Lessons learned lead to big bounce back
A&E Custom Manufacturing avoids mistakes of the past, makes investments for the future
A&E Custom Manufacturing was on the ropes financially in the early 1990s, but the lessons learned during that struggle helped to put it in a position to rebound strongly after the downturn of 2009. In fact, they have been steadily rebuilding the business since the second quarter of 2009 and haven't looked back.
“Mistakes are the portals of discovery.” Irish author James Joyce said it, and everyone validates it every day. Some don’t care for the discovery process, while others recognize the opportunity for self-improvement.
Steve Hasty, president, A&E Custom Manufacturing, Kansas City, Kan., is a part of the latter group. He and his talented team have built A&E to the point where it was approaching a record year in revenue toward the close of 2011. It hasn’t always been a smooth ride, but company management has made some wise decisions in recent years, which has allowed it to survive tumultuous times, even the last downturn.
Hasty didn’t always have the luxury of business experience. He jumped into the metal fabricating business with the purchase of a tool and die shop back in 1980. He learned machining and leadership skills while serving in the U.S. Marine Corps and working for a truck and trailer manufacturer. He didn’t see a career path for himself at the manufacturer, so he looked to forge his own. Following a leveraged buyout of toolmakers Arnold & Eugene, financed by a second mortgage, A&E became his business, and the forging process had begun.
“I was very naïve,” Hasty said. “I had eight employees and three days of business [backlog]. I had to hit the ground running.”
Over the next 10 years, A&E grew to earn about $1 million in sales. The company had developed a reputation for good work, and the relationships were thought to be solid.
A couple of relationships actually weren’t, however. Two customers left A&E with thousands of dollars in parts and no intention of paying the company. The timing and shortage of incoming cash were too much to overcome. A&E had to file for bankruptcy on Oct. 19, 1990.
Hasty didn’t run from the honest approach that he had taken when it came to running his business. He let A&E’s suppliers know that the company was filing for bankruptcy a week before it occurred. He paid the suppliers cash in the ensuing weeks, as the company rebuilt.
The suppliers recognized the effort and stayed with A&E. Hasty said that six months later, A&E was back on 30-day terms with those same companies.
“We are the one in 10 that successfully comes out of bankruptcy. At least, that’s what my attorney told me when he took his final retainer fee,” Hasty said.
It was undoubtedly a stressful time for all involved, but the whole ordeal also was an opportunity for discovery. When asked what he learned, Hasty said, “I just had to learn what God had planned for me.”
Diversification definitely was on the agenda. A&E had been built on its stamping expertise and its tooling capabilities. As a result, the company wasn’t involved in low-volume, high-mix jobs. That was to change, however.
At the turn of the millennium, A&E bought a waterjet and an old press brake. It also started offering welding services.
“A customer finally said, ‘If you would buy that laser that you keep talking about, I’ve got a million dollars in parts for you to fabricate,’” Hasty said.
In early 2001 A&E heeded the customer’s suggestion. It moved into a new facility and purchased its first laser cutting machine. It also added a 10-foot press brake, which was much larger than the small one it had previously.
“We were able to get laser work right away,” Hasty said.
The transformation from a tool and die and stamping shop to a full-fledged metal fabricator was well under way. So was A&E’s maturity in operating as a business.
This was no longer a company that ran solely on a handshake. It was about long-term security. A customer’s ability to pay was as important as the potential size of the metal fabricating project. Cash was needed to run a business, not good intentions.
That conservative approach—and A&E’s move away from doing only metal stamping—served it well during the 2000s. It had achieved record revenues, approximately $6.5 million per year, and 40 employees by 2008.
“We set sales goals, and we plan for capital equipment and personnel decisions when we budget,” said John Jaixen, A&E’s general manager. “Then you have to see the sales coming before you can react to that. Otherwise, you end up hiring and laying off. We try to avoid the layoff part of it, of course.”
In January 2009 the lessons learned from the past were put to the test as the A&E team faced the challenge of the Great Recession.
“People asked me how the recession had impacted us,” said Hasty, as he recalled conversations from the close of 2008. “Well, we had been too busy to notice.”
By the third week of January 2009, the business had not bounced back from a beginning-of-the-year lull that many metal fabricators plan for. The management team took immediate steps to ensure that its expenses were cut aggressively to match the expected drop in revenue. Everyone took a 10 percent cut in salaries and wages, and the company reduced its workforce to 34 employees.
The quick action to soften the blow of the huge revenue drop worked. Sales rebounded in the second quarter in 2009 and have increased each quarter since.
Actually, that first quarter of doom has paid off in other ways too: The A&E workforce has become more versatile. Welders run machining centers, press brake operators run hardware insertion machines. No one has just one job assignment.
That employee flexibility allowed Hasty to reward everyone even in the face of the pay reduction by giving them a three-day weekend every other week. Everyone worked four nine-hour days, but on Friday only half of the workers showed up for duty. That’s because those workers not only had worked 40 hours the week before, but also an additional four on the previous Friday. Those additional four hours on that Friday, however, went against the following week’s payroll, allowing the workers to work 36 hours and enjoy a Friday away from A&E. When the schedule was in full swing, one-half of the workforce was enjoying a Friday off every other week.
Even when pay levels were restored in the second quarter of 2009, A&E decided to keep the same work schedule.
“We have kept the same schedule because the employees seem to really like it. It also affords them more opportunities for overtime now that we are rolling again,” Jaixen said.
The big bounce-back that has been occurring since 2008 has reinforced the fact that A&E is growing because of the varied talents of its employees. Like so many other metal fabricators looking for the right employees, A&E isn’t going to hire just anyone to fill a position. The company has prospered because the current staff is marked by deep and varied skill sets.
The employees that A&E has been lucky enough to add in recent years have contributed greatly to the success of the company, Hasty said. The downturn has helped to unearth some very good welders, boosting the department’s ranks to 14, and also some administrative talent.
But probably the most powerful impact has been the introduction of automation.
“That’s where it’s hard for a small 10- to 20-man shop. They can’t afford to invest in the automation because of its high cost,” Jaixen said. “We aren’t that much bigger, but if we can afford to do it and make it work, I think it gives us a huge edge.”
A&E figured it made sense when it purchased a 4-kW Amada laser in 2005 and then another one in 2006. Both are equipped with automated blank and cut sheet removal. Bill Goodman, A&E’s chief financial officer, said he thinks A&E is the only fabricator in the Kansas City metro area that has that type of automated material handling on its laser cutting machines.
A&E took another big step when it decided to invest in an automated bending cell (see Figure 1), a move that not too many fabricators in North America, let alone Kansas City, have made. The company was asked to quote on a job to produce an aluminum part for an electric vehicle. The job, which calls for more than 10,000 parts per year, was an intricate one, requiring multiple bends. Amada’s Astro 100NT started to look like a good investment after the customer rejected the $2 million tab to create stamping dies to deliver the complex forms, and A&E grew disenchanted with the idea of buying a couple of press brakes and trying to hire hard-to-find press brake operators.
“I probably won’t buy another press brake without that [automation],” Hasty said.
While some metal fabricators find a robot’s relationship with a press brake to be very intimidating, A&E’s shop floor crew have embraced the challenge (see Figure 2). On the floor for just about six months, the robotic press brake’s sweet spot is parts with at least three bends, that come in lots of 25 to 50, and that are repeated at least once per quarter. Programmers continually look for jobs that fit this sweet spot.
Additionally, the operator who runs the robotic press brake actually can tend to other machines. For example, a PEMSERTER® hardware insertion press sits near the press brake, and the operator can work that while also moving parts from the automated bending cell.
A&E also has invested in other areas (see Figure 3) to decrease job turnaround time. The pressure to deliver parts in a couple of weeks, not the four to six weeks as had been the case in the past, is real.
“It used to be that price pretty much drove it, but now price has become almost secondary to turnaround time,” Jaixen said.
The plans for investment didn’t end with the robotic press brake. A&E was having a robotic welding cell installed early in the fourth quarter of 2011 to assist with the fabrication of parts for petroleum storage tanks and are currently installing a laser/punch combination machine with an accompanying material storage tower.
Cash Is Still King
To make those types of investment, A&E’s management team has to ensure that the purchases make financial sense. As the past has taught everyone, cash flow is the lifeblood of a successful metal fabricating company, especially during slow times.
A&E is upgrading its enterprise resource planning software, migrating from Epicor®’s Vista™ software to its much more robust Epicor 9 product. To accommodate the move, A&E is installing new servers and setting up a dual-server architecture for faster and more reliable computer processing power.
When the software is fully operational and the data migration has been completed, Hasty said he expects scheduling to become much smoother. Today A&E struggles a bit to maintain its high on-time delivery rate when business really picks up and the shop floor is abuzz with activity.
The other improvement is expected to come in the area of inventory control. A&E has the typical inventory concerns that most fabricating operations have with raw material, but the company also has a sophisticated inventory program with some of its major customers (see Figure 4). The new ERP software’s inventory control programming, hand-held bar code readers that will be introduced on the shop floor, and tablet computing devices that will replace less-than-mobile PCs—all promise to bolster the company’s inventory improvement effort.
“That’s one of our weak spots now, the inventory control,” Jaixen said. “And once we get this implemented, we should be able to tell where everything is at all times. It will eliminate one of the wastes—according to lean [manufacturing principles]—as far as looking for stuff.”
Multiple Talents, Multiple Opportunities
Expanding fabricating capabilities, investing in equipment to expand manufacturing capacity, and implementing software and processes to improve customer service even during growth periods—all are important goals in preparing A&E for an exciting future.
One project, which the A&E of 10 years ago was in no position to take on, is an example of just what the company currently can offer. It is on the verge of becoming a contract manufacturer of a power source that can deliver air, electric, and hydraulic power in a package the size of a small conference table.
The project began about five years ago with simple hand sketches shared between A&E designers and the man with the vision for the portable power source package. Since then A&E has made about 120 units, including multiple spinoffs, ranging from a track-based unit for use in the railroad industry to more robust units for the military.
All sheet metal parts are either laser-cut, punched, formed on a press brake, or undergo some combination of processes. A&E designers handle all component design, including some dramatic changes for some of the specialty applications, and the company also takes on all assembly responsibilities.
If everything falls into place, A&E is ready to fabricate up to 40 of these units per month. That’s no small feat for a company that was really only a stamping shop (see Figure 5) a little more than 10 years ago.
“We’re a hybrid,” said Clark Ward, who heads inside sales for A&E. “There are very few companies that I’m aware of that have the stamping capability, fab capability, and the tool shop capability.”
That’s the sort of thing you can find when you take time to peer through that portal of discovery.
The FABRICATOR is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971.