A little fabricator grows up

“You can’t make a silk purse from a sow’s ear” is part adage and part common sense, but don’t waste your time trying to give this bit of advice to Larry and Gloria Dlouhy. The founders of Superior Tube Products Inc., Davenport, Iowa, have spent 25 years doing just this.

The sow’s ear was a stamping company, Industrial Machine and Stamping (IMS), Rock Island, Ill., which was in bankruptcy when the Dlouhys purchased it in 1991. They kept the company running for a few years while they transitioned its core competence, bit by bit, to tube bending. From an initial staff that included the Dlouhy’s children running small machines in the family garage, the company grew to more than 50 employees running the latest CNC equipment in an 80,000-sq.-ft. building on the outskirts of Davenport. While its focus is bending, the company provides other services, such as slotting, notching, 5-axis laser cutting, and robotic welding, so it can provide a full complement of services, delivering fabricated tube and tubular assemblies.

The company’s recent growth, contributions to manufacturing education, and many philanthropic activities earned it the TPJ Industry Award for 2015.

Origins

The Dlouhys’ venture as entrepreneurs started inauspiciously with the purchase of IMS in 1991. Buying an insolvent company isn’t for the faint of heart, but for a buyer with boundless determination, such a company is actually a good purchase (it can only improve). The Dlouhys had no long-term interest in running a stamping company, but rather saw it as a foundation for a new business. Despite the insolvency, IMS had customers who continued to place orders, so the Dlouhys kept the stamping presses running while they worked on their transition plan.

Formerly the general manager of a sheet metal fabricator, Larry knew the difficulty in procuring bent tube and tubular assemblies, so the plan was to develop a fabrication company to concentrate in this area. Even then good welders were in short supply, and manufacturers were replacing welded tubular assemblies with lighter-weight components, which meant switching to bent tube.

On the surface, stamping sheet metal and bending tube don’t seem to have much in common, but in Larry’s eyes, the processes aren’t very different from each other. Both use tooling and a large amount of force to displace metal. Larry’s experience with all things mechanical spanned his entire life, starting when he grew up on a farm, learning how to coax balky machines to run properly and how to fix the ones that wouldn’t. A stint at hydraulic press manufacturer Williams, White & Co. helped expand his understanding of industrial machines, and in the early days of owning IMS he supplemented the company’s revenue by repairing hydraulic presses in automotive plants around the U.S. Blessed with an innate understanding of mechanical systems and varied experience in using and repairing metalworking machinery, Larry was well-positioned to start working over the sow’s ear.

By 1996 the Dlouhys had invested enough money in tube fabrication equipment, taken on enough tube fabrication customers, and established a solid enough reputation to change the name to Superior Tube Products. The geographic market grew until it spanned much of the middle of the U.S.—the Midwest and the Great Plains states, north to the states that border Canada, and south to those along the Gulf of Mexico.

For the first three years or so, it was a hand-to-mouth existence, Dlouhy said. The company expanded, but like the journey most small businesses take, it wasn’t without its challenges. Long stretches of solid revenue growth were followed by lean times. A few big customers in just one or two industries dominated its order books. Running the business from day to day, and dealing with business cycles and various industry fluctuations, meant that it was difficult to find enough time to dedicate to long-term, strategic planning.

Should the company diversify into additional services? That might contribute to a steadier stream of revenue, but it would risk diluting the company’s core competence. Should it add another shift of workers? Without time to dedicate to solid forecasts, it’s hard to know how many workers to hire. Should it upgrade its equipment? It’s hard to dedicate time to researching equipment investments when navigating a river of orders; it’s hard to justify new investments when the orders are just a trickle.

Guiding a business through its formative years is no easy task, and few last more than a year or two. Dlouhy gives credit for the company’s survival during the first few years, and its many successful years since, to his brother Al. Employed at Superior by day while running his own business at night, Al contributes as much as Larry, if not more, in his knowledge of equipment and tooling.

Figure 1
The need to participate in just-in-time (JIT) manufacturing nudged Superior along the path to developing workcells and one-piece. General Manager Keith Niebur noted that JIT requires carefully controlled processes and consistent results to keep rework and scrap to a minimum. “Just-in-time manufacturing often means having barely enough time to make a part once,” he said. “It doesn’t leave any time to make the same part twice.”

“Our financial system was bleak,” Larry said. “If we didn’t have the money for a project, Al would build or invent something to get the job done.”

“When I need a solution, I just bring the problem to Al’s attention,” said General Manager Keith Niebur. “Then I come back later and it’s done. We call him Dr. Al, and I always advise other manufacturers that they should have a Dr. Al of their own, but they can’t have ours.”

Staffing and Delegating. Most small businesses start with just one or two owners who have every title imaginable: machine operator, accounting clerk (receivables and payables), receiving dock supervisor, quality control inspector, ringing-telephone answerer, vice president of human resources, safety director, purchasing manager, vice president of product development, federal regulations compliance officer, chief groundskeeper, and a few dozen others. Needless to say, time for planning much beyond next month or, in some cases, next week is in short supply. The Dlouhys started delegating some of these duties long ago, but initially it was a slow process.

“In the early days, all 20 people here had to run production,” Dlouhy said. Titles weren’t important then—everyone knew where to find expertise when they needed it—but in the last five or six years the informal system gave way to a structured arrangement with formal titles and clearly defined job duties. Production experience across the board from the early days has proved invaluable.

“These days all of our managers know the importance of moving material out the door,” Dlouhy said. If you’ve never gone home from work with skinned knuckles, dirt under your fingernails, and grease on your clothes, don’t bother to apply for a middle-management job at Superior.

As the company grew, Al’s role also changed. The company hired a skilled laser operator and an experienced machinist, and part of their job was to soak up as much of Al’s knowledge as possible. He’s still involved in designing and building equipment and designing tooling, but if he had a series of informal titles, the progression would be like this:

• The Guy Who Does Complicated Things
• The Guy Who Does Complicated Things While You Watch
• The Guy Who Does Complicated Things While You Help
• The Guy Who Coaches You While You Do Complicated Things and Checks Your Work Along the Way
• The Guy Who Lets You Do Complicated Things and Checks Your Results
• The Guy Who Lets You Do Complicated Things and Checks Your Results Occasionally

A pivotal move, sometime around 2000, was a decision to maximize the company’s ERP system. It had implemented one some time before, but management felt that it was using only about 25 percent of the system’s capabilities. The Dlouhys hired Niebur, who came to Superior straight from college with a degree in business administration. Niebur’s software classes came in handy, and by the time his six-month temporary stint was finished, the owners gained the ability to monitor inventory, track jobs, and keep labor records. In addition to providing a thorough understanding of the various costs involved in running

the business, it gave Superior enough insight to participate in just-in-time programs. Niebur and others also took courses in JIT and one-piece flow to learn how to plan and implement this sort of production.

“Instead of running parts through two operations, for example, one to cut and one to punch, now we handle the part once to do both operations,” Niebur said. For the skeptics at Superior, and even the believers, cutting the labor time in half was an eye-opening experiences and the company has since converted the rest of its production from batches to flow (see Figure 1).

In recent years management also found that it had enough revenue to support a larger office staff. The Dlouhys knew that hiring a cohort of recent college graduates would be the least expensive route, but they also knew that it would be the least productive, so they hired experience. The company now has a chief financial officer who formerly worked for a Fortune 500® company; two estimators, one with a sales background and one with a quality background; a plant manager who formerly worked in construction engineering; a purchasing assistant with a background in transportation and logistics; and a sales and marketing manager with a background in medical device sales.

Figure 2
Superior Tube Products’ largest bender handles ODs up to 10 in. Superior has found that having a diverse set of capabilities, just-in-time manufacturing, a collaborative approach with its customers, and the ability to turn orders around quickly help to solidify customer relationships while essentially nullifying overseas competition.

Their strategy wasn’t just to bring in more people, but to bring people with similarities and differences in all the right places. They sought similarities that would complement the company’s culture—that is to say, they looked for driven, hard-working people—and backgrounds that were as varied as possible, bringing a diversity of education, work experience, and perspectives.

Granted, this wasn’t a snap decision, and it certainly wasn’t the sort of expansion the company could have afforded a decade or two ago. The revenue had to grow before the company could grow like this, but that said, it now is in a position to find more customers, turn estimates around more quickly, and work new sales contracts into the existing production schedule without bogging down everything else along the way. Each successfully launched product puts Superior in a position to bid on more contracts, and the cycle starts over again.

The Dlouhys are ardent believers that the formula for building a small business from scratch—60-hour weeks, a dogged perseverance, and taking small steps to deal with the many obstacles—isn’t the same formula for running a maturing company that has found solid footing and is beginning to take long strides. The recent increase in office staff is part of a transition from a small proprietorship to a professionally managed company.

This isn’t to say that each person has just one job at Superior.

“When we started, everyone wore five hats,” Dlouhy said. “These days most just wear two.”

Sales and Marketing and Sales. Other than a few initial cold calls, many fabricators don’t have a proactive sales strategy, and for many years, neither did Superior. For many small job shops and contract manufacturers, additional sales are generated by word-of-mouth, a satisfied purchasing agent who moves from one OEM to another, and sales growth at the OEM level. Most small businesses are earnest about early sales efforts, but when repeat orders turn into long-term contracts, sales efforts tend to wither.

And then Lisa Wertzbaugher was hired, bringing her experience from the medical device industry. A typical medical device sales call is a high-pressure situation, a matter of catching a surgeon between appointments and making a sales pitch during a 30-second elevator ride or a brisk, 40-second walk down a hospital hallway. Making a lasting impression in a compressed time frame is imperative, considering that every surgeon is bombarded by salespeople.

Wertzbaugher has found that the sales strategy most fabricators use—not too frequent, not too intense—means that making an impression is as easy as dialing the purchasing manager’s number and scheduling an appointment. Granted, this doesn’t lead directly to winning a contract. Persistence and patience go hand-in-hand these days. Customer projects are more sophisticated and require significantly more contact on the front end than in the past.

Superior has made its sales process an integral component of the company’s growth strategy. Diversification is a key element. Just a few years ago, a single industry provided Superior with 70 percent of its revenue and 45 percent came from a single customer. The company has taken steps to find new customers in new industries in an effort to protect itself from booms and busts. Management doesn’t hesitate to point out that dampening the peaks and valleys helps to keep lead times predictable and forecasts accurate, so it actually is a benefit to Superior’s customers as well.

Superior, Mark III

As Dlouhy described the company history, it has gone through three phases. The first was when all 20 people had a hand in producing parts and getting them out the door; the second was hiring middle managers and office workers, people who didn’t actually do machine setups or run machines; the third phase, which it entered not long ago, is a consultative approach to manufacturing. Whenever possible, Superior tries to work with its customers to drive down costs. In many cases, it’s a matter of simplifying a part that is needlessly complicated.

Figure 3
Whether a component part has a simple bend in one plane or multiplane bends and varying radii, Superior’s mainstay has always been, and remains, bent tube. It augments bending with machining, punching, laser cutting, and assembly.

It usually starts when a design engineer who is new to his job overspecifies a component. In tube fabrication, this means something along the lines of zero ovality, a chamfer, and bending tolerances that would leave Pythagoras himself scratching his head. In reality, a little ovality doesn’t matter, deburring would be sufficient, and common bending tolerances would get the job done.

Rather than deal with these issues one at a time, Superior took another cue from the medical device industry by organizing educational seminars to teach about bending. In the medical industry, the companies that develop new products also teach surgeons how to install them. It’s expensive, but necessary. How else are doctors going to learn how to do the necessary procedures? As it applies in manufacturing, it’s a matter of teaching engineers a bit about benders, tooling, and the bending process. Superior has found that the best way to help incoming prints hit the bullseye—or at least get somewhere near the target—is to teach its customers’ engineers how to develop specifications Superior can work with.

Responding to input from customers who completed the class, Superior incorporated laser cutting and other forming processes to give the participants a comprehensive view of tube fabrication.

The company also has found that simplifying a bend can do more than drive down a part’s cost. It can have far-reaching implications.

“A bend might have a large radius for no reason, and we might be the only company in this area that has the equipment to bend it,” Dlouhy said. While some fabricators might bid on such a contract willingly, Superior goes the other direction, recommending a smaller radius that other fabricators also can handle, Dlouhy said. He figures opening up the company to competition on the part, clearly a downside, is outweighed by the goodwill and trust that grow from a frank assessment that benefits the OEM.

Is There a Doctor in the House? In addition to teaching its customers the basics of bending, Superior also has been delving into ever-more-complex bends. One example, a tube with a D-shaped profile, required $30,000 in tooling and Dr. Al’s expertise to build a machine. Superior management invited the customer to see the equipment and tooling, confident that it would net the contract. The tour concluded with a trip to the quality control area where a completed part, one that conformed to the dimensional requirements, lay on a table for all to see.

Another was a cab for an off-road machine. Nearly every component had something more than just a common bend—tubes with varying radii, bends in two planes, contoured end cuts, and so on. The OEM was steadfast in its belief that its supplier was the only company in the world that had the level of expertise necessary to build the cab. The OEM was even willing to sit on 60 days of inventory to compensate for the time needed to ship the parts all the way from Europe.

When the value of the euro climbed a little too high for comfort, the OEM decided to give Superior a chance. In the end the original fabricator lost the work, and the OEM now keeps just two days’ worth of Superior’s parts in inventory at a reduced cost.

“We’ve Never Done That Before.” New projects bring new challenges, and the supervisors occasionally hear old fears crop up. “We’ve never done that before” comes up once in a while, to which Niebur replies, “We’ve never done a lot of things before.” Even Larry expressed skepticism at investing in a laser machine, actually using the word never. The company now has three 5-axis lasers and two inline lasers.

Also, the company has upgraded its core competence significantly in recent years. In the early days its focus was on sizes up to 1 in. OD. Now it bends tube up to 10 in. OD using a fleet of 14 benders (see Figure 2).

“Two are 180-degree benders, all electric, so they can be programmed more precisely than hydraulic machines,” Niebur said. “The timing of the feed, bend, and rotate functions is incredible—they make parts with great tolerances,” he said.

It augments its bending capability with machining—five vertical machining centers, one horizontal machining center, and one lathe—and myriad other processes, such as saw cutting, punching, and flattening, so it can do more than bend tube (see Figure 3).

Future Planning

Growing the business for the future and looking out for the employees can be a stressful situation to address. Superior has been approached to sell the company to investors or competitors. The question that always arises is, What will happen to the employees?

“Larry doesn’t trust that anyone else will help the employees the way the company does,” Wertzbaugher said.

Help is the key word. In many small businesses, the owners do their best to treat the employees well, and perhaps even take care of them, but in Superior’s jargon, it’s help.

The help shows up in big ways.

“We have a policy of not laying people off,” Dlouhy said. The company has had stretches of working without profit, and occasionally the books go red for a time, but Dlouhy sees this as a commitment to the people who are committed to Superior. This isn’t to say that the company has never laid off an employee, but according to Dlouhy, those layoffs came from specific circumstances and were not due to the prevailing business climate.

It shows up in small ways too.

“We have a lot of employees who drive 25 or 30 miles to work each way,” Niebur said. “When gasoline was more than $4 per gallon, many asked if they could work four 10-hour days.” Not a big request, but it would help household budgets a bit. The owners were skeptical. Would fatigue contribute to carelessness and accidents? Would productivity drop off toward the end of the day? Would they be able to ship five days’ worth of orders in four days? In the end, Superior adopted a four-day workweek. A little less driving, three-day weekends, happier workers, and a benefit to the company: a little better productivity from running machines for 10 hours rather than 8.

It didn’t end there. For the occasional worker whose home life doesn’t accommodate a 10-hour workday, the owners are flexible enough to allow five 8-hour workdays. It helps a busy parent.

Needless to say, the Dlouhys didn’t know if they could trust a new owner to provide this sort of help to the employees. The employees had the same concern.

Bringing experienced middle and upper management into the company has placed Superior in a strong position for the future. Larry and Al, once the center of gravity on the production floor, are no longer in the middle of everything. Both are doing their best to transfer their knowledge to others and working fewer hours these days.

Meanwhile, Wertzbaugher and Niebur are doing more. Their personalities and job duties mesh without overlapping, and their personal stakes in the company provide all the assurance the Dlouhys need that the silk purse is in good hands.