| Mentorship
helps small company survive loss of federal contracts
by Bill Geroux
for Virginia Business
May 2005
Joyce Kershaw was cooking dinner
in front of the TV one Sunday in 1992 when she saw
a segment on “60
Minutes” exposing widespread waste in federal
purchasing. She remarked to her husband, Earl Reubel,
that the report could prompt changes in government
policy. It might even affect their year-old small business,
Kerma Medical Products Inc.
She did not know how right she was.
Within a few months, Congress
mandated broad reforms in federal purchasing practices.
In the health-care
field, the government would buy products chiefly from
large “prime vendors” while canceling its
direct-supplier contracts, including Kerma’s.
At the time Kerma, a minority-owned small business in Chesapeake, relied almost
entirely on a pair of government contracts to produce burn dressings and to
cut and package bandages. Neither of those contracts were part of the pattern
of waste discovered by investigators. But the rug was yanked out anyway, leaving
Kerma to face the prospect of quick extinction.
Kershaw, Kerma’s president, and Reubel, its
general manager, knew their way around the complex
world of government contracting, but they were lost
in the arena of commercial competition in health-care
products. They needed to establish a partnership with
a major distributor — to find a place in the
supply chain — and time was short.
One of their government contracts
was terminated in May 1994, and the second that July,
leaving Kerma
a small fraction of its business. Kershaw and Reubel
laid off all but two of their 26 employees. “The
only ones left were the sales manager and production
manager,” Reubel recalls, “and they had
no one to manage.” Kerma began having to choose
which bills to pay on time every month. Ruebel logged
hundreds of miles driving to meetings and conferences — he
could no longer afford to fly — in search of
customers or at least some guidance. “It was
kind of like trying to learn to swim while you’re
drowning,” Kershaw says. “But Earl is persistent,
and I had faith.”
Finally, in April 1995, a
consultant representing Kerma, Joe Watkins, attended
a government-sponsored
conference in Philadelphia and attracted the attention
of Owens & Minor, a Richmond-based Fortune 500
company. Owens & Minor is one of the nation’s
largest distributors of medical and surgical supplies
to hospitals and integrated health-care systems.
Jose’ Valderas, Owens and Minor's vice president
for supply chain management, said his company teamed
up with Kerma for several reasons: Some large government
contracts require minority participation; Owens & Minor
wants to maintain a variety of suppliers; and Owens & Minor
saw an opportunity to help generate jobs and business
in a city that needed them. Valderas said Kerma has
proven itself a flexible and highly efficient partner.
In the following months, some
of Owens & Minor’s
top executives, including Chairman and CEO G. Gilmer
Minor III, coached Kershaw and Reubel to change and
expand their company’s product line to find niches
in the health-care market. In addition to burn dressings,
for example, Kerma began making baby bonnets. It also
began to package latex-free bandages, stethoscopes,
digital thermometers, telemetry pouches, protective
gear and face masks.
Kershaw says Owens & Minor offered sound advice
without pressuring the company to follow it. The larger
company even encouraged Kerma to seek out business
with its competitors, including the manufacturing and
distributing giant Cardinal Health. “It’s
really impossible to exaggerate how much they have
done for us,” she says.
The relationship between Owens & Minor and Kerma
earned the two businesses the Department of Defense’s
Nunn-Perry Award for business mentorship programs in
1999. Kerma was Cardinal Health’s Small Business
of the Year in 2001 and Owens & Minor’s Small
Business Supplier of the Year in 2003.
Today, Kerma operates out of a 27,000-square-foot
building on PortCentre Parkway in Portsmouth that contains
its offices, warehouse and manufacturing plant. Reubel
says the business has grown elevenfold since its best
days as a government contractor and that its work force
has nearly doubled in size, to 48. Several longtime
employees say Kershaw and Reubel treat them almost
like family.
Kerma’s horizon is by
no means cloudless. Like many small manufacturers,
the company is beginning
to feel the competition from China. Reubel says Kerma
already is exploring specialized products to try to
insulate itself from Chinese competition, though he
would not elaborate.
But neither Reubel nor Kershaw seems particularly worried. They project the
quiet confidence of battle-tested survivors.
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