Business Spotlight: Recharge of an Industry
Electronics remanufacturer Ciona Technologies fights device obsolescence
Ciona Technologies LLC isn’t an old-school manufacturing shop.
Where bulky, greasy equipment once sat – the facility was, after all, an automotive brake distribution center – there are racks of electric circuit boards ready for repair and computer workstations manned by people in blue coats.
The floor is spick and span, covered in electro-diffusing paint, and expensive server-like testing machines hum in the aisles.
This 50-50 joint venture between SRC Holdings Corp. and John Deere Shared Services is the blueprint for advanced manufacturing. The products are clean and high-tech. But don’t be fooled, they’re made rugged to last in the field.
Ciona Technologies formed four years ago to capitalize on an underserved niche market: remanufactured electronics in agriculture, construction and over-the-road trucking.
The product that kicked it off was a late 1980s vintage Bosch engine controller that reportedly had a high rate of failure after years of high stress. Only problem, that little black box for farming equipment was 15 years removed from production.
“It’s the brain of the engine,” says Chris Montgomery, Ciona’s operations manager. “If we don’t produce it, that tractor’s done.”
Ciona still remanufacturers that Bosch engine controller today – over 100 units a year – but the precision agriculture segment has become its core.
“The challenge for the farmer or the customer is he’s got a $30,000 asset that he’s just turned into a lawn ornament if he can’t find a solution for that engine controller,” says Ciona General Manager Michael Finan, who was the company’s fourth hire at startup. “The advantage of having an electronics remanufacturer is primarily about obsolescence.”
Ciona first occupied less than a quarter of the 33,000-square-foot building at 3001 E. Division St. NewStream Enterprises, another SRC Holdings subsidiary, was the main tenant.
“We’ve been slowly converting it to a high-tech manufacturing facility,” Montgomery says.
In December, the company built a clean room and an ice-blast area within the building.
Engine controller repairs represent 75 percent of production, and other remanufactured components include GPS receivers, sensory devices and intelligent displays.
Last year, Ciona shipped out roughly 12,000 units for $10 million in forecasted sales. Officials declined to disclose actual sales.
Orders from Deere represent 60 percent of production, and other original equipment manufacturer customers are CNH and Navistar. Ciona managers emphasize product diversity for the private-label parts the team rebuilds.
“We don’t ship anything out of this building with a Ciona label on it,” Finan says.
SRC and Deere
Under the joint venture structure, Ciona sits in between SRC and Deere.
SRC is the operating partner and oversees Ciona management. Deere manages the core parts – the term for products at the end of their lives – as well as sales and marketing of the remanufactured Deere units.
Finan reports directly to SRC Executive Vice President Dick Moger and provides weekly financials.
“We’re locked in to their corporate staff meetings,” Finan says.
True to form with SRC – where CEO Jack Stack’s open-book management style was birthed – Ciona staff members hold their own financial huddles on Tuesdays to make monthly projections. The weekly operating metrics reported by managers are on a white board for all to see on the shop floor.
January projections started out with a six-figure loss and finalized with a $30,000 loss.
“We share them once a week, whether we like them or not – the good, bad or ugly. This month, we didn’t make money,” Finan says, noting Ciona’s dependence on agriculture typically creates a slow first quarter.
Come harvest season, though, business picks up. Last year, Ciona realized a 7-8 percent profit margin, below its annual target of 12-13 percent.
With 2015 revenue projected to exceed $12 million, the company’s five-year strategy through 2018 is $25 million in annual revenue with a 10 percent return.
Ciona is not SRC’s first venture with Deere. The two companies partnered on ReGen Technologies for 10 years until John Deere Co. bought it out in 2008.
With Deere, Ciona gets built-in product volumes. Finan says Deere is able to serve longtime customers with product improvements, while the joint venture navigates the startup and engineering activities.
“The nice thing about the Deere product is they own all their intellectual property, so it’s much easier and faster to take one of their products to market versus another company that might have outsourced some of that design work to a third party,” says Montgomery, who last year led the team to quality management certification by the International Organization for Standardization. “We tried to go where the money’s at, get a good, stable business. Now, we’re focused on diversification.”
Montgomery says last year Ciona launched 26 products, including farm-field moisture sensors and a tractor GPS receiver. The golden-domed Deere StarFire 300 maps out accurate routes for seeding fields. Ciona invested $250,000 to bring on that product line.
“It was a third of our capital plan,” Finan says. “To test those parts, you have to talk to the satellites. Those things are so sophisticated, you tip it an inch or two, it knows.”
Products on the radar include electromechanical actuators, touch panels and joystick controls.
“We’re not just a garage shop,” Montgomery says. “We’ve got to continuously keep products in the pipeline, so we can keep that revenue coming in.”