December 12, 2006
When Crystal Distribution Inc., a manufacturer of curb adapters and related products, was challenged by the logistics of its facility, President Pat O'Brien had three choices: lease a different building, buy a different building, or build a new facility. Deciding to build a new facility made the most sense and ended up giving the company's manufacturing operations a whole new flow.
When an HVAC unit is replaced, often the new unit doesn't match the existing curb size and drop locations of the existing unit. To meet the new unit's specifications, a curb adapter is custom-made.
For more than 13 years, Crystal Distribution Inc. (CDI) has been manufacturing curb adapters and related products, including Convert-A-Curb®, ERV/RTU combination curbs, and multizone curbs, for such situations.
To be a successful curb adapter manufacturer, CDI guarantees it will deliver fully assembled curbs and curb adapters in five days from order to shipping. The manufacturer says it has the fastest turnaround in the HVAC business, but started facing production challenges because of insufficient space in its 21,000-square-foot Maple Grove, Minn., facility.
"Logistically it was becoming a real challenge," said Pat O'Brien, president of CDI. "We leased four bays located at different ends of the building, which meant that we were constantly moving products and materials from bay to bay. We just didn't have the right configuration to make production run as efficiently as it could."
To improve its structure, CDI had three options: lease, buy, or build a new facility.
"In a business like accounting, you can literally unplug your computers and leave tomorrow [without] making major physical improvements to a building. We have large machinery anchored to the floor, plugged in, etc.," said O'Brien. But when leasing a building, he said, companies don't benefit from making physical improvements when it's time to leave and make the next move.
With that in mind, the company decided to build.
"In the long term, we own the building personally, and it's an investment," O'Brien said. "There are some tax and financial incentives to building and owning your own facility."
From there the company moved forward with the help of savings it already had established for the purpose of moving.
"We knew we had a three-year outlook in which we were going to build or buy a building," he said. One year before the planned move, the company sent proposals to banks with the hope of securing conventional or Small Business Administration-type financing.
"We had to put about 10 percent in out of our own pockets for the project, and we knew there were going to be moving costs, new furniture, and things like that, so we knew we had to plan for all of that ahead of time," O'Brien said.
The next step was to shop for a contractor and site for the new building. Two of the sites the company considered were owned by construction companies, so buying either site meant having to use the construction company that owned it. CDI also thought about moving to Elk River, Minn., which offered tax abatement financing. Monticello, Minn., was another option—the city had inexpensive land, but no tax incentives.
Although the Monticello land cost about half as much as the Elk River land upfront, O'Brien said he knew he would get the extra money he spent in Elk River back in tax incentives, so the company decided on the Elk River location.
Choosing a contractor came next. Cost and timing were the company's two biggest concerns. CDI didn't break ground until October 2005, and it had to be out of its current building in May 2006.
Of the five contractors the company considered, three were in the middle costwise, so O'Brien chose the contractor he knew the most about: SourceGroup.
SourceGroup's past working relationship with CDI, its successful track record, and its ability to meet CDI's deadline made the contractor an appealing choice, O'Brien said.
"There were thousands of contractors in the city who could do the project. However, that personal connection is all you have to go by," he said. "You want to work with someone you know, you've heard about, or is recommended to you. When you're selling a service, you're trying to find a connection that will make the project work."
Another decision to be made was lot size, which involved the city of Elk River. This led to discussions about tax abatement financing.
Once negotiations with the city were finalized, CDI worked backward. Often companies buy a piece of land before hiring a contractor, but CDI hired SourceGroup first and then went shopping for land.
"They were helpful in finding the land," O'Brien said of SourceGroup. "Based on how you design the building, there are cost differences between building a square building, a pie-shaped building, or a rectangle. So they were instrumental in helping us get the most bang for our buck."
Logistically, the biggest concern for CDI was to build a facility that would complement its functions and activities. Originally, the company was located in a multitenant building, which meant its three bays were located in two different buildings.
"We started out in one small bay, sharing with someone, and then we took another one three doors down. We took another one four doors down the other way, and we were just broken up," O'Brien said. "Over time we grew and took what was available to us, and it just wasn't very efficient."
In addition, without an overhead crane in the old building, employees manually loaded products onto a truck, which wasn't efficient either.
"We make products that can be 40 to 50 feet long, and it would literally take 12 to 20 people to load a truck," O'Brien said.
On top of that, because of the lack of space, the company had to restrict itself to buying 4,000-lb. skids of steel at a time, even though it would have been more cost-effective to buy larger skids.
Logistics aside, O'Brien felt that his growing staff would also benefit from a more comfortable work environment.
"Since our employees are what make this company a success, it was important for us to design a facility around our employees so they felt comfortable."
SourceGroup and CDI worked together to come up with a design customized for CDI's operations—now and in the future.
"We were dedicated to designing a structure that met their immediate needs as well as where they planned to be in the future," said Dave Link, vice president, SourceGroup. "We wanted to make the building marketable in case Mr. O'Brien ever decided to sell it."
To move in the right direction, CDI first had to get all of its operations under one roof. To do this, it needed more space—it needed double what it had.
The new space can accommodate a crane (seeFigure 1), which one person operates, saving time and labor. The extra space also allows the company to buy 10,000-lb. skids of steel at a time, which is more cost-efficient than smaller skids. The new facility also has higher ceilings, which O'Brien said lets them stack higher and use floor space more economically, increasing the inventory and completed goods the company can store.
CDI also installed a new dust collection system for its welding applications (see Figure 2), as well as a fire alarm system that already has proven its worth.
"We recommended a sophisticated fire alarm and sprinkler system to protect the new facility from possible fires," Link said. "We felt that it was a critical safety feature to have, especially with all the welding equipment they utilize."
Shortly after a new dust collection system was installed, it caught fire.
"No one noticed because everyone had left for the day," O'Brien said. "If it wasn't for the alarm system, our new building would not be standing."
Other advantages to the 32,000-sq.-ft. layout are 4,800 sq. ft. of office space, five load-in docks for shipping, and two drive-in doors for receiving. Located in the back left corner of the facility, the drive-in bays allow trucks to back in physically, to where they are situated under the crane for easy loading and unloading. Three trucks are stored daily at the five load-in docks and filled with finished products. At the end of the day, trailers are cycled and products and materials are shipped.
Overall, O'Brien said, work flow has improved tremendously.
"Everything has a natural flow to it. From the fabrication to the paperwork side, an order comes in at one spot; goes over to the next cube, which is data entry; goes to the next spot, which is the engineering guys; and then when it comes back, it's into the billing department or shipping department. The shop's the same way—it just has a natural flow to it," O'Brien said.
CDI's new facility is impressive not only to its employees, but also to customers, said O'Brien.
"The appearance of the building has had an effect on our customer base," he said. "They see that there are things going on, there's an office, things are happening—that means there is an investment there. There is an aura to what we have here."
For other companies, though, O'Brien advises taking more time. From start to finish, CDI's entire project took a year.
"I know we paid a little more money to get what we did in the time we did," O'Brien said. "We also feel that from a negotiation standpoint with the city [to buy land], we could have done more things. I would highly recommend more time."
In addition, O'Brien said to plan for the unexpected.
"I told people that when we moved, machines were going to get broken, things were going to get lost, things were going to get misplaced. In the long run, it's well, well, well worth the move," he said. "Just be patient. When you move a 30,000-square-foot facility, you're going to run into some issues. Have realistic goals and expectations."
Overall, owning a facility—especially one that matches a company's needs—is an advantage for any manufacturer, according to O'Brien.
"It's exciting to have our customers come in and see the new CDI," O'Brien said. "In the last few months we've closed some big deals, and we are already looking into the possibility of expanding."
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