By Kenny Berkowitz
When Bethlehem Steel filed for bankruptcy in 2001, it felt like the end of an era. At its peak, the company had 300,000 employees, making it the second largest steel producer in the United States, and when it closed, people started asking whether American manufacturing would survive the new century. But just down the road from the plant’s old blast furnaces, there’s a much smaller factory that might have the answer.
It’s called Follett Ice, and for the past 20 years, it’s been run by Steve Follett ’78, who took over the business in 1994 from his father, Don Follett ’52, who inherited it from his father, Roy Follett, back in 1954. With 320 workers at the facility outside Easton, Pennsylvania, the company is never going to rival the old Bethlehem Steel, and it’s not supposed to. It’s a family business, privately held by the Folletts and their employees, run with a motto that promises “innovative solutions inspired by ice,” a strong sense of core values, and an impressive record of growth.
“Over the last four years, the business has doubled its revenue, and more than doubled its profits,” says Steve, CEO and chairman, who majored in operations research and industrial engineering. “Last year, our revenue broke the hundred million dollar barrier for the first time ever, broke it by a fair amount. In each of the past four years, we developed a growth plan that was pretty aggressive, and succeeded in meeting our goals. This year we’re looking at double-digit growth, and we’re going to keep being lean, scrappy, and innovative.”
In the years since Steve arrived, Follett Ice has greatly expanded its line, which began in 1948 with a single product: storage bins for York ice machines. Roy Follett was an optimist, a natural entrepreneur, and after coming back from World War II, he wanted to start a company of his own. He opted to go with the latest technology, automatic ice, which was introduced in 1945 as an alternative to the iceman and the delivery truck.
To concentrate on sales, Roy subcontracted the manufacturing to some sheet metal shops in New York City, and within two years, he was doing well enough to buy out his partners. But his health hadn’t been good since landing with the Navy at Okinawa, and in 1954, Roy died suddenly, leaving the business to his only child.
“My father and I were very close, but we had very different personalities, and we could not have worked together,” says Don, who’d graduated two years earlier with a bachelor’s in mechanical and industrial engineering . “We knew that, so it wasn’t even a question in our minds. Still, a lot of my father rubbed off on me. I knew I wanted my own business some day, that much was clear. I was working for Reliance Electric, and things were going along quite well, but here was an opportunity to operate independently. I found that rather exciting.”
For the next two years, Don kept up the sales business, but what he really wanted was to make the leap into manufacturing. So he called Bob Conti ’52, who’d been a friend since their fifth-year engineering project, when they built an electromagnetic fluid metal pump to cool nuclear power plants. (“The faculty members were really, really impressed we were tackling this project,” says Don. “We were getting all kinds of notoriety, and we did a beautiful report, built the pump, and both got A’s. Well, guess what? The pump didn’t work.”)
Conti signed on, and after several false starts, they opened a 20,000 square-foot factory in Phillipsburg, New Jersey, and started producing the ice bins themselves. Innovations followed, and ten years later, they moved to a space three times larger in Easton, where they diversified into other products to complement the York line. There was a freestanding ice and water dispenser, vending machines, and a countertop beverage dispenser, and when York decided to exit the ice market, Don and Bob bought the rights to the company’s diced ice technology.
There was nothing else like it on the market, a machine that could make ice nuggets in a continuous process, then transport them to a dispenser in another room—usually office kitchens or fast-food restaurants, which were rapidly becoming a nationwide phenomenon. But there was one problem: The technology didn’t always work.
“It was a very, very interesting concept, but the machines themselves were very unreliable,” says Steve, who joined Follett Ice in 1987, ten years after the company began manufacturing its own version of the York machine. “The machines worked, but not well, which meant the service aspect of our business got really good, because it needed to. Over a number of years, there was a lot of redesign on the ice machine, with some new product development and pretty radical changes to the designs. And that’s when the growth really started happening.”
Like his father, in all his time at Cornell, Steve had never planned to run the company. After receiving his bachelor’s, Steve spent two years at The Trane Company, one of the world’s largest makers of air-conditioning systems, then went back to school for an MBA at Northwestern University. Next, he worked five years at IBM, where he was involved with project management to launch new hard disk drives and a new product line of mid range computers before deciding he’d prefer the challenge of expanding Follett Ice.
“We talked about it, and I gave him all the reasons why I didn’t think it was a good idea,” says Don, who has remained a member of the board of directors. “He said, ‘Now, wait a minute. You had a chance at this. Why shouldn’t I get a chance?’ Well, the timing was right, because Bob Conti had just gotten his Ph.D. and was getting ready to go into teaching. And Steve had the intellectual tools and experience to understudy for Bob, who was the operations person, while I did the sales and marketing. I realized it was the perfect spot for Steve to step in and take over.”
For the next seven years, until Don retired as CEO in 1994, Steve took charge of sales, marketing, and financial planning, taking what he calls “a $10 million company with great potential” and building it into an industry leader. Under Steve’s leadership, Follett Ice opened a manufacturing plant in Gdansk, Poland, which caters to growing markets in Europe, and the Middle East, and made significant inroads in Australia, Canada, Hong Kong, Latin America, Mexico, and Singapore. It expanded its market leading position in healthcare markets for ice and water dispensers by launching a line of medical-grade refrigerators and freezers that account for much of the company’s recent revenue growth, and it’s continually re-envisioned its food service equipment, which now covers ice machines, ice dispensers, and ice transport systems.
To make it possible, Steve has expanded the Easton plant to 175,000 square feet, increased the number of engineers on staff, placed a new emphasis on modular design, and dramatically reduced inventory costs. Most important of all, he continues to install many aspects of the Toyota production system, which emphasizes continual improvement and lean manufacturing, while strengthening a culture of service to customers, teamwork, personal accountability, and respect for others.
“The Toyota system permits Follett Ice to keep costs competitive with offshore manufacturing and maintain a high level of quality and a superiority in product design,” says Peter Jackson, Cornell professor and director of graduate studies, who visits the factory each year with his ORIE 5100 class. “Their product development cycle, the engineering that goes into their products, and the process they go through in bringing new products to the marketplace are all important parts of their success. Their designs are fundamentally different from those of their competitors, and they have a unique ability to understand customer needs, design new products to fit those needs, and deliver them with high added value.”
To Steve, that added value is the key to keeping the company competitive with overseas producers, and one of the main reasons why he remains optimistic about the future of American manufacturing. “Here in the U.S., none of us manufacturers will ever be low-cost producers,” he says. “So we work very hard to be high-value producers, which means we have to be innovative, both in our products and in our services. Our best opportunity to succeed is when we have innovation infused throughout every piece of the system, from design to manufacture to ordering to delivery to service. There’s been some really positive news about manufacturing in the U.S., with a trend toward leanness and taking the waste out of operations, and we’re proud to be part of it.”
According to the Department of Commerce, manufacturers contributed $2.14 trillion in value-added output during the fourth quarter of 2013, rising 3.1 percent over the year before. That’s a long way from $1.69 trillion in the second quarter of 2009, when the Great Recession touched bottom, and that’s good news for both Steve and Don, who describes the current state of American manufacturing as “strong and competitive.” Now retired, he divides his year between Pennsylvania and Florida, spends as much as he can with his grandchildren, and remains deeply connected to Cornell, serving as a life member on the University Council along with his wife, Mibs Martin Follett ’51.
Looking back, father and son credit the college—and each other—for their company’s success. “We both agree that the Cornell education we received was absolutely the best anyone could have received for doing what we did,” says Don. “We can truthfully say that we used all of it in starting and building a manufacturing business from scratch.”
“When I came on board, the business was small, but it had a culture of customer service that is still very, very evident today,” says Steve, who currently serves on the board of the Society for Hospitality and Foodservice Management and is a former president of the North American Association of Food Equipment Manufacturers. “There was a strong emphasis on service, and as we’ve grown, we’ve worked very hard to maintain that piece. You can differentiate with products, and you can differentiate with services—but you can also differentiate with culture, which is why our core values are so important to us. That’s one of the biggest lessons I learned from my father.”