Taco, Inc. (pronounced TAYco) is a Rhode Island company that has had great commercial
success for 76 years selling products to keep people warm in the winter and cool in the
summer. Its market is the world, from Rhode Island's Bryant College and Naval Education
& Training Center to businesses in Turkey, South Korea, the Middle East, and the
reemerging markets of South America. Taco sends its pumps, valves, boilers, circulators
and heat exchange systems to them all.
Its customers range from networks of plumbers and contractors who install the parts and
systems directly into people's homes, to equipment manufacturers who add the components to
assemblies for heating and cooling every conceivable type of large building structure.
The Thermal Appliance Company (or "T.A.Co.") began with the collaboration in
1920 between Elwood White and Rhode Island inventor Robert Blanding. The two started their
operations in a small house in Providence with a handful of employees and a New York city
office for sales. The quality of the water tanks and related products they produced, along
with continual sensitivity to customer demands, soon gave the company domination in the
water heater business.
During World War II, Taco twice won the Army/Navy E Award for manufacturing excellence,
supporting the war effort by supplying gun mounts and heat exchangers for Navy ships and
landing craft. While trying to land a War Department contract in 1942, Elwood White died
of a heart attack, and his son, John Hazen White, took over the management of the company.
Under John Hazen White's direction, the company expanded and grew during the post-war
years. Blanding's inventions continued and some remain as industry standards today. White
concentrated on the development of a wet rotor circulator, which led to the introduction
of Taco's venerable "OO" products for residential and light commercial use, and
heavy duty commercial pumps for industry.
In 1991, Taco found itself at a crossroads. New England businesses, particularly those
related to construction, were hit hard by a two-year recession that was worsened in Rhode
Island by a banking crisis. White and his son, John Hazen White, Jr., who by this time was
working in sales and production at the company, had to make a decision. Should they keep
the company in Rhode Island or move it to an economically kinder climate?
After meeting in small groups with their 450 employees, the two decided to keep the
company in Rhode Island. Through the painful process of laying off 30 percent of their
employees, dropping capital spending, and draining their inventory to the limit to free up
cash, they reorganized the company.
Once made, the Whites' decision carried a commitment to their remaining employees not to
displace people with machines -- the layoff meant survival, not displacement. Seeking
ideas and approval from hourly workers every step of the way, the company began developing
work processes which meant carrying less inventory.
Making the new operation succeed with fewer people meant developing human capital. Part of
White's bargain with his employees was to provide them with a learning center that is
unique today among businesses of Taco's size. Created in 1992 at a cost of $250,000, the
center offers employees the opportunity to learn blueprints and gauges, basic math and
English, computer skills, in addition to GED preparation, citizenship preparation, and
credits toward an associates degree.
White says every dollar Taco has spent since 1991 came out of reduced inventory costs.
Prices have scarcely budged. The number of employees--and their names--are unchanged (the
turnover rate is less than 1 percent). With sales of between $80 and $90 million in 1995,
Taco has enjoyed an excellent return in labor productivity on its investment in employee
education .
Since 1992, 14 new or modified products have been introduced as a result of concurrent
engineering in which all relevant departments -- engineering, production, operations,
quality, planning, purchasing and marketing -- are involved in the development and
roll-out of a new product. This process represents a 50 percent decrease in the time it
took to bring out a product under the previous method of serial engineering.
Taco's management structure and concurrent engineering provide the creativity and
flexibility to keep up with the needs of its global customers. In addition to its business
in the Middle East, South America and Mexico, the company has recently opened a sales
office in South Korea to tap into the growing economies of the Pacific Rim.
John White, Jr., now executive vice president, spearheads Taco's international business
today. He says the company is committed to being a serious player in the international
marketplace, and because of this has become closely attuned to the business practices and
cultural attitudes of overseas customers.
The company has also created TacoNet, a computerized visualization system for selecting
and matching hydronic components. The system recently went online so that customers all
over the world can tap into it for the latest product introductions and updates and get
answers to technical questions. Taco maintains a web site at http://www.taco-hvac.com.
The relationship between John Jr. and John Sr remain one of Taco's greatest strengths.
"I've seen many family businesses fail because there's an over-eagerness by the older
generation to turn the business over to the younger generation," says John White Jr.
"In some cases, they were totally unqualified. They went bankrupt or sold out.
"I have a close relationship with my dad," he continues. "We communicate
often. There is no power struggle for management. He has the overall responsibility. He is
the boss."