3 distinct business changes put Harco Metal Products in a good position for future success
June 12, 2007
As customers look for ways to add to their bottom-line performance, Harco Metal Products, Tempe, Ariz., has stepped forward with services that make the tube fabricator more valuable to its customer--and harder to replace.
Jay Hall, president of Harco Metal Products Inc., Tempe, Ariz., laughs when asked if he ever thought China and other countries would have affected his business when he jumped into tube fabricating 19 years ago.
"Then I told them it was a nonissue. I didn't even know they existed," he said. "Boy, has that changed. It is a huge difference.
"Obviously, the global market in today's world means everything—how we buy material, how we fabricate components, how we look at automating," he continued. "Our competition is no longer a couple of companies in California and Texas."
As the world has changed, so has Harco's approach to fabricating. As other fabricators wondered where tomorrow's customers would come from, Harco went south. As consolidation occurred among North American OEMs, Harco sought to develop its own tube-based product lines. As customers look for ways to add to their bottom-line performance, Harco has stepped forward with services that make the tube fabricator more valuable to its customer—and harder to replace.
A vendor-managed inventory program at its Alabama facility has helped Harco save its customer thousands of dollars in inventory costs.
Hall grew up around Detroit and the city's manufacturing muscle. He said he always enjoyed manufacturing and machines and theorized that's why he's most comfortable as an entrepreneur in an industrial setting.
Before setting up shop in the Phoenix area, he was involved in cabinetry design, manufacturing, and distribution. Well, that's downstream in the construction cycle, and trying to collect money and accommodate all the construction that's already taken place are not exactly enjoyable exercises, according to Hall.
Tube fabrication, however, presented some unique opportunities. The West didn't have too many tube fabricators, and customers would want him involved earlier in projects, rather than dumping everything on him at the end, when most of the major design decisions already have been made.
With the opportunities in mind, Hall purchased a business that cut, bent, and threaded conduit for electrical contractors. Because the soil in places such as Arizona and Nevada is so acidic, wire buried in the ground has to be run through metal conduit, not PVC, to electrical boxes.
Harco Metal Products wasn't exactly where Hall wanted it to be, but he now was able to learn about tube fabricating and work toward purchasing more advanced equipment to serve a wider customer base.
Almost 20 years later, Harco is closer to becoming the company it needs to be to survive. All during this time, it has maintained a focus on the customer it wanted to serve.
"We don't try to be everything," Hall said. "We do stainless steel, steel, and aluminum. We fabricate in the small tube range, from 1⁄4 inch to 2 inches. We don't do a whole lot beyond that."
He's talking about tube size, of course. The business is doing a whole lot more.
This wheelchair base from Kids UP Inc. features a spring attached to the bottom as part of a new design for a spring-loaded seat that will help wheelchair users to stand up more easily when getting out of the chair. Harco believes this project is an example of the low-volume, highly intricate projects that will become part of the company's job shop business in the future.
Having multiple locations is not something a business owner necessarily relishes. More locations mean more headaches. But when one of your largest customers announces that it is consolidating manufacturing operations from Arizona to an existing facility across the U.S., that business owner might be more open to the idea.
Such a customer move got Hall to thinking. If the longtime customer wanted Harco to support their manufacturing operations in the Deep South, what were the options?
"When we first decided to go out to Alabama, we looked at two scenarios: What if we do, and what if we don't. And the 'what if we don't' was a lot scarier than 'what if we do,'" Hall said.
So three years ago, Hall asked his right-hand man, Jeff Kramer, to move out to Alabama and establish roots. Soon afterward, the Southeast Division of Harco Metal Products was open for business in Fort Payne, Ala.
Hall estimated he sent a third of his tube bending, cutting, and forming equipment to serve this one customer.
Hall made a greater commitment to his Southern location almost a year ago when a major automotive program ended. The Phoenix location watched 20 percent of the company's job activity vanish with the end of that automotive job. As a result, Hall elected to downsize in Arizona and send more equipment and other fabricating jobs that logistically made sense to Alabama and a new, larger building.
Harco now has 10,000 square feet in Tempe and 20,000 square feet in Fort Payne, and 10 employees work at each location.
This is what the wheelchair base from Kids UP Inc. looks like when finally assembled.
"We are no longer doing work just for that one customer [in Fort Payne]," Hall said. "We started this year with about 75 percent to 25 percent in favor of that one customer, and by the end of this year, it will be about 40 percent to 60 percent because of new contracts.
"[This shift] allowed us to build up and get our feet wet out [in Fort Payne]. Then we scaled down here and shifted equipment out there where our costs are lower."
The move to Alabama was a gamble that has paid off immensely for Harco.
"There are more customers within a 250-mile radius of my Alabama facility than I will ever see in my Arizona facility. They are big companies as well," Hall said.
The Tempe location has evolved into an administrative center and a specialty fabricating shop, according to Hall. Some high-volume jobs still are done in Tempe, because customers are close, but most of the fabricating work is more technical in nature and requires many secondary processes and some assembly work. In fact, most of the equipment now is located in Alabama as it emerges as the flagship fabricating facility, but the Tempe shop still maintains CNC bending and cutting capabilities.
That's good because Harco's Tempe shop is emerging as a sort of product design and development facility that also fabricates low- to medium-volume specialty parts.
Harco fabricated the paraglider motor mount so that customer AeroThrust Technologies LLC could market its ZG-Mount™ as the only engine mount that could accommodate a variety of motors and be attached to many different powered paraglider frames. The rear assembly for the powered paraglider was formed on an Eagle Bending Machines roll bender.
Harco is getting more involved in helping others develop their own tube-based products.
"As a job shop, you can't always steer your own future. You are always waiting on how good someone does marketing their own product. And if they aren't any good at that, you don't sell much," Hall said.
Just as Hall saw opportunities in tube fabricating, he sees an opportunity in some of the wild-eyed inventors who contact him for help in building the next great mousetrap.
"We see a large share of inventors, wannabe entrepreneurs. Over the years I've gotten very good at picking out the ones that have a chance and the ones that don't," he said.
One that definitely worked was a relationship with a powered paraglider instructor from Tuscon, Ariz. He had been involved with importing and distributing buggies and scooters from overseas sources and wanted to start manufacturing his own line of paragliders. A Web search connected him to Harco.
Harco fabricates the circular propeller housing, bent on an Eagle Bending Machines roll bender, and the engine mounts. Harco has been able to contribute tube and metal fabrication expertise that has led to the creation of an engine mount that can be used on any of the three paraglider designs and can accommodate many engine styles.
A business relationship between the two parties is now a full-fledged business partnership—AeroThrust Technologies LLC. Hall handles the design, fabrication of components, and the accounting, and his business partner handles design concepts, design approvals, final assembly, and sales.
Hall expects AeroThrust sales to top $500,000 and possibly more. At the time of the interview, AeroThrust was on the verge of selling a very large contract to a foreign military service.
That's not the only thing that Harco has in the works. Hall is in negotiations with an entrepreneur to become a strategic partner with a company that is developing a product called the Windflex, a self-correcting sign.
The sign design features a C-shaped holder made of thin-gauge aluminum tubing that sits on a pole of similar material. A plastic sign sits in the C-shaped holder and is connected to the holder by brackets that allow the sign to swing as the wind or other forces set the sign in motion.
The sign comes in about 10 different sizes, from small holders that could be used as endcaps on aisles in department or grocery stores to larger holders that can replace traditional real estate signs.
Even with this new activity, Harco is still about tube fabricating.
"The product lines that we are focusing on are all tubular-based. We have to be creative about where the opportunities are," Hall said.
Opportunities may not even result from shop floor activity, but from ancillary activity. For example, Kramer has devised a vendor-managed material program out of Harco's Alabama facility for one of its largest transportation industry customers.
The truck manufacturer no longer stocks tubing material. Harco delivers it when needed.
Because Kramer has developed such a good relationship with the customer's purchasing department, Harco is updated every day as to what is scheduled for production. Harco personnel make note of the trucks being assembled, create kits from the more than 500 SKUs it fabricates for the customer, and delivers the kits for next-day usage.
"We have gone from two or three turnovers a year the way they were doing it to two to three turnovers per month [on our end]," Hall said. "We are saving them an estimated $200,000 to $250,000 annually in saved inventory costs and by eliminating the purchasing of obsolete parts."
Harco also offers design services, which many customers—even larger companies—use. The company now has a full-time SolidWorks programmer to handle the increased requests for drafting assistance.
Lo and behold, Harco is even investigating China as a low-cost supplier of less complex fabrications to supplement the company's fabricating offerings in North America. Hall visited the country this spring in search of potential strategic alliances.
Hall probably didn't envision tube fabricating being this complex of a business, but he doesn't seem to mind.
"I'm more excited about what I'm doing today than ever before. It's so much more fun. It challenges me a lot more. I've got to think about how I'm going to position myself in manufacturing," he said.
Harco Metal Products is in a better position to survive today thanks to changes it has made than if no changes were made at all.