Being better while being bigger

Figure 1
Robert Kamphuis, MEC’s chairman, president, and CEO, is surrouned by some of the company’s manager and front office and shop floor workers, who also happen to be shareholders in the fabricating business. MEC is one of the nation’s largest employee-owned companies in the U.S. (Photos courtesy of Artist Group Photography and Video).

Acquisitions are always difficult to pull off. First, the financial transaction has to meet the requirements of both the buyer and seller. If that can be accomplished, the acquiring company has to begin the process of integrating the new organization into the family—surveying manufacturing capabilities, getting to know employees and customers, and taking a critical look at incoming work processes and IT systems. It takes time and plenty of focus to pull off successfully.

Now imagine that during such a transaction, a metal fabricator finds an opportunity to add some new manufacturing space and expand its capabilities. It has to take into account new facility layouts and incorporation of new fabricating technology on the shop floor without interrupting service to existing customers. That’s a major administrative challenge for any fab shop, but to attempt to do something like that in the face of ongoing acquisitions and an uncertain economy might make some industry observers scratch their heads.

Mayville Engineering Co. (MEC) accomplished both of those feats over the past three years. At the end of 2012, the Mayville, Wis., fabricator had completed a deal to acquire Center Manufacturing of Byron Center, Mich.—a company that was 80 percent of MEC’s size. The acquisition gave MEC new fabricating capabilities, such as complex frame assemblies for the power sports market, and access to a manufacturing-rich regional market. In the fall of 2014, MEC added to its Virginia operations with a new 148,000-square-foot, state-of-the-art manufacturing facility in Atkins, Va. The move solidified its presence in southwest Virginia, and the new capacity actually opened the door to some much-welcomed internal growth opportunities.

In 2015 the heavy lifting associated with these expansion efforts had evolved into everyday company operations. Human resource policies are now consistent. Manufacturing capabilities have been fully cataloged, and best practices are being shared among MEC’s seven Wisconsin locations; two plants in Virginia; and the former Center Manufacturing locations in Michigan, Mississippi, and South Carolina. The tube business systems have been converted to MEC’s homegrown production planning system to support commonality, speed, and flexibility, while a remaining legacy system is refined to be effective in a high-volume, low-mix manufacturing and planning environment.

Reflecting its growth—and trying to formalize the idea of it being one entity with several manufacturing talents instead of a holding company with several manufacturing businesses—the company has spent the last several years rebranding itself as MEC (which rhymes with “tech”). For example, it’s no longer called Mayville Engineering or Center Manufacturing, but MEC Fabrication. Fabricating Specialists of Neillsville, Wis., is now MEC Tube, and Phoenix Coaters in Beaver Dam, Wis., is now MEC Coatings. Even the shotshell-reloading business, one of the company’s original product lines, dating back to the mid-1950s, is now known as MEC Shooting Sports.

To be specific, MEC’s revenue was $335 million in 2014, which put it at the top of The FABRICATOR’s FAB 40 list for the fifth year in a row. It expects to generate sales in the range of $350 million this year, even faced with declining markets in agriculture and mining; new markets that came with recent business acquisitions have helped to balance out the dips in the other markets.

“I think the story here is tying a fragmented marketplace together,” said Robert Kamphuis, MEC’s chairman, president, and CEO. “There are a lot of smaller shops out there. What we do is look to aggregate or consolidate that.”

Maintaining this type of dramatic growth is typically the realm of venture capitalists, who buy distressed businesses, build them up, and then sell them off for healthy profits. Kamphuis said that’s not MEC’s motivation. It wants to build a big fabricating business that is responsive to customer needs, is supportive of the local communities in which it operates, and is profitable for the company’s shareholders (see Figure 1).

In recognition of the creation of this huge fabricating business, The FABRICATOR has named MEC as the winner of its 2016 Industry Award. The company, with approximately 2,000 employees and 17 locations, is building its fortune the same way a small shop might go about it, and it’s having great success doing it that way.

Diversify or Die

Diversification has not only been good for growing MEC’s customer base, but also for creating consistency in production levels, helping the company to avoid the major peaks and valleys that might occur with only a few major customers. The blue-chip manufacturing companies like the idea of doing business with a fabricator that has the foundation to sustain in uncertain economic times.

Figure 2
Robotic press brakes not only increase part bending efficiency, but also help operators avoid the potential of strained backs caused by the manipulatin of large and heavy parts.

MEC knows the dangers of relying on one or two industries for most of its business. In the late 1990s, the company had a major aerial scissor lift business that propelled it to purchase a 163,000-sq.-ft. facility to handle the expanding manufacturing activity. By 2001 a competitor had introduced an articulated boom-type product that totally changed what people could do with a lift, and MEC had to shut down production in its new Beaver Dam, Wis., facility shortly thereafter. Also around that time, one of its large customers in the electronics area shifted its production to overseas sources.

Those lessons were never to be forgotten and were a key motivation to seek out new opportunities, in this case Center Manufacturing. The acquisition got MEC into complex, tube-intensive frame structures for performance sports, and it’s proved beneficial while agriculture and mining, or “earth-connected” industries as Kamphuis describes them, await for the global economy to rebound.

Not only does this diversification help to provide a safety net from the ups and downs of volatile industry segments, but it also has provided a valuable manufacturing perspective. The individuals who were part of the Center Manufacturing deal came with a lot of automotive experience, which makes sense given their proximity to the Motor City, and they are very familiar with sophisticated tube frame designs that rely on automated welding.

“[With that experience] they are then able to take what they know in automotive, combine that with the experience and interaction of the high-mix and low-volume environment, and tailor some nice solutions that provide a competitive advantage on cost,” said Chad Mitts, MEC’s executive vice president.

As an example, Mitts said the folks with MEC Fabrication understand how to cost-effectively design for low-volume, prototype, and aftermarket manufacturing without the need for hard tooling, using their knowledge of fabrication efficiencies, such as modular welding fixturing. Simultaneously, engineers at MEC Performance Structures, which evolved from the Center Manufacturing purchase, have a lot of experience with dedicated equipment, fixtures, and processes for high-volume, repetitive products. The result of such mind-melds of these parties is a fabricating scenario in which turnarounds are measured in days, not weeks.

“Our diversification is probably the best in the marketplace of the companies that do the type of work that we do,” Kamphuis said.

MEC Requires Tech

Opportunities to pursue potential acquisition targets and grab market share from other fabricators that are unable to meet the requirements of large OEMs can occur only if MEC has capacity. That’s why it needs flexibility on the shop floor to absorb spikes in job orders.

“Being able to move quickly is key,” Kamphuis said. MEC spends about 150 to 200 percent of the company’s annual depreciation on capital equipment purchases.

Eric Welak, MEC’s vice president of operations, cited two TRUMPF robotic press brake cells (see Figure 2) as examples of recent equipment investments that can take on additional work without supervisors having to scramble to find additional human operators.

“Most parts that run through there would have taken two or three people to move the part around to position it in the press brake,” Welak said. “Now the robot is doing that, and it’s doing it faster and with better quality.”

Figure 3
MEC has the capability to laser-cut metal up to 0.625 in. thick while maintaining tolerances to 0.002 in. at speeds up to 1,300 inches per minute.

Capital expenditures are focused on growth areas, as MEC works to fill current footprint capacities. Kamphuis said the company is always ready to take a look at potential investment as new opportunities come along. New opportunities that require additional equipment trigger quick discussions about availability of the new fabricating equipment, the possible implementation window, and the deadline for having the new capacity available.

When capacity utilization hits 80 percent for a certain fabricating operation, MEC starts looking at potential relief alternatives. To offset what might be a temporary peak in production, company officials may elect to outsource the extra work. If it continues, of course, discussions about capital equipment investments begin.

Across its many facilities, MEC has a breadth of fabricating capabilities:

• Solid-state and CO2 laser cutting systems (see Figure 3)
• Plasma cutting machines
• Press brakes ranging in size from 35 to 400 tons
• Large-bed stamping presses from 50 to 1,200 tons, some with in-die measuring and sensing
• Coil processing equipment that can handle coils up to 8,000 lbs.
• Robotic welding cells (see Figure 4)
• Milling and turning equipment
• Tube cutting and bending machines that can accommodate round and rectangular tubes from 0.25 to 8 in.
• End forming equipment for tube fabrications
• Powder coating and painting lines
• An electrodeposition (e-coat) line
• A two-pass chemical agent-resistant coating paint line for military markets

Planning for Capacity

Equipment to take on additional capacity is useful only if it’s in place on time. MEC can do that because of its investment in capacity planning tools.

The origins of this homegrown shop management software tool date back to MEC in the late 1970s and early 80s. From the start, the goal of the IT system was to use it to improve and standardize all quotation, product launch, and production-planning activities.

Today the enterprise software system that runs the high-mix MEC businesses has an Oracle database foundation, and MEC’s IT staff maintains the specialized applications that were written to accommodate the variety associated with the company’s job shop business.

“We have the ability to manipulate it so that it fits our business, and we have done that for years,” Welak said. “What keeps us nimble is our ability to do capacity planning in a contract manufacturing environment, which isn’t typical. When you are a manufacturer making the same few widgets every day, it’s easier to schedule.

“We see changes weekly, and we have to react to those. Our capacity planning tools allow us to do that quickly when we are dealing with a lot of complexity and multiple parts,” Welak added. “It’s second to none and possibly the best in the market.”

Kamphuis said the origin of the current software system dates back to MEC’s scissor lift manufacturing days. Back then the shop floor was dealing with projects that could be a simple product or a much more complex assembly that fed into a subassembly and then the final assembly. The software system used had to contend with numerous levels of bills of materials.

“Our dataset back then was built around complexity. Today that heritage helps us to be a lot more agile and able to plan at a detailed level and with a lot of flexibility,” Kamphuis said.

Figure 4
MEC can design and construct its own weld fixtures, which helps to minimize the turnaround time for automated welding jobs.

How might that agility work? Responses to requests for quotes are detailed because they are repeat jobs or contain elements of similar jobs.

If a purchase order is issued for a job, the quote is then fed into the production planning system. No one is expected to re-enter the data. The information flows through the entire organization. Machine time is scheduled, material use is noted, and CAM programs are created in some instances. At the same time, when the project is given the green light, future production capacity is reflected.

“This is the most efficient way to drive down your cycle time development and to make sure you are providing the best cost solution out there,” said Ryan Raber, MEC’s vice president of sales and marketing.

The IT systems have scaled successfully as MEC has grown larger over the past several years. They have allowed the company to truly grasp the entire organization’s manufacturing capabilities over its many locations and distill that into thorough and realistic quotes.

Welak said that MEC’s IT department, which is made up of software developers who have learned about fabricating and manufacturing professionals who have jumped into coding, has had to expand its ranks by just two because of company expansion. The software has proven to be a useful tool for all parties—MEC veterans and new users—and the IT department hasn’t had to worry about reinventing the system with the arrival of new manufacturing entities into the MEC family.

MEC knows what’s coming, and it can react appropriately. Meanwhile, the company’s software is flexible enough to accommodate the inevitable daily production schedule changes that come with the fabricating environment. MEC has created a valuable tool that other fabricators would find hard to duplicate.

Deliver the Value

Talk of winning quotes may lead others to believe that MEC must be pretty good at such a task. With annual revenues above $300 million, sales personnel must be closing a lot of deals.

That’s not the way the fabricator looks at its customer-facing efforts, however. It has a team of sales engineers who are aligned with markets and large customers. All of these individuals have either an engineering or a technical background. Each one of these 30 sales engineers is a face for the entire MEC organization, knowledgeable about all that the company can offer and skilled enough to present the best approach to get a fabrication made quickly and efficiently.

“Where the value is created isn’t in a customer sending me 100 prints and me sending 100 quotes,” Raber said. “Let’s find out what needs to happen, and let’s have a technical conversation where we can get the intention of the part, not the design of the part, and get that figured out. We’ll end up in the best cost position by doing all of the other things right upfront.”

MEC puts its money where its intentions are. It has a couple of sales engineers that actually maintain an office at the customer locations. They interact with the customer’s engineers and work with them to ensure parts are designed for manufacturability.

MEC also maintains a prototyping group for its fabricating and tube business. They are able to test early designs, which not only helps the customer’s production development teams, but also allows MEC to prove whether the part designs are as easy to fabricate as planned.

Kamphuis said the company tracks the revenues and costs separately for the prototyping activities because it’s important to know how much customers are leaning on MEC for these services.

“The reason that we went this route is a lot of our business is about listening to the customer and what they value,” Raber said. “Over the years, the OEMs used to be very vertically integrated. However, you don’t see a lot of brick and mortar investment by those guys anymore. They design, assemble, market, and distribute the product. They are getting out of manufacturing.

“We have seen the need to be the technical experts, and for them to trust us because we are the experts in what we do.”

The model is not just a simple commercial interaction for MEC. They are fabricating experts for those companies that don’t have that expertise.

The Path to Continued Growth

When asked if he thinks MEC is still a manufacturing company, as opposed to a “solution provider,” “product life cycle manager,” or some other slick marketing descriptor, Kamphuis was quick to say his company is still a contract manufacturer. It just happens to have a perspective that maybe other fabricators don’t.

“Whereas many shops are concerned just with getting the quote and delivering the product, MEC sees opportunity in all aspects of customers’ product development.

MEC has structured itself in such a way to be all of these things to all of its customers,” Kamphuis said.

If a customer needs engineering assistance, the approximately 80 engineers in the MEC ranks can assist, and the prototyping service can turn around designs quickly without the hassles of having to navigate the shop floor. If a customer needs to ramp up production, MEC has the capacity, technology, and manufacturing locations to make that a reality, whether it’s high-volume production that requires hard tooling or a smaller run that involves laser cutting, bending, and some welding. If a customer has to deal with legacy products and isn’t interested in handling aftermarket inventory, MEC is responsive enough to be able to build fabrications that meet original design specifications and have them shipped out. In the meantime, customers realize that they are dealing with a company of a certain size and level of success, which gives them confidence that they won’t be closing up shop because the stock market has had a bad week.

“We are in this for the long haul,” Kamphuis said. “Even though our metrics and goals are tough, we are not waiting to hear whether or not our shareholders like us. They all work here in our shop. We do things for the right reasons and for the long-term return on investment.

“Our model is unique. MEC’s agility, adaptability, and alignment of performance and value creation is in place,” he said, “and it has a long horizon to it.”

On the outskirts of Mayville’s downtown is a historical marker noting that the town was the site of Wisconsin’s first iron smelter. In 1847 John Orr and James White founded Wisconsin Iron Co., and two years later the company’s furnace fired up its first molten iron. The company’s furnaces produced iron for 79 years, but the facility shuttered in 1928 with the disappearing demand for pig iron.

Eighty-eight years later, metal is big in Mayville again. It’s not the raw material that’s going to keep the story going, however. It’s MEC’s fabricating prowess that will keep the company growing and, ultimately, the story might be worth a historical marker of its own.

MEC, 715 South St., Mayville, WI 53050, 920-387-4500, www.mecinc.com