On the Ball

By Baselinemag  |  Posted 2003-06-01 Email Print this article Print
 
 
 
 
 
 
 

Cookie-cutter overhauls and a system of 'sister plants' let the $4 billion can-maker digest acquisitions fast.



PDF DownloadNot long ago, Ball Corp. Chief Executive R. David Hoover and his management team could only scratch their heads and wonder as tens of billions of dollars were lavished each year on technology startups—most of which had no profits and many of which had no revenue.

By contrast, Ball had spent a century making glass and metal containers, to reach its annual sales of $2 billion. It made a profit—and even paid stockholders a dividend. The company used homegrown applications on IBM Unix hardware to serve big-name customers such as Pepsi, Coke, Coors and Anheuser-Busch. But investors often overlooked them. Its stock was trading at $16 a share in April 2000, when the dot-com bubble burst. That was essentially the same price as in January 1998.

"What are we doing wrong?" Hoover would muse.

What a difference a couple of years makes. The company no longer makes home canning jars and lids, the products that made its brand famous with jelly and jam producers across North America. It also did away with products far from its comfort zone, such as video display terminals. Along the way, the company has overhauled itself to emerge as the largest maker of beverage and food cans in the world, resulting in the company using its factories more efficiently. Investors have pushed shares past $55 each.

"They [investors] started looking at us," Hoover says, "…and said, 'what do these guys do? They make something, and sell it and make money doing it? What a novel idea!'"

The efforts to bring focus to the business have not been without a cost. Creaking information systems have been taxed to keep up with the change from relatively low-volume glass container production to high-volume, highly efficient can manufacturing, and from tying together a collection of data systems inherited from a series of relatively rapid acquisitions that extended its reach overseas.

Nonetheless, the company boosted its annual revenue from $2.9 billion in 1998 to $3.9 billion last year, and turned a break-even operation in 2001 to one generating $320 million of earnings before interest and taxes. Its moves include:

  • Acquiring Reynolds Metals' food and beverage can manufacturing business in 1998.
  • Closing four underused can plants in 1999 and 2000.
  • Forming a joint venture with ConAgra Grocery Products to make metal food containers in 2001.
  • Creating, also that year, a joint venture with Coors Brewing to operate its can factories.
  • Finalizing, early this year, its $890 million acquisition of German can manufacturer Schmalbach-Lubeca AG.

    "We realized that in order to continue on with business, we were going to have to acquire, or we were going to be acquired," Hoover says.

    Now the former family-owned business focuses exclusively on making aluminum and metal cans.

    The reshaping of its product lineup and Ball's acquisitions have produced blood, sweat and tears for its information systems managers. The consolidation of its acquisitions as well as the growth of its manufacturing and distribution operations must be handled with a technology budget that amounts to around $30 million a year—around six-tenths of 1% of expected sales of $5 billion this year.

    That means grinding out any advances in the systems it employs to track can manufacturing and delivery.

    "This is a blue-collar company." says Tom Andrews, senior vice president of information services. "People have a get-it-done kind of attitude. We may not use the highest percentages that we would like to have. But when we implement technology, we are almost always successful at getting it implemented."

    Most of the computing systems in use at Ball are "older, legacy systems" from IBM, says Andrews.

    A big plus, he says, is that Ball retains many longtime employees, who know those systems well, and make them work at top efficiency.

    In some cases, that dated technology now seems almost trendy. Its factories and warehouses use wireless systems— radio-frequency-equipped forklifts to find and move pallets of products. Those units read and transmit bar-coded information from license plates on pallets, which identify the customer, automatically update bills of lading and inventory, generate all paperwork, and in some cases send a shipment notice to customers telling them that "the product will arrive in 20 minutes," Andrews says.

    That makes them reliable—but leaves Ball with no inherent advantage over rival can makers. "There isn't a lot that is new about those systems," Andrews says.

    On the other hand, Ball had to adapt and integrate systems at acquired factories if it was to successfully pursue its current strategy of signing signature clients and establishing joint ventures with big can customers such as ConAgra.

    For example, in 1999 Ball acquired 14 manufacturing plants from Reynolds Can Co. Ball's information systems managers wanted to convert Reynolds' IBM mainframe—which used an internally produced accounting application called "Walker"—to its own IBM software and hardware. But Ball was loath to reconfigure the data and business operations immediately, for fear of shutting down plant operations to do so.



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