May 13, 2008
Diverse customer base—from heavy equipment to medical—key to Blessing Industries' success
Filing bankruptcy teaches hard lessons, and managers at one Iowa metal fabricator used those lessons to build a better business. Today that company, Blessing Industries, stands thoroughly in the black and has several years of consistent growth behind it—not bad, considering the history.
In 1999 Blessing Industries enjoyed one of the best years in its history, but the growth was uncontrollable, which, said sources, is what led ultimately to its demise. Blessing was forced to file for Chapter 11 bankruptcy in January 2000 and was purchased by Decker Acquisition Corp., which also owns a precision machining company called Quamaco.
"When 9/11 hit, a lot of companies stuck their heads in the sand and gave up," said Jim LaGrange, director of sales and marketing.
Blessing wasn't one of those companies.
Nobody could have predicted 9/11 or the extent of the manufacturing downturn. The company went from dealing with a sizable order backlog to having just barely enough work to keep the doors open. But, LaGrange said, in retrospect the fabricator had a flaw that would have spelled trouble no matter the economic circumstance.
For years Blessing relied too heavily on two customers, an aerial lift-maker and a printing press manufacturer, which together provided 80 percent of company revenue. When the printing press company filed for bankruptcy in early 2000, debt mounted at Blessing, and the Fayette, Iowa, metal fabricator had no choice but to file for bankruptcy itself.
Much has changed. Today Blessing can honestly say it has more clients than workers, with 80 employees serving almost 90 customers in various industries—from heavy equipment and agriculture to power generation—and no one source supplies more than 20 percent of the business's revenue. To get there required a serious look into something that the company really never invested in before: marketing.
In the late 1990s LaGrange was Blessing's general manager. At the time of the terrorist attacks, he had very little (if any) production to manage, so when the company launched a marketing program, LaGrange was assigned to manage it. Like many job shops, Blessing never had a formal marketing program to speak of—and why would it? During the late '90s Blessing thrived largely because it had great relationships with two customers. Then came the bankruptcy in 2000, followed by 9/11 in 2001, and, as Blessing managers soon realized, the need to diversify.
In his new marketing role, LaGrange set some benchmarks. "We embarked on an aggressive program with our marketing partner, [St. Cloud, Minn.-based] Intersection Marketing Services. We wanted the company to compete in at least seven industries, heavy equipment, platforms, agricultural machinery, hydraulics, medical, material handling, and transportation equipment among them," he explained. "The list has changed over the years, and if a market sector's not working out, we take that one off the list."
Within these sectors, the company works to find customers that fit its business. Consider heavy- and agricultural equipment industries, two sectors that have remained on the list. Demand for infrastructure-building and agricultural machines has increased worldwide, and Blessing has tapped into that demand, but not in the conventional way.
"We concentrate on clients who want to bring innovative ideas to the market," LaGrange said. One customer, for instance, is headed by two individuals that happened to invent the company's main product, which allows farmers and hog operations to take liquid manure and put it right back into the fields as fertilizer. This brings more efficiency to the farm and serves a niche in the agricultural market—a sector that's sure to remain healthy. After all, the world's ever-growing population needs to eat.
In heavy equipment, the company made another assumption: The ever-growing population also needs more infrastructure—and that includes bridge and highway construction. Blessing has partnered with companies that make, among other things, rock-crushing, drilling, and bridge-building equipment—but not the companies that first come to mind.
"When we started to venture into the heavy-equipment market, we knew there were applications and opportunities with some major OEMs," LaGrange explained. "But we didn't want to go that route. So we found other avenues to keep the company growing until we found a niche [in heavy equipment] that fits us best."
In other words, the company seeks customers that allow Blessing to maintain a broad customer base. This usually means lower-volume work, but it doesn't mean that Blessing stays away from large companies. For instance, Blessing partners with construction equipment giant Terex Corp., an entity that really operates as a multitude of companies, with more than 20 divisions serving an array of infrastructure-building fields. Blessing specifically does business with crane OEM Terex Waverly along with Terex Reedrill and CR Terex, which make drilling equipment for the mining, construction, and utility sectors. Like Blessing, LaGrange explained, all those divisions diversify Terex, entrenching the corporation in businesses that meet basic human needs: building power generation and transportation infrastructures. These needs also demand what Blessing has become good at: heavy-plate cutting, bending, and welding.
Lower volumes for customers who need quick turnaround drive the business, because managers know that business is likely to stay stateside. "When people first jump into China, they see the price is great," LaGrange explained. "But little do they realize what they're getting into. They have to buy in volume and deal with extended lead-times, not to mention the inventory that has to be held, rather than having your orders built as you need them. It's a matter of knowing if you can deal with those drawbacks and still make a profit." Considering the time and money it takes to send parts across an ocean—especially the large parts required for heavy equipment—staying stateside for many makes the most business sense. The companies that think this way, LaGrange explained, represent Blessing's niche.
Establishing the niche, the company did go over some managerial road bumps. When the company was first emerging from Chapter 11, Blessing took work from its two old-standby customers, only to find the orders cut short a year later. "At the time we said to ourselves, ‘We're not going down that road again,'" LaGrange recalled.
He added that the misstep was understandable. The company needed cash, so turning down work was a tough choice to make. To dig itself out, Blessing took a leap of faith into the ideas behind strong marketing—marketing geared toward the customers Blessing needed to build a stable business.
In getting the new customer base, "the biggest challenge was getting to know what those customers really expected and the price ranges where we could compete," LaGrange said. "We were launching our marketing program during hard times, and a lot of shops were looking for the same type of work."
LaGrange knocked on a lot of doors, visited tradeshows, and did his research on the various supply chains, and today the shop's full of mostly lower-volume work from myriad customers. In Blessing's case, a big mix of small orders makes a more stable whole.
Attaining a broad customer base took more than persistent legwork, though. "The mindset of the company had to change," LaGrange said, "particularly after everyone was used to dealing with mainly just two clients." Managers had tight relationships, knew the products and the price ranges for those products, and knew what customers expected from Blessing. Having only a few major customers made the business easier to manage, except, of course, when those customers pulled their work.
LaGrange added that the move toward diversifying has fostered a more dynamic shop floor. "People are no longer doing the same thing day in and day out," he said, but instead are challenged by a stream of new jobs.
During the 1990s boom, the company operated in its original Fayette facility plus three small buildings in the area to handle the overflow. In the late 1990s, United Farm Tools in Oelwein, about 16 miles south of Fayette, shuttered its doors, and Blessing took over the building. The 40,000-square-foot plant was already set up for heavy-plate fabrication, so Blessing moved all mild steel jobs thicker than ¼ inch to the new facility. The 25,000-sq.-ft. Fayette building handled thin mild steel down to 22 gauge, as well as all stainless work. Light- and heavy-gauge fabrication "are two different animals," LaGrange explained, so splitting them between the two buildings made sense.
The shop sends light-gauge metal through its TRUMPF TLF 2600 Turbo laser; Strippit 1250M CNC turret punch; and Amada 100-ton, 10-ft. CNC press brake. Heavier gauges require the company's MG Systems plasma cutting system and Wysong 400-ton, 16-ft. CNC brake.
The part flow arrangement accommodated the new, diverse customer base nicely. The Fayette facility houses the company's lasers and lower-tonnage press brakes, and work-in-process is moved in kits on pallets and skids. The Oelwein facility houses the company's plasma machines and higher-tonnage brakes. Cranes or fork trucks carry heavy-gauge plate for rock-crushing, drilling, bridge-building, and other heavy machinery.
Between about 1996 and 2002, "we had average annual revenue of about $2 million to $3.5 million," LaGrange explained, chuckling. The average doesn't reveal that in 1999 the company took in $9.8 million, and that in March 2000 it filed for bankruptcy. Averages hide a lot. "Go figure," he said.
Over the past five years, the company has grown between 13 percent and 17 percent annually. It brought in $7 million in 2007 and is projecting about $8 million this year.
Learning from the past, LaGrange said the company is careful not to grow too quickly. Managers think twice about getting an order that would dramatically jack up annual revenue because, in turn, the new work would require additional investment in machines, material, and people—and what if that large contract disappeared?
Like a savvy investor, the company has garnered a diverse portfolio. So many customers may take more effort to manage, but, LaGrange said, for Blessing the extra work is more likely to bring long-term success.
"There's such a thing as excessive, uncontrollable growth," he concluded. "We know. We learned from the school of hard knocks."
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