March 17, 2014
BEPeterson, Avon, Mass., used to be a weld shop. Most of the work was seasonal, which isn’t really a solid foundation for growth. The fabricator changed that with a commitment to diversification. Today the company has three unique business units: power utility, medical, and pressure vessels.
Shortly after Steve Flesner arrived at BEPeterson in 1994, then company President Steve Peterson, grandson of the founder, showed off the heavy fabricator’s pride and joy: a CNC hardfacing machine that in utility equipment circles was a sight to behold. He saw the hardfacing of what’s known as a coal nozzle tip, a structure for coal-fired boilers in power plants—in this case, for global utility equipment-maker Alstom—that captures and channels the stream of abrasive pulverized coal and air. The environment is about as harsh as you can get, hence the need for hardfacing.
Conventional practice was for welders to perform the hardfacing manually. But BEPeterson (see Figure 1) developed a way to automate the task using a unique combination of hardfacing wires, power source, and a track-mounted system that held the torch steady. It’s a technology Peterson’s grandfather probably couldn’t have imagined when he founded the company in 1935.
The system allowed the fabricator to reduce cost and increase quality, which in turn led to much more work from Alstom. By the time Flesner arrived at the company, the Alstom account provided BEPeterson with well more than 70 percent of its business.
As Flesner, vice president of business units, recalled, “The company basically had one customer, and if real growth and long-term success was to be secured, this needed to change.”
In the 1990s BEPeterson was known as a heavy weld shop, with a large proportion of their capacity devoted to Alstom’s coal nozzle tips and other utility products, including low-NOx burners (see Figure 2) and wind boxes. An adjacent area was dedicated to miscellaneous job shop work.
Before the early 1970s, the company essentially operated as a small job shop. But when Alstom started working with the company in 1974, the situation changed. The company grew, employed more—all well and good, except for the fact that all this success depended on just one customer.
There was no imminent threat to the business. It had built up a good working relationship with Alstom, and there was no reason to think the work would end anytime soon. Utility work is seasonal, and such demand variability wasn’t easy to deal with or predict. And without steady work, it became difficult for the company to retain talent. Thus began the fabricator’s evolution into what it is today.
Diversification strategies in metal fabrication tend to follow a predictable path. Business leaders identify core competencies and then identify industries that can use those competencies. A heavy fabricator like BEPeterson perhaps could have expanded into other fields demanding heavy-plate fabrication, such as construction and rail equipment.
But the company didn’t follow that playbook. Instead, it analyzed the markets first. What sectors have a bright future? Which can provide demand consistency and complement existing work? From there BEPeterson sells its ideas and builds the capability, sometimes nearly from scratch, hiring the right people and purchasing the right machines to do the job.
The approach isn’t unique. Shops frequently purchase equipment to meet the demands of a new customer. It’s how shops justify the capital expenditure. But anyone who worked at BEPeterson in the 1970s would probably be shocked to learn that, alongside its utility equipment business, it also rolls shells for pressure vessels, tanks, and—most unusual—MRI machines. The company rolls aluminum and stainless steel into 70-in.-diameter cylinders to within ±1⁄32 in. on the circumference. Not bad for a company once known as a heavy weld shop.
Essentially, BEPeterson diversified by becoming a different company, one with three unique business units: power utility, medical, and pressure vessels.
Throughout high school and college, Flesner had worked in a machine shop. After college he started his engineering career at Nooter Corp. in St. Louis. The atmosphere resembled his machine shop experience, but on steroids. Many of the final rolled assemblies towered multiple stories, and the company’s massive rolls formed serious plate, much of it 6 in. thick or more. “When I left there, I was building a vessel that weighed 500 tons, or about a million pounds,” Flesner said.
He worked there for 15 years before moving to New England to be near his wife’s family. There he landed a job at a company that made cryogenic vessels before being hired at BEPeterson in 1994. At that time the company hadn’t yet moved to its current 15-acre site in Avon. The shop was only about 35,000 sq. ft., and much of it was dedicated to fabricating products for the utility business. It had only one 4-ft.-wide roll—certainly not a system for precision-rolling large plate.
But Flesner came to the job with years of experience and numerous contacts in the plate rolling arena. It was a big reason that the Peterson family hired him. So when the MRI machine opportunity came along in 1998 from Philips, Flesner sold the idea to management. Philips sent the project out for quotes, six fabricators submitted bids, and BEPeterson ultimately won the contract. The work started small but grew consistently over time (see Figure 3).
“We’ve grown this business to the point where now we’re one of Philips’ global suppliers,” Flesner said.
“At the time this was such an anomaly,” added Daniel Szczurko, vice president of business development. “Why would a metal fabricator like us get involved with that type of business? We were basically a welding shop that worked with heavy metals for the utility industry. Steve had the vision to take a risk. Did we have the right skill sets for it? Did we have the right equipment? The answer to those questions was no. The company had to purchase machines and bring in people to run that equipment.”
The move was risky, to be sure, but it paid off. Thanks to its medical business, BEPeterson endured the Great Recession relatively unscathed. As Szczurko explained, the company needed to adapt to meet what the market demanded. There’s an inherent logic to this. Say a fabricator determines its core technology areas and simply markets them to other sectors. What if those sectors aren’t strong enough to support the fabricator’s goals for growth? As managers perceived it, they couldn’t control the market, but they could monitor it, identify opportunities, and adapt.
To tackle this kind of work, the company needed a staff with plate rolling experience. They reached out to several people, including Jeff Visser, a plate rolling veteran (he had worked at New England Steel Tank since 1983) who came onboard in 1999 as an operator and rose through the ranks to become production manager of the medical business unit.
On the equipment side, the company bought a dual-head plasma table so it could cut the oversized plate to specified dimensions. It also increased its machining capability by installing two large vertical turning centers
And, of course, the company needed greater plate rolling capacity. To that end, it installed a large four-roll machine to roll the cylinders. Operators had to swap out the top roll to handle the soft aluminum, which hindered productivity and required some finessing to get the job done right. Still, this was enough to handle the tolerance requirements at the time.
But over the years the customer refined its designs, using more powerful magnets. Designers had to pack these powerful magnets, including all the wires that come with them, in the same amount of space as previous models. This gave the assembly less wiggle room. So now all components must be positioned at just the right spot to capture the right image. This required those cylinders to be rolled to within ±1⁄32 in.
At this point BEPeterson had no choice but to invest in new equipment, a Faccin CNC four-roll machine with an oversized top roll (about 12 in. in diameter) to eliminate the need for crowning, which could distort the soft aluminum (much of it grade 1100-0). Instead, the top roll diameter is consistent from end to end, with no crowning in the middle. This, together with overhead and side supports to hold the formed cylinders steady throughout each cycle, allows the company to roll those 70-in.-diameter cylinders to such a tight tolerance.
The risky move paid off, but looking back on the strategy now, sources explained several aspects that made the expansion less risky than it appeared. First, the shop wasn’t tackling a high-volume production environment. They weren’t rolling hundreds of tanks to stock or hiring dozens of new employees to handle all the work. They instead expanded toward lower-volume, specialized, precision work. It required investment in machinery and a few highly skilled people, but it didn’t require entirely new facilities or hundreds of new employees.
Second, the market itself—that is, the medical field—is an underserved growth market, especially in the heavy fabrication arena. When it comes to rolling cylinders for MRI machines, there just aren’t that many players. Few have the precise plate rolling capability.
Moreover, material needs to be sourced carefully, cost-effectively, and in a timely fashion, considering that these MRI machines are shipped globally. Today all such products are certified to what’s known as PED, or the Pressure Equipment Directive. At first Philips provided the raw material, but this complicated matters when it came to scheduling. So now the company sources the material in-house. “We buy this material on a worldwide basis,” Szczurko said.
The company’s next strategic target: pressure vessels. With its precision rolling capability, BEPeterson’s expansion into vessels may not seem like too much of a stretch. After all, the fabricator had held certifications for such work for years, though it was never a major focus for the business. Flesner brought years of engineering experience in the vessel arena. And the company had experience sourcing various components, be it secondary processing or certified materials. When it comes to reducing lead-times for specialty vessels, getting unusual material delivered quickly is half the battle. But according to sources, it was a bigger stretch than it superficially appears.
Szczurko analyzed market realities: What businesses demanded pressure vessels in medium volumes? What did that market demand from a fabricator, and what could set it apart? He visited various prospects, and most of them wouldn’t suit.
“I visited a fabricator that made pharmaceutical vessels, and I saw right then, that’s not BEPeterson,” Szczurko said. The smaller company focused solely on the pharmaceutical field, producing vessels with highly polished finishes. It’s a specialty business, and the volumes weren’t sufficient.
The company isn’t an extremely high-volume vessel shop either, dedicated to producing many vessels and tanks—propane tanks, water tanks, and so on. Szczurko was looking for the sweet spot in the middle, and he found it in environmental filtration: vessels and tanks sold to OEMs of filtration systems, such as those for water, chemicals, and oil separation (see Figure 4).
The vessels have stringent quality and traceability requirements. Many prospects in the market also demanded components beyond the vessel itself, such as fittings, skids, pumps, piping, and valves. In other words, they demanded industrial systems, not just tanks and vessels.
The fabricator’s plate rolls generally handle up to 1-in.-thick plate, depending on the cylinder diameter, but the company takes on thicker projects as well, outsourcing the rolling work and completing the value-added fabrication in-house.
This kind of work isn’t unique, but it’s one in which managers felt they could add value. It also required another jump into new territory, one that demanded more design and quality engineering. The company now employs about eight engineers, and each has specific business units—medical, utility, and vessel—to serve.
Today the 88,000-sq.-ft. facility looks starkly different from how it did just 10 years ago. In 2002 the Peterson family sold the company to two venture capital groups. Currently the fabricator has approximately $24 million in annual sales and employs about 80 people.
The plant has five fabrication bays plus a two-bay machine shop. One fabrication bay provides components to Alstom and others in the utility sector. Many of these components have short lead-times and quick turnarounds, including those coal nozzle tips. When equipment wears, utilities need to replace it in a hurry. “It’s consistent, but we never know what might be coming,” Szczurko said, adding that the company produces hundreds of different types of coal nozzle tips alone.
Another bay is dedicated to prefabrication, where the shearing, cutting, punching, and bending occur. Two more bays are dedicated to precision rolling for the medical industry, including the company’s precision-rolled cylinders for MRI systems, as well as cylinders for tanks and pressure vessels. And the last bay works on the final fabrication of industrial systems. Much of this goes to the filtration arena, though some jobs may ship to customers in the medical or utility sector.
According to sources, the company has no hiring-and-layoff cycle coinciding with big revenue swings. Each unit—utility, medical, and pressure vessels—evens out the shop’s finances and provides consistent work to the floor.
So what’s next? The company is looking into several areas, including processing equipment used for nanotechnology. Managers also see potential in fuel cells and the secondary (not utility scale) wind arena.
“My job is to always be on the lookout for the next great technology,” Szczurko said. “We’ve got irons in the fire for these industries. Where are they going? How’s the manufacturing going to be taking place, and where? And can we play in that arena? We need to keep an eye on areas of emerging technology, because one of them could break wide open.”
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