Sustainable growth in the sunny Southwest
Diverse, large projects fuel growth at Arizona fabricator
You might have noticed the employees of CAID Industries Inc., Tucson, Ariz., walking around FABTECH 2013 with bright yellow shirts indicating that the fabricator was hiring. The company is looking for the right talent to help turn the $40-million-a-year business into something much larger.
Several attendees at last year’s FABTECH® weren’t dressed for November in Chicago. They walked McCormick Place’s well-heated halls wearing T-shirts depicting a large sun (see Figure 1) behind bold fonts: “Come to the Arizona sunshine! CAID Industries is hiring! CWI, Engineers, and Welders. Ask me!” Tempting words.
The company was (and is) seeking certified welders, weld inspectors, and project managers wanting to move to the warmth of Tucson, Arizona, where a metal fabricator, CAID Industries, calls home.
They probably weren’t the only fabricators at the show needing help, but the need represents one part of a multifaceted strategy for the company, already averaging more than $40 million annually, to consistently produce annual sales between $50 million and $60 million.
Company managers have worked to diversify to smooth out the ripples of varying demand. In contract metal fabrication, a diverse customer portfolio equates (ideally, at least) to better stability and sustainable growth, which in turn attract talent—that, and wearing shorts in January.
The company’s roots go back to the 1920s to a metal construction and plumbing firm called Hearn & Caid. After 20 years, W.P. Hearn, a plumber by trade, left to get into the appliance sector, while his business partner, Thomas Arthur Caid, a sheet metal tradesman, officially launched T.A. Caid & Sons in 1947 with his five sons. The company started in a small building in downtown Tucson, on a street with roofing contractors, plumbers, warehouses, and the like.
From 1947 through the 1950s it remained a small shop focusing on ventilation and architectural, light-gauge sheet metal work for commercial buildings. But starting in the 1950s and 1960s, Hughes Aircraft (later acquired by Raytheon Missile Systems) came to town to build missiles in Tucson, and CAID became a key supplier. A few years later, construction began in the region on a series of 17 missile silos, part of the Cold War defense system. A great deal of the metalwork for the bunkers and other structural elements came from CAID.
The Mining Effect
Around that same time also came Arizona’s copper mines, which forever changed the fabricator’s future. CAID performed both shop and field fabrication work at the open-pit copper mines that began to dot the state. And in the summer of 1973, William Assenmacher arrived at the company’s facilities near downtown Tucson.
Throughout engineering school he had undergone an alternating work-study program: a semester of professional experience followed by a semester of study, and so on. He arrived at CAID as a fifth-year senior and never left. Today the 41-year company veteran is president.
1973 was a good time to start. That year a major mining customer approached the fabricator about a corrosion problem with a copper assembly called a “mother blank.” This was a key technology in the refining of copper and other nonferrous metals (see Figures 2 and 3). This process starts with a smelter that casts a copper billet into a 2-in.-thick slab called an anode. That slug of copper still has other elements buried inside, like gold, silver, lead, and arsenic. And so the refining begins—or, technically, the electrorefining, which uses electroplating to extract pure copper from the mother blank of copper. After the anode blank is dipped in an acidic electrolyte solution, current is sent through it, and the ensuing corrosion deposits a thin layer of near-pure copper onto the cathodes.
“These blanks would get corrosion between the bolted bus bars, and the sheets that would electroplate,” Assenmacher said. The corrosion caused pitting, or small cavities, in the copper. When the copper deposits were transferred from the anode, some copper remained stuck in those cavities.
So in the 1970s CAID patented a cathode assembly that avoided a bolted connection altogether. It instead involved welding copper to stainless steel using a unique filler metal and gas tungsten arc welding—not the easiest of tasks, considering the differing metallurgical properties and melting temperatures of copper and stainless. Welders developed the process over several years and eventually found a consistent way to weld stainless sheets and copper bus bars together.
In the following years customers began using a related copper refining process, electrowinning. Instead of refining copper after smelting, electrowinning submerges the copper in a leach solution. This new process increased the demand for CAID’s dissimilar-metal welding.
“There are competing technologies today,” Assenmacher said, adding that similar techniques are used for refining other nonferrous metals, including cobalt and nickel. “But we have built several million of these units to support the work in Tucson, and we also export worldwide.”
“When you have large industrial customers in your backyard, and things wear out, it is a great opportunity to help them with their problems,” Assenmacher said. “They have a tendency to start replacing OEM equipment, and to some degree you become an OEM yourself.”
This could have easily pushed CAID to become primarily a mining industry supplier, especially considering the product mix three decades ago, when cathodes alone made up half of the fabricator’s business. But managers didn’t take this approach. “In the 40-plus years I’ve been here, we have never chased after just one product line or one customer base,” Assenmacher said.
This occurred in part because some of the company’s core customers required various metal fabrication expertise, which opened the door to other industries. The thin and thick plate work in mining led to process piping, tank, and vessel work. The armored plate work for mining chutes and hoppers gave the company a footing in the armored-plate arena, eventually leading to contracts involving armored plate for military vehicles. All the while the firm kept its foothold in commercial construction, including architectural, artistic, and ornamental fabrication (see Figure 4), as well as specialized construction work, such as providing the steel structural components for research telescopes that dot the mountaintops of the Southwest. CAID also does a fair amount of work for the renewable energy sector, including wind and solar.
On top of all this, the company opened a facility in Chile to offer products to the country’s mining business. “The government of Chile likes to see local content,” Assenmacher said, “so we opened the facility to provide manufacturing and service work in Chile to meet customer needs.”
As the variety of work grew, so did its complexity. Project work in mining, the medical field, and other sectors often called for extensive engineering involving motors, drives, robotics, and controls—automation engineering beyond CAID’s expertise. So the firm farmed out the automation work and kept the fabrication elements in-house.
When the Great Recession hit southern Arizona, it affected some industries more than others, and one of the most affected was the area’s burgeoning solar business. Potential projects abounded, but thanks to the mess in the financial system, financial backers hadn’t pulled the trigger to set those projects in motion. The result: Some local automation engineers found themselves either underemployed or out of work entirely.
“Three key automation engineers approached us to talk about finding investors or business partners,” Assenmacher recalled, “and it immediately seemed obvious: We could expand and add these underemployed people with automation expertise to our company.”
Whence came CAID’s automation division, which launched about a year and a half ago (see Figure 5) and designs automated machinery for a variety of customers. So now when a project involving automated or mechanized machinery comes in the door, the fabricator need not farm out the automation work.
Today’s project portfolio runs the gamut. The fabricator performs architectural work, including artistic and ornamental fabrication, both in-house and on-site (though for many projects, especially artistic ones, the company uses local installers to erect the structure). It offers industrial fabrication, which includes process piping, vessels, skids, and tanks. It performs contract sheet metal fabrication, including extensive enclosure work. And it continues to offer assemblies and products for the mining industry, including cathodes, the product that sent the company on its growth path several decades ago.
CAID is also in the middle of a major expansion, adding 50,000 square feet of space in a new building, bringing the total manufacturing space up to 266,000 square feet. The company has eight buildings on its campus, five of which are used for manufacturing. In one building is a centralized parts-making department with four lasers, two plasma systems, and one waterjet, along with numerous precision press brakes. These workpieces then flow to other facilities dedicated to certain product families.
Smoothing the Demand Cycles
CAID faces a challenge common to most metal fabricators: demand variability. Several years ago the company had about $10 million worth of military work annually, but those contracts ended. At this writing, the fabricator has several large orders from the solar industry that together amount to about $2 million. In four months’ time, those orders will be gone.
The company has a bit more demand predictability than a typical job shop. Much of its revenue comes from large, project-based work, often scheduled to be delivered at specific times to customers, so workers can replace worn machinery during scheduled shutdown periods. This work demands that CAID deliver its products on time. But it also gives managers a better view of future business, because customers budget for and schedule equipment upgrades a year ahead of time. CAID may not have purchase orders months ahead of time, but it still has a good idea when those POs will be coming.
Although these long-term projects have been central to its growth, the fabricator doesn’t turn down certain requests for short turnaround work either. Still, those jobs represent a small but important part of CAID’s product mix.
So how does the company tackle this scheduling challenge? First, Assenmacher said, is to utilize information technology. CAID relies on a custom scheduling system built around its unique capabilities, product mix, and customer demand cycles. Second, he said, is to build a diverse project portfolio to smooth out the diverse demand cycles: When the demand from one sector wanes, demand from other sectors rises. That’s the planned intent, at least.
t’s a common goal, but CAID’s approach is a little less common. The fabricator avoids what business watchers have come to call a “customer relationship of convenience.” As Jeff Mengel, partner and leader in Plante Moran’s manufacturing group, put it in a 2012 interview, “If a company is innovative, it can develop intimate customer relationships that aren’t governed by mere convenience. This occurs not just by being physically close to a customer, but through the sharing of knowledge and supply chain transparency.”
A convenient business relationship is one in which the OEM buys parts from a fabricator for convenience’ sake. The price may not be the lowest in town, but quality parts continue to arrive on time. As long as the OEM’s revenues remain steady or grow, it doesn’t scrutinize the relationship. But if business falls—as it did for most in the Great Recession—the scrutiny begins, and those convenient relationships are the first on the chopping block.
What remains is the “intimate” relationships, business relationships that Mengel described as truly inconvenient to break. Manufacturing or design expertise can help build this kind of relationship, as can patented product technology. So can help with logistics, like having the ability to source, warehouse, distribute, or ship products directly to customers’ customers.
CAID has followed all of these approaches. It provides design assistance. It has patented products, including its cathodes. And for one of its major customers, it warehouses and provides logistical support for several product lines, a service that would be impractical for smaller competitors. Warehousing allows the company to build certain products in larger volumes, which in turn leads to suggestions and changes to aid manufacturability, such as common plate thicknesses or grades across a product family.
Ultimately, all this helps smooth the varying demand cycles, avoiding the feast-or-famine environment that can be common in contract metal fabrication.
Why Talent Matters
No matter how smooth demand cycles are, a shop can’t avoid bottlenecks without skilled talent—and this goes back to those sunny T-shirts CAID employees wore at FABTECH. Since 2012 the company expanded its in-house training program to increase welding expertise, particularly for GTAW of aluminum. But the company still has a need, particularly for code-certified welders, be it ASME Section IX for pressure vessels, the structural welding code from AWS, or other standards.
“The intent is to find underemployed people who have a reason to move to the Southwest,” Assenmacher said. “Tucson and Phoenix are considered major growth areas. I know [this winter] much of the country was knee-deep in snow. And I can also tell you that for most of our winter, on most days it was between 75 and 80 degrees.”
Photos courtesy of CAID Industries Inc., 2275 E. Ganley Road, Tucson, AZ 85706, 520-294-3126, www.caid.com.
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.