Welcome to Season 12 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Tony Martin, president of Martin’s Famous Pastry Shoppe. They’re exploring how this company has grown from a family-owned brand into a national icon. Sponsored by AMF Bakery Systems.

In the third episode, we hear Tony’s perspectives on scaling the business through acquisitions and facility expansions, and how rapid technology advances have impacted equipment and operational needs.

Learn more about this season here, and tune into Troubleshooting Innovation on Apple or Spotify.

Joanie Spencer: Hi Tony, thanks for joining me again this week.

Tony Martin: It’s good to be here.

Spencer: So, we’ve had a couple of really good discussions, and I’ve learned a lot. Last week, we talked a lot about product development for this amazing, unique product that you sell in a traditional market.

This week, I want to talk about the operational side of that, especially in terms of how Martin’s has grown over the years. So, I thought the best starting point would be to revisit that evolution of growth for Martin’s, but this time I want to talk about it more from your perspective.

So, first question: What was your role in the company when the brand started really taking off and distribution began to expand?

Martin: Okay, sure. I would say our product really took off in the late ’80s. I was still pretty young — I was still in high school — and I saw the business grow and participate in new cities each year. We tried to grow in connected cities; it’s kind of hard to leapfrog. We’re in the northeast and it’s pretty condensed, city to city, so we started in Allentown, went to Philadelphia, New Jersey, New York. By the mid-’90s we were north to, probably, the Boston-area. We were headed south at the same time, but we didn’t go west very much. Primarily because in this country, people move north and south, they don’t move east and west. So, we found it was harder to introduce our product into areas where there weren’t at least some people who were familiar with us. So, we basically went north and south. We went south all the way to Norfolk, and then we just kind of grew in those areas for many years.

When I joined the company in ’95, we were starting to think about how we could strategically serve our northeast market who happen to live in Florida. So, one of the things that I actually did was … I did a couple of MBA programs at that point and I was starting to figure out if we could leverage … again, we were mostly a roll producer; at that time, we didn’t have any bread … How could we leverage our extra capacity in the wintertime that we were using almost too much in the summertime? And we thought, “Well, let’s get a market in Florida to help offset that.”

 About that time, we had some distributors who we worked with in New York who had moved to Florida, and they kind of started asking questions like, “Hey, your product’s not down here. We think it would do well, any considerations moving to Florida?” So, we worked on that for several years, and I’d say by ’98 or ’99 we had started thinking about transporting it down there. So, we did that, and we did for many years, until about 2007 when we built a facility in Georgia to basically serve that Florida market.

Again, because the name recognition was pretty strong down there, that market grew pretty quickly. That was one of the things that really helped us grow down there was name recognition. So we learned from that going east and west was going to be a little tougher. I can’t remember what year it was, probably in 2014 we started serving Chicago, and that was a large market for us, but that’s been a little bit more tough, because, again, the name recognition is not there. People don’t tend to move east and west.

Spencer: That’s really interesting — the power of name recognition. You know, I’ve also talked to some bakers who are more mid-size, who said that getting in with the right distributor was really the hinge that turned their business towards growth. Getting with that distributor who said, “Hey, you can sell this in Florida,” … was that a big moment for you?

Martin: Yeah, absolutely. We got with a strong distributor in South Florida who actually was a direct distributor of ours when he lived on Long Island himself. He owned a few routes. So, when he moved to Florida, he started another business down there and was really looking to provide our product to the big stores down there, like Publix and Winn-Dixie and all those. So, he was excited when we said yes, and again, no overnight success. It took him several years in order to grow that business. You typically don’t get into the largest customer day one. You always have to start with Customer B and C, perform well in there, and then Customer A goes, “Well, I guess I’ll take you, too.”

We did everything word of mouth, and that’s basically how we’ve always grown. We didn’t necessarily go with a mass marketing campaign like some maybe larger manufacturers do. So, again, we have to kind of earn our way. In some ways, that’s the best way, because they’re the same customers who keep you in the store. If you buy your way in, you can go out pretty quick as well. We survive off customer demand, and we know that. It’s all about the bun, and it’s the quality that keeps you in.

Spencer: Okay, so then, how did you all know it was time to expand operationally? Like, how did you know, aside from the geography and the growth in that geography, how did you know, “Okay, we’re ready to invest in opening the bakery in Georgia?”

Martin: So, each time we’ve had an opportunity to expand, we have outstripped our capacity. And again, we’re a bun producer, so there’s three or four major holidays in the summertime that were really difficult for us to provide enough product for the customer. You know, you do the typical manufacturing, you back schedule. So, we would make ahead a few days, try to hold on to that product and then ship it out all at one time.

At that point, we weren’t freezing products. That wasn’t even an option. So, as we hit those demand capacity issues, we’d plan a year ahead, because it takes about a year, a year and a half, to put a new building up or add another line. We had to do it strategically and, inevitably, every time we’d add a line, we’d have a downturn in sales, or, you’d have an Atkins or something like that hit the market and really hurt demand for a while. And of course, you scratch your head thinking, “Did you do the right thing?” In the end, it was always good because it gave us an opportunity to breathe a little bit, do a little more training.

So, what happened in the mid-2000s … we were shipping a lot down to Florida. We looked at the cost of transportation and felt, “Okay, right now is the right time to do it. We have to either divest of that business down there, or take on the debt in order to basically put a new plant in.” And as an entrepreneurial family, you bet the farm every once in a while. You hope to get to some point that that’s not the case, but it’s risk and reward. So, if you risk it, and it works out, great, but the opposite can happen as well.

We always try to make the right decisions, and we pray hard about it and figure out what we think is the best, and then use the best wisdom available.

Spencer: When you say that it’s either divest or go all in … I mean, talk about a hard decision that you cannot take lightly.

Martin: Yeah, family businesses make that determination often, especially if you’re growing. If you’ve been in business for a long time and you have pretty flat growth, perhaps you can pay as you go, but when you’re growing quickly, you know you get in the cash crunch because you need to grow quickly. You have to buy new equipment, new machinery, new buildings and invest in the future. So, it’s constantly reinvesting into the business.

Spencer: Okay, I need to go back, if we’re doing this chronologically. I want to talk about the Valley Pride acquisition. That happened in the ’90s, and that’s what really brought you into the potato bread market, as opposed to rolls, right?

Martin: That’s correct. We did not have any bread at all from the mid-’80s up until about ’95. Again, we were a roll producer, and we saw what had happened in the market when there was a bread producer producing what they called potato bread. It was different than ours. So, we felt that we needed to get to the market first.

We found a local company, a local family business, that was looking to divest. It was called Valley Pride, which was about 15 miles up the road in Shippensburg, PA. We bought them and quickly started making bread at that facility. We shipped it to Chambersburg, put it on our trucks, and then we distributed it up and down through our current market. That went very well; the potato bread was very well accepted.

It took a number of years, but it wasn’t long until it was the number one bread single SKU in New York City. So that was a combination of … We knew that that product was going to be a winner, and then we stayed with that product alone for quite some time. Then as we needed some diversity and to get a little bit more shelf space, we added whole wheat bread. My dad wanted a whole wheat product that his grandkids would eat. It was a health benefit with the fiber and all that. So, our whole wheat is actually what we call a ‘soft whole wheat.’ We were one of the first ones to use white whole wheat. It was a product that … it’s actually what I eat every day for breakfast, because it’s healthier and it tastes good. Then later on, just a few years ago, we added butter bread to our mix.

Spencer: You’re making me hungry!

So, I’m trying to think about this operationally. When you had the Valley Pride acquisition, did you take on a facility, or did you just start producing that bread in your current facility?

Martin: At the time, our facility did not have room to add an additional line, nor did we know if it was going to really take off or not. So, we purchased their facility, we allowed them to finish their operations, and then we started basically using that facility, I’d say, for three-fourths of the day, and then they eventually shut down completely on their side over a couple months. So, we produced there for, I don’t know how many years we were there, probably five years.

Spencer: Were there any sort of operational lessons that you learned from that acquisition that you carried with you when you opened the facility in Georgia?

Martin: Well, I would say we learned … we were kind of ‘cookie cuttering’ each line from a machine standpoint, whatever our folks were familiar with, from an oven to baggers to the conveyor lines to the mixers … We basically took what was working and snapshotted it down and laid it in. We found actually that getting all the software … because we were highly automated … so all of our PLCs talked with one another, and that allowed us to basically bring it up much faster. We originally thought it was going to take about two and a half years to get our Valdosta facility up and running; we were able to do that in just a little over a year. It was really quick, faster than most of our engineers said we could do it, but we knew we needed to do it quickly.

Spencer: Well, yeah, especially when you’re producing rolls and buns, and there’s a season. It’s ‘bun season.’ Bun season stops for no one!

Martin: That’s true. With big holiday weekends, you can’t miss the boat. If you miss it today, you don’t make it up tomorrow,

Spencer: Right? So, I’ve kind of bounced around on the timeline, but I want to come back to present day. You’re growing again, and you’ve got this major expansion happening in Chambersburg. Congratulations on that.

Martin: Thank you.

Spencer: So as this expansion has gotten underway, how did you apply the lessons that you learned in Georgia? Because you expanded that one, so you’ve been through growth in that one. What did you learn from opening that facility and expanding that facility that you’re applying to the project you’re in now?

Martin: I would hope to say that, you know, we learned from our mistakes. It had been probably seven or eight years since we had had a gap in a new line. So, in that amount of time, most of our current vendors and equipment had lapsed. In other words, some of those companies had gone out of business. Some had decided to retire. So, we had a lot less options to do what we had done prior.

And technology has changed a lot. We had moved from one PLC vendor to a new PLC vendor. So, when we opened up in 2016 or 2017 in Valdosta, we made a lot of mistakes. The production line really struggled for a while, and we’re getting through all those issues now. But what we did when we came to Chambersburg, we said, lessons learned. So, whatever we did right down there, repeat. Whatever we need to do better, fix. And so that’s what our folks have done. And we were able to bring this one up, we started producing about a month ago, and our yields are much better than any of our other lines at this point, so we’re starting to add more production shifts to it, and it’s making more items and things like that.

So again, lessons learned. We’ve strategically corrected those errors, and now we’re going to repeat what we’ve learned and what’s done well and go back to the other line and fix it so that it also runs well.

Spencer: Okay, so it’s kind of a continuous cycle. I mean, I guess that’s why they call it continuous improvement, right?

Martin: Correct. Yeah, iterative. I would say we do a lot of iterative things here. You put it in place to see how it works. It doesn’t work, you change it, you do it again and do it again until you eventually, hopefully, get to the point where you’re satisfied with the yield and, of course, the throughput.

Spencer: So, equipment is built to last decades sometimes, and, like you said, the equipment sometimes will outlast the company that manufactured it. And now we have rapid technological advances. Those two don’t always jive together: Equipment that lasts, but technology that is outpacing it. How do you find that balance? And then on top of that, how have those changes impacted your equipment and operational needs today versus five or 10 years ago?

Martin: Yeah, historically, back in the day when you had contacts and other types of big switches to make machines run, things were on pulleys, and they were on a certain speed. Then as technology has advanced, and you put a PLC in there, which is smart, you put servo drives so that you have a lot more variability where you can change your speeds and all that. It all works well until the technology sunsets.

We’ve been facing that today with some of our older equipment. When we put the original equipment in, we had big contacts, and all that worked well. And then we put a Modicon PLC system in that is now aged out and all that equipment is not replaceable. So, now we’re in the process of upgrading all the logic computers that run the machine to an Allen-Bradley version.

So, it probably takes seven or eight years, but at that point, you really have to strongly think about upgrading your technology stack on your equipment, or it becomes very difficult to get spare equipment. So, you end up looking on eBay and wherever you can find the different pieces of hardware and software and control boards to make things work. You know, obviously we know the rapid change is getting even quicker. We ran equipment that was made in the ’70s without any problem up into the ’90s, but now equipment that you installed in the early 2000s you really have to be very conscious of keeping spare equipment available, because if it goes out, you don’t call the manufacturer, because he may not be in business; they may not be able to provide those pieces of hardware.

So yeah, it’s a very interesting process that we are living in. Manufacturers are going to have to face that over the next few years: How are you going to deal with aging equipment? The other thing we learned was we highly automated and made everything talk together, which sounds great on paper, but we found that, from a networking standpoint and all that, we may have made things too interconnected, and it was causing an issue, so we’ve decoupled some of the of the intelligence. It’s still very automated, and we can extract all the data and the set points through our manufacturing PLC systems, but we’re not quite as reliant on each other as they originally were.

Spencer: What are some of those drawbacks of over-communication between machines?

Martin: Well, it’s an odd thing. If you have a failure in one area, it could potentially take down the whole line. That’s what we’ve found. If you have a, let’s say it’s a network issue or you have a network glitch that we experience on the internet, and you can’t get on or whatever, in the PLC world on the floor, there could be intercommunication requirements that, “Hey, I can’t work unless I know I hear from you, Mr. PLC number two.” And it can’t talk. So, when it can’t talk, it doesn’t start.

In this facility in Chambersburg, we’re highly automated on the distribution side. We have an ASRS (advanced storage and retrieval system) at the pallet level, and we have a pick system that can get down to the eaches of each tray. It’s a fantastic system. Our order fulfillment has never been more accurate with less labor and issues with repetitive motion, you know, concerns with their bodies. It’s been a great addition, except when that automation goes down, and then we’ve never had more late departures, because maybe you lost 50% of your throughput. Again, it’s a two-edged sword. The technology has been good, but we’ve learned a lot through the process.

Spencer: I, too, am a product of the ’80s, and so everything that you’re saying just makes me think of that movie War Games.

Martin: There’s a lot of that here. Hopefully we’re not at war, but sometimes, you know, we’re trying to figure out how to get stuff back up and running quickly, and it causes a lot of tension to your workforce, and so you have to be cognizant of cut off times and how you do things. One of our benefits to our distribution network is that we can take last-minute order changes right up until that truck is ready to leave, and we want to maintain that flexibility.

Spencer: Yeah, that’s awesome, and that’s really just an important insight to understand what the drawbacks are, because it does make life easier, but it doesn’t do life for you. There’s still an element of responsibility that the operation has, from a human being level and a strategic level to make sure that everything’s working properly.

So, the Valdosta expansion happened pre-COVID and pre-supply chain disruption. You said, “Allen-Bradley,” and I was a little triggered. How did major events like COVID and the supply chain disruption impact your expansion strategy at Chambersburg? Because it sounds like the timing probably might not have been ideal, at least from a strategic standpoint.

Martin: Yeah, the COVID, you know, phenomenon … I think all manufacturers were in an unknown state of what was going to happen. From the time that the schools were called off and you weren’t supposed to send anybody to work, everybody was supposed to stay home. And yet we knew, as an industry, frankly, that people still needed to eat. How were those two things going to be compatible with one another? So, we had enough raw materials, and, you know, bags, things like that, available for us, to hold us through the first couple of weeks. And that was key, because if you were just-in-time, you were just out of business, because at that point, you weren’t going to get resupplied.

So, we worked hard with our suppliers in order to make sure that, “What are you guys going to do in supply chain? Are you going to have the bags available?” And we worked really hard with them, because they had a couple weeks maybe on hand of our product. In some cases, we actually sent our trucks up to their manufacturing facilities to pick it up, because they weren’t able to get truck deliveries. So yeah, everyone worked very hard, because all of a sudden, no one was eating out. Everyone was buying from the grocery store. Every grocery store was wiped out. So, the minute you decided what to put in there, it was literally gone in a few hours.

These would be things that we will tell our great-grandchildren, that you know you couldn’t believe the things that we all lived through. But it was good for our industry, frankly, because I think we were able to reintroduce a product that I think some people had forgotten about: Bread.

Spencer: True.

Martin: It was the staple that they felt comfortable with. It was comfort food at that point, too. I think that a lot of good, frankly, for our industry, because people, for the first time in a long time, I won’t say, “were forced to eat it,” because there really wasn’t anything to eat, and we were able to produce enough extra to maybe pick up some new customers. That was one of the things that we weren’t sure about.

Everybody in the industry, you know … is tapped out most of the time. You know, 95 percent capacity, there’s not a lot of room for growth where, because we’re a roll producer, in the summertime, we’re at those numbers, but in the wintertime, we weren’t. So, all of a sudden, we had extra capacity all year round, and we were able to provide something that was available to the customer that wasn’t before and pick up new customers. So, it was good. It was a good thing for us.

Spencer: So then after that, we went through a couple of years, really, of the supply chain disruption. I don’t think we’re completely out of the woods there, as far as lead times as well. So, when you were project planning for the Chambersburg expansion, where did that sit in your mindset? Did you plan for, “Okay, if we have another national crisis, we need to have our lines able to do this”? And did it impact your project planning as far as lead times and when you would be able to start up?

Martin: I’m not sure we would have changed our capacity numbers depending on that, but I would say for sure it affected our weeks-on-hand of raw materials, which then obviously translates into more space. So we put more racking up, we store more available on hand quickly, so that if there is a pinch in a couple weeks and you’re not going to get a load of something, you still have enough to ride through. So we’re fortunate to have enough local extra warehouse capacity in the area that if … and that’s what we did do, we brought some extra different raw ingredients in, put them in warehouse so that we had more weeks on hand.

 What some of the suppliers were doing is they would give one of their key customers a run, and then they would delay you, and then they would give you … and so you had to have enough extra to ride through a couple bumps. And that’s what we did. And we’re still doing it, right? I can’t think of any examples off the top of my head right now, but there were some odd and high-tech pieces where, you know, a particular cable, which was made of all places like Ukraine, and then during the war, that caused, obviously, a supply chain issue.

Spencer: Yeah, and you know in 20 — I would say 2021, 2022 — every conversation revolved around, “Well, if we can’t get this one piece of technology, then all this is is a big metal box, and I can’t do anything with it.”

Martin: Yeah, one of the things I say is, during the COVID phenomenon, one of the things that we were struggling with was actually competing with the government. And what I mean by that is for workers. Because I think the government was trying to do what was right for the people, but with all the incentives to stay home and not work, it really changed the dynamics of available workforce.

Now it’s been tough, and I think … you talk about a supply chain issue; it’s still a supply chain issue, but it’s the human aspect of it. People have not returned to where they were prior. In some cases, maybe it’s better for society, but it’s still something we have to deal with as manufacturers is trying to be able to find enough resources who want to work our type of jobs and with the schedules that we typically have, it’s just been a challenge. It’s gotten better the last six to nine months, but prior to that, for a couple years, it was really, really tight.

Spencer: Would you say being able to alleviate the lack of workforce, is that a big priority for you when you’re thinking about who you’re choosing for, say, an equipment supplier partner?

Martin: It obviously goes through your mind of, “How can you do more with the same?” And so yeah, I mean, through automation, we haven’t added AGVs and things like that to our strategy, but we’re thinking about it because we’re trying to figure out how can we continue to expand without the pressure of trying to find enough extra workforce to do what needs to be done?

So, yeah, it’s definitely something that is a consideration of automation. We have automatic palletizers and things like that. So, you coined it well. It’s trying to find the right manufacturer who will stand behind their equipment and automate it and then support it.

Spencer: Yeah. I mean, we talked in that first episode that you’re really an early adopter, and you’ve leaned into technology really well. So, when you think about this most recent expansion in Chambersburg and thinking about the future, what are your goals for this expansion? How do you see more capacity supporting your current demand, but also taking Martin’s into the future?

Martin: Well, we’re obviously trying to solidify what equipment is working well for us, and then we will use that, hopefully, in a future expansion and be able to, again, cookie cutter, take your programs and things like that that are been written and working well, so that you can expedite an expansion and not have to deal with software rewrites and new opportunities that end up being very time consuming to troubleshoot.

So again, I think we have plans in the future, if we outstrip our capacity, what we’re going to do next, and then we have one plan for after that. And then if our Texas area is doing pretty well, at some point, we’ll maybe have a Texas plant. So we’re just trying to prepare ourselves by having the right people, getting enough extra people trained, so that if we’re going to do an expansion, there’s always some folks who want to move up in management, take on a new opportunity and plant. Those are the kind of things we’re strategically planning for in the future, but only God knows what happens in the future.

Spencer: Right. If 2020 taught us anything, it taught us that, right?

Martin: That’s for sure.

Spencer: Well, you know, you read my mind. I was going to ask you if you could predict that you might have a third facility. So, I guess it’s a “never say never” kind of scenario, right?

Martin: Correct. We never say never. We had one slated on paper in the future, but frankly, with the efficiencies that we’ve gained with our current plant and things like that, we kind of took it off right now. But that doesn’t mean it’s not going to come back if, if you get rapid growth in a particular area that you want to support.

Spencer: All right. Cool. Well, Tony, that’s everything for this week, and talking about operational considerations that come with growth. And this was such a cool conversation. Thank you so much for walking me through what this trajectory looked like for Martin’s from inside the facilities. It was really fun. I appreciate it.

Martin: Thank you. Thanks for asking good questions.

Spencer: Thank you. So next week we are going to have — I think it’s going to be a really interesting one — and that is how to build a corporate culture that lasts through generations. So I’m excited for next week, but once again, thanks for your time this week, Tony.

Martin: You’re very welcome. Thank you.