Northern Tool + Equipment isn’t your typical retailer. While the business has more than 130 retail locations throughout the U.S. selling power tools and light industrial equipment, Northern Tool is also a manufacturer, and it recently made significant changes to reshore manufacturing operations.
Northern Tool's shelves are filled with more than 100,000 tools from notable brands, like Stihl, Milwaukee Tool and DeWalt, but the company also designs, builds and manufactures its own in-house line of products and equipment.
For years, Northern Tool has focused on serving tradespeople and premium-level do-it-yourselfers who want high-quality equipment, but the company has had a few quality escapes that John Bakke, the company’s executive vice president, said they weren’t happy with. “As cost pressures come in, getting our attention back to [quality] as our core differentiator really matters to our customer,” Bakke said.
Investing in U.S. Manufacturing
Northern Tool has been manufacturing in Minnesota since 1991, but it had humble beginnings. The company was founded by Don Kotula, who started by selling DIY plans to people who wanted to build their own log splitter. He ran the business out of his garage in Egan, Minnesota. His customers started asking for more than the plans; they wanted to know where they could buy the components. So, he started selling components. After a while, his customers started saying, "Why don't you just sell me a log splitter?"
Kotula found a local fabricator, and they started making log splitters. As demand surged, his partner couldn't keep up, so he bought them out and transformed the company into Northern Manufacturing—and the company has been growing ever since.
About a year ago, Northern Tool made a big decision—the company was going to reshore manufacturing from Monterrey, Mexico, to its U.S. hub in Faribault, Minnesota. Bakke said the company left Mexico to concentrate operations in Minnesota. “It gives us more control, and gets everything closer to home—more efficient, more agile, a lot of upsides,” Bakke said. “It's an interesting time in manufacturing. It’s a chance to focus on quality, focus on simplicity, and focus on cost and overhead operations.”
Before nearshoring to Mexico a few years ago, the company operated a factory in China for nearly 20 years. At the time, Bakke recalled that “It seemed like the right move to get closer to home.”
Supply Chain Challenges
The reshoring initiative won’t require Northern Tool to add any additional square footage. The company’s current Faribault footprint includes about 260,000 square feet traditionally split between manufacturing and distribution. The building size isn’t changing, but after an extensive review of the factory layout, Northern Tool is repurposing some 40,000 square feet from distribution to manufacturing to support its new efforts. The company will add 20 to 30 new jobs this year to join the 80 or so currently on the Faribault payroll. Thus far, no state or local tax incentives have been earmarked for the expansion.
As for whether the move was in response to an uneven tariff situation, Bakke said, “Everything is tariff-related. But you do have influences from costs and not just tariffs, like long lead times. We've all seen that play out over the last year or so, as well as container rates and fuel prices and all of the things that change and shift the market constantly.”
If components are being sourced from longer lead-time countries, Bakke admitted that the Minnesota move won't change much. However, the company is re-sourcing a lot of its supply chain, moving as much of it back to the U.S. as possible. Still, labor costs are higher in the U.S., but the company will save on transportation costs as well as overhead. For example, running one facility with one management team instead of several creates pretty substantial savings.
Finding Skilled Labor
Filling the more than 30 new positions could be a challenge in a single shot, but Northern Tool is taking a more methodical approach. “We're continuing to look for people with an interest in building a career around manufacturing and production, and those folks are out there,” Bakke said. Faribault is a decent-sized manufacturing center, Bakke noted, and the community is made up of very highly-skilled, hardworking people.
“If we want to go out and hire 30 at a shot, that would be a bigger issue, but if we're reasonable or responsible in the number of people that we can ingest at a time, it's okay,” he added.
Manufacturing careers may be attractive to a growing number of graduates turned off by the cost of a four-year degree. “I think that there is a renewed interest in U.S. manufacturing from all angles and I think there's maybe a renewed appreciation for skilled tradespeople,” Bakke said. “[The trades are] a very highly-respected profession and I think that's returning to prominence—you get done at the end of the day, and you can move on with your life; not every career is that way. You can also make good money.” He stressed that the people who build stuff, create stuff, maintain and fix stuff are vital to the economy.
What Is Northern Tool Reshoring?
Northern Tool makes a significant number of products in Faribault, like hot and cold water pressure washers, gas-powered air compressors, water pumps, agricultural sprayers and, of course, log splitters. With the new space, the company plans to add more material handling products, like hand trucks and two-wheel dollies.
From a manufacturing capabilities standpoint, the company has a long history in metalworking. For example, the company has three lasers it uses to cut flat steel. The company also has in-house bending and forming equipment that can cut and bend tubing up to 2.5 inches. They also have welding, powder coat and final assembly operations.
The Mexico closure also means the Faribault facility is prepping to ingest new blow-molding operations, primarily used for its ag sprayer business. The company is also preparing to bring plastic and rubber injection molding capabilities online in the near future.
Still, the facility has room to grow. “We've got capacity even with the ingestion of our Monterrey business,” Bakke said. “We can add shifts, we can add workers. The next two or three years will be all about Faribault growth, and then we'll see what comes next.”
Renewed Emphasis on ‘Insourcing’
Part of Northern Tool’s strategy is “insourcing,” identifying products that the company has traditionally sold from other suppliers and making competing products under their own brands. The company has tooled up to make material handling products as well as an expanded line of pressure washers, and Bakke even teased new “ideas and innovations” scheduled to be unveiled later this year. Really, it’s a renewed focus on a mentality that was crucial to the company’s founding.
“Our founder’s core belief is that if somebody needs something, let's build it for them. A core tenet of Northern is to talk to the customer, understand them deeply and serve them uniquely–figure out what they're not getting elsewhere (or getting efficiently) and figure out a way to get it to them.”
Northern Tool’s multidisciplinary engineering team is tasked with new product development. The team has design, testing and certification centers in-house, mostly to run equipment just as customers would. “We don't test to pass; we test to prove,” Bakke said. If that means a pressure washer is going to run outside in temperatures ranging from below zero to more than 100 degrees Fahrenheit, that's how they run it in testing. If they're running air compressors flat out, that's how they are pushed in testing. It gives Northern Tool confidence in its products.
The toolmaker’s core customers are small- and mid-sized businesses with 100 employees or less. Bakke said that’s their “sweet spot”: companies that require quality but also need a level of service. Northern Tool is also big with the “trades-minded” person on your block who has a garage full of typically well-maintained, well-organized tools.
Service is a differentiator for the company, including a call center team for support, in-store service centers for repairs, and a mobile service network deployed to perform customer repairs in the field.
Passing the Tribal Knowledge Torch
At a recent company event, an employee celebrated 42 years at Northern Tool. But what Bakke, who has more than 30 years under his own belt, found inspiring was just how many folks in the room had more than 35 years on the job–one guy even mentioned that as he celebrated his 10-year anniversary, he didn’t feel like the new guy anymore.
“We have turnover like everyone else, but there is a culture of career here, and a lot of folks have stayed with us for a long, long time,” Bakke said. “The concern is real when you have long-tenured employees, but there's a real culture of developing the next generation of talent. And that's an expectation from all of us: getting the next generation ready to lead and step up. We're very proud that we've had a number of positions, senior positions, who have started at varying levels, even part-time at a retail store.”
Beyond manufacturing in Minnesota, Northern Tool maintains distribution centers in Texas and South Carolina and has retail stores that run from Duluth, Minnesota, to El Paso, Texas, from Miami to just outside Washington, D.C. The company has more than 2,800 employees who are passionate about their work. Still, both the retail and manufacturing industries are constantly evolving, but Bakke said Northern Tool does its best to stay ahead of the curve.
“You do your best to think ahead, but in today's environment, it's hard for a business our size to see and plan for every scenario. Really, it's about looking at what the core components are. Do we have good, active, open dialogue with our key suppliers? You have to continue to be aware, to think, and to ask a million questions to everybody that you think might help us, or who we could help.”
