on par with medical as industrial work continues to drive about half of Vergent's total business.
"It's lower volumes certainly," says Sage. "Our business is a mid- to low-volume, high-mix manufacturing model. One very big consumer job can overrun the business, and we want to be diversified."
Adds Dokter: "We will do consumer products, but we don't go looking for it."
That openness dovetails into a turnkey approach that intersects with a broad customer base. "We are a total end-to-end service provider," says Dokter. "We do product design. We do sourcing of materials. We do printed circuit board assembly. We do box builds. We also offer 3PL services, so we'll ship the product for our customer."
Lately, that's involved some reengineering to mitigate issues with sourcing. "We use some artificial intelligence algorithms and tools that help us look at components," says Sage. "We can take a customer's bill of materials, their BOM, and we can run artificial intelligence supply chain on their BOM, and we can tell a client, 'This component you specified, it's already obsolete, it's already end of life, or it's going to go end of life in the next year or two. We ought to be looking at a different component now versus later as we get your product ramped up and into production.'"
Dokter bought the company with three other general partners: Sage, CFO Dan Kamrath, and COO Tracy Ireland. "The paperless manufacturing, all those systems and controls, that's all Tracy's brainchild," says Dokter.
Vergent's post-acquisition trajectory has been solid, if a bit bumpy. After a slowdown in 2020, sales have grown by about 15 to 20 percent in 2021, with a forecast for 25-plus percent growth in 2022.
That's catalyzed by a slate of products slowed by COVID-19 are finally coming to fruition in late 2021 and 2022. "We've got products and clients we've been working on pursuing for over a year and a half, in some cases two years," says Sage. "Now they're coming back to life, they want to get to market, they want to finish their product design."
Challenges: An unstable supply chain for electronics components. "We're only as fast as we can get components," says Sage. "Our supply chain team is really laser-focused on: 'How do we find available components?' 'How do we help clients that have specified components that might have a one-year lead time?' We're seeing that -- we're seeing components with a year of lead time."
And that often means a redesign, he adds. "You can't just one-for-one swap out a chip. That's a big deal to the performance of an electronic product, so it does require some reengineering when you're swapping out those kinds of components, and we can help clients with that reengineering effort."
Opportunities: A growing amount of aerospace and defense work, as well as sustained growth with medical and industrial customers, driven in large part by smart sensors and Internet of Things (IoT) products. "Medical remains strong, even in cyclical markets," says Sage. "The medical market is a great one to have in your portfolio, because it's not 100 percent 100 percent recession proof, but it certainly withstands down markets better than others."
Needs: Workforce, says Dokter, citing a need for 15 new employees in the first half of 2022, largely in production. "Finding those right people that are good for our team, that can help us, that we can help develop is our challenge," he says.
"It's also automation," he adds. "It's mainly around assembly. . . . We're looking to automate so we can be extremely competitive price-wise. With the tight labor market, it just makes sense."
Currently based in a 67,000-square-foot facility -- 50,000 of which are dedicated to manufacturing -- Vergent will likely relocate to the Forge Campus in the next three years. "Part of the interest in moving to Forge Campus is more space as we grow," says Dokter.