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Oshkosh Tanning Company Boone, Iowa.

A Tour by Charles Roegiers, School of Business and Herbert T. Hoover, History Department, the University of South Dakota Conducted by Thomas Pietz, Vice President, November 21, 1991

It's not every day one gets to mix a little pleasure with business, but it does happen now and then. Professors Roegiers and Hoover drove from Vermillion, South Dakota, to Boone, Iowa, to tour the Oshkosh sheep pelt tanning plant and discuss its history with the Vice President, Tom Pietz. This outing is part of a project concerning the history of the sheep and wool industry in the northern prairie and Great Plains states since the 1840s. This tannery is one of the three largest still functioning in the United States and impacts positively upon the sheep industry in South Dakota.

The plant is owned and operated by Tom Pietz, who began the interview by describing his plant at Boone, Iowa, as one that originated in Oshkosh, Wisconsin, but later moved to Boone. Since its inception, this particular plant has been owned and managed by two families, the Pietz and the Odells. As mentioned earlier, it is one of only three such industries remaining in the United States: Oshkosh Company at Boone, Texas Tanning Company in Texas, and Nelson and Sons at San Antonio. Historically, the peak production years for tanning industries came early in the 1940s, 1943 being the specific peak year. Since then, the United States sheep pelt tanning industry has been experiencing a general decline as has the sheep and wool industries in general. From a demand high in 1943 to the present, the production numbers have generally declined to its current level. Only in the last two years, 1990 and 1991, has there been an increase witnessed.

Throughout the years, the Oshkosh plant has developed its limited markets to rely mainly upon the processing of sheep and lamb pelts for sale as automobile seat covers, interior upholstery use, and for the applicator business--i.e., the manufacture of pads and paint rollers. In addition, the pelts of these sheep sell as "shaggy rugs," sheep skin jackets with collars, specialty footwear, and other products of lesser value on the domestic markets. With the exception of the applicators, all other products are finished by other businesses, who rely upon Oshkosh as their pelt supplier. Even today in recessionary times, good markets have remained for tanned pelts outside the United States--especially in Mexico, South Korea, Italy, and Japan. Leather and woolen goods are linked to quality and seem always to have a certain amount of appeal among the affluent.

Suppliers of raw pelts, in all forms, have diminished. Monfort at Greeley, Colorado, the largest sheep kill plant in the United States, is a main supplier of green pelts. The Harper Plant in Kansas is another. Oshkosh Company makes frequent purchases of untanned skins from Farmland Industries, Monfort, the Harper Plant, and John Morrell Packing Plant in Sioux Falls, where the lamb kill runs about 300 to 500 per day. "We basically are very selective, and they supply us with what we need and want," remarked Mr. Pietz.

When the Oshkosh Company first appeared in Wisconsin during the 1940s, there existed seven or eight tanners who operated exclusively in the United States for the production of finished sheep pelts. Two of them consolidated talents to become Oshkosh Tanning Company after a seemingly insatiable market with exciting and growing demands raised expectations during World War II. This Oshkosh Company expanded production operations in the year 1946, producing tanned hides especially for use in garments, ear muffs, and paint rollers and pads. After the Company moved to Boone, Iowa, in 1969, its managers struggled for a time. The cost of skins at this time was about $1 each and tanned hides brought only about 50 cents per square foot. This economic situation demanded an overhaul of the operation in 1977. Currently, the Oshkosh Tanning Company is smaller than its Texas counterparts, but it stands tall among the only three noteworthy operations of its type in the United States.

Added to the reduced demand for raw pelts and finished hides in worldwide markets, has come an additional obstacle to the big three in this industry: the rise of governmental regulations on industrial pollution. The control of chemicals, their use, and their disposal as possible pollutant bi-products of the industry, is a contemporary obstacle faced by all. Environmental awareness has rendered it more expensive to operate these plants and more difficult to manage their "bottom line." On the upside, compensating in part for this new expense and imposed controls, has been the importation and adoption of new technology and machinery as well as improved soaps and tanning solvents from Western Europe (much has happened recently in the wool processing industry). Trying to balance these factors has been no easy task for Mr. Pietz and the Boone operation. Currently, the Oshkosh Tannery markets about 90% of its product in the United States and the remainder abroad.

It is interesting to note that wool quality for the tanned hide industry is quite different from that of the garment wool business. Garment wool producers receive much more for their fine textured, long fiber wool than for coarse textured, short fiber wool. Hide tanners gain an advantage in sales for pelts bearing coarse textured, short fiber wool (for use in car seats, for example) than for fine textured, long fiber wool (for use in rugs, for instance, and even some blankets).

Marketing can be expensive, but because most of the tanned products sell themselves, this cost is more easily managed. Efficiency is maximized by employing the print media through published advertisements, and in displaying the products at selected shows and exhibits. For a tanner, it is not as profitable to put salesmen on the road to call on stores or other retail outlets. Mainly, as plant manager, Mr Pietz looks to more sizeable markets--the United States Air Force, the automotive industry, the garment industry, and various leather manufacturers--for sales on the wholesale market. This may be accomplished easily through telephone conversations, FAX contacts, word of mouth at conventions, or conversations with leather brokers.

Prices vary according to pelt quality, size, and color, and market demand from year to year. At present, the Oshkosh plant acquires its pelts at cost plus transportation from its suppliers, and after processing is complete it employs an electronic machine that calibrates pelt size precisely in square feet. This may run as high as 10 square feet in a single pelt. In the most favorable market used by the automotive industry -- pelts generally bring around $30.00 apiece. Others scale down from there depending on quality, pelt size, and defects, such as cuts in the product itself.

This plant employs about sixty non-union people, operating on two shifts of eight hours each. They work in a well lit and ventilated environment that appears clean and healthful.

Since the plant is not unionized and little was said about this aspect of the workplace, one can only surmise that there are few problems with hiring, and that workers labor under adequate supervision and compensation with full concentration being given to maximum production efficiency. Turnover is low to non-existent.

The Oshkosh employees completely process 1,000 to 1,200 pelts per day. These sell on a domestic market with little foreign competition. This is partly due to the fact that American pelts are both larger and better in quality than are most foreign imports. Pelts arrive overnight (in recent years not by rail cars, as before, but on refrigerated trucks). They arrive in good condition. In the plant, they are grouped in lots that vary upwards from about thirty skins to one hundred. They then go through sequential procedures, roughly as follows: (1) on arrival they are segregated by types, according to wool grade, size, and cut damage; (2) they soak in water overnight, after which they are washed in water at about 100 degrees F with detergents (now using a Norwegian soap); (3) next they are fleshed, to remove flesh and fat or burrs and other foreign matter from the hide and wool; (4) after that they are rewashed and rinsed completely. Once the cleaning processes are completed, the hides are ready for the remaining procedures; (5) pickling (with salt and formic or sulfuric acid) starts the tanning process, removing bacteria; (6) tanning goes on by various procedures, in recent years with chemicals and chrome, but no longer by vegetable process; (7) now, in large rotating drums some oil is applied and worked back into the skin. Coloring is added, if the buyers request it; (8) the wool is brushed and carded to lift and separate the strands, and where appropriate it is clipped to one of several lengths as desired by the buyers; (9) the hides are drummed in sawdust, with water added, for cleansing; (10) they are stretched both to enlarge the size (by as much as 20%) and to soften the skin; (11) they are measured, electronically, as mentioned above; (12) they are graded according to use and quality; (13) the edges are trimmed by hand before they are sorted and piled for boxing and shipping.

The authors can only speculate here about operational costs, but some things seem clear. If, as manager/owner Tom Pietz has suggested, the tanned pelts are produced at 1,000 per day and sold on average for $25 per pelt, a day's production has potential in sales at $25,000. Expenses--raw materials, labor, and fixed costs--could vary, but let's use $10 per pelt. Likely about half of the remainder--$15 each--should go into processing and overhead. It would seem that the plant, in a steady, full day of operation, could generate approximately $7,000 to the satisfaction of its owners. With this potential profit margin, Mr. Pietz can plan for future operations and unexpected expenses such as when hides again cost between 7 and 12 dollars.

Roegiers and Hoover came away from the tour with a sense of having seen it without the omission of any significant part of its operation. It was as clean and quiet as one might expect of an animal processing industry. The help was focused, without a display of undue stress. Although some of the work seemed routine, other aspects involving machines and knives could be perceived as somewhat dangerous. Overall, it appeared to operate at maximum efficiency, to the benefit of all concerned. Mr. Pietz is a professional in his field with a well trained staff and a long family history in tanning hides, and he is a significant player in the nation's sheep industry. Located in the heartland of America, he services the Midwest and especially the states bordering Iowa. This is the type of agricultural business that is often missed and seldom praised for its contributions to the economy of the family farm and a rural society.

About the authors: Charles L. Roegiers, Ph.D., is Professor of Management at the School of Business, University of South Dakota. Herbert T. Hoover, Ph.D., is Professor of History at the University of South Dakota.
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Author:Roegiers, Charles; Hoover, Herbert
Publication:South Dakota Business Review
Article Type:Company Profile
Date:Dec 1, 1992
Previous Article:A message from the class of '93.
Next Article:South Dakota and the North American Free Trade Agreement.

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