A metal fabricator, finisher, and retail store fixture maker join forces

In July F3 Metalworx formed as a combination of three companies: a sheet metal fabricator, a custom powder coater, and a store fixture fabricator.

When Jason Paglia began his CEO job in September 2017, the company he was hired to lead didn’t exist. His office was in a building in Erie, Pa., occupied by Arvite Precision Sheet Metal Fabrication—not the company he was hired to lead. At least not exactly.

He also worked with a shop north of Buffalo, N.Y, called Wire Weld Store Fixtures, but he wasn’t hired to lead that company either. The same applied to Cost Effective Coatings, a custom powder coater in North East, Pa., at the northeast corner of Pennsylvania’s Lake Erie shoreline (which, confusingly, is in the far northwestern corner of the state).

Instead, Paglia was hired to oversee all three autonomous business units, which he quickly realized needed to be one cohesive organization. The new company, which employs about 100 people, officially launched on July 1 as F3Metalworx. The merger creates a one-stop shop, a common strategy in fixtures, fabrication, and finishing (the three Fs in F3 Metalworx), but the story behind the merger can serve as a solid case study of effective change management.

More Valuable Together

The three businesses had been under the same ownership since 2015. They collaborated, but they still operated as separate organizations. If Arvite needed to coat a product, it would sub it out to Cost Effective Coatings. If Wire Weld Store Fixtures required a sheet metal part that was beyond its capacity, it would sub out to Arvite.

That’s par for the course for many shops acquired by financial investors as “portfolio” companies. The portfolio companies are worth more separately than as a single merged entity. But the investors behind F3 Metalworx took a different approach. They thought the three companies would be more successful together rather than apart.

As a first step, the store fixture division, two hours from Erie in Lockport, N.Y., was moved from New York into the coating operations’ facility in North East. Considering the manufacturing resources that could be shared, the move made sense. But physically moving the operation was just a first step.

Good Timing

In mid-July, about a dozen days after the official merger, Paglia sat in the car next to Shaun Coletta, vice president of sales, on a road trip to see a customer. The merger’s payoff was already starting to show.

“Right now I’ve been concentrating on existing customers,” Coletta said. “Most don’t know we offer all the services we do. I’ve been visiting key accounts to discuss what else we can offer them.” He added that the additional work from existing customers, along with business with new customers, will increase sales of the combined operations by 15 to 20 percent this year.

Paglia added that in certain ways, the merger, rebranding, and sales effort have benefited from good timing, especially when it comes to material prices. He didn’t sugarcoat the situation; tariffs and the material price situation haven’t made things easy, but they also have helped open doors to opportunities.

F3Metalworx isn’t just calling customers and saying they can expect prices to increase. Some price increases can’t be avoided, but some can be, mainly by simplifying fabrication. Does this part really need this bend tolerance? Could we reduce the number of pieces in that assembly? Does this need to be quarter-inch carbon steel? Since material prices are forcing costs to go up across the industry, customers are motivated to sit down at the design table, talk about manufacturing options, and try to take costs out of a part.

Fail Fast

“Everything is a calculated risk,” Paglia said. “If there are things that are not going to cripple the company [if they fail], then try them.” The trick, he said, is to calculate the risk carefully and then move forward accordingly. If the risk is high, you move forward slowly. If the risk is low, you move quickly, and you may even fail. “But you fail fast,” Paglia said, “and you can always try something else.”

This sums up Paglia’s management philosophy. It’s his way of avoiding analysis paralysis—which probably would have prevented F3 Metalworx from making so many improvements so quickly, particularly when it comes to lead time. Many fabrication jobs that took about six weeks to ship now take between two and three weeks. That improvement happened over just a few months.

How did the company make this happen so quickly? It revamped its inventory and batch size strategy, which in turn has made scheduling and part flow much more stable and predictable.

A New Batch-size Strategy

A year ago the fabrication operation ran under traditional assumptions about batch sizes. Large batch sizes allow you to amortize your setup costs over more parts. They increase machine uptime, but at a cost. Running large batches of the same part on a laser cutting machine or press brake ties up that machine for days, preventing other jobs from starting, then sends a massive amount of work to the next downstream operation—which can’t handle it all at once. Work-in-process (WIP) balloons, parts get lost, and chaos ensues.

When you reduce the batch size, you free capacity for other jobs to flow, especially as machine setups are streamlined. During the past few months at F3 Metalworx, a typical batch size has shrunk from about 300 pieces to 50.
“This freed up so much capacity and helped us level-load the shop,” said Steve Dusicsko, scheduling and purchasing manager.

Inventory Strategy

The term “level loading” has a tumultuous history with many job shops. After all, in a purely make-to-order operation, with each machine making dozens or even hundreds of different parts a day, each requiring different cycle times, how on earth can you level-load the operation, where each machine or manufacturing step has the same cycle time (takt), a drumbeat consistent and fast enough to meet demand?

Considering the headache, why go through the trouble? Keep it simple. When the order comes in, just release the job to the floor, and people on the floor will handle it.

This may make sense if every job is entirely different and demand is entirely unpredictable. But that’s a rarity and, if you think about it, a challenging scenario for any manufacturing business. If every job is entirely different, why scale up the business beyond a handful of employees and machines?

The truth is that custom fabricators, F3 Metalworx included, have a mix of one-off orders together with repeat and blanket orders. Those repeat and blanket orders have different inventory requirements. A few are made from scratch and shipped when finished, while others require some inventory to be held, with each part having a specified reorder point. There’s a pattern to demand, a consistency behind the chaos.

In recent months the F3 Metalworx team has used that consistency as a fundamental building block to level-loading the fabrication operation. They knew they could never achieve the level-loading of, say, a high-volume, low-mix assembly operation. All the same, Dusicsko said that the loading could be more consistent than it was—with the right ingredients.

The first ingredient was batch-size reduction. The second was a rethinking of the company’s inventory strategy. This involved raw stock, real-time WIP piled between work centers or manufacturing steps; stored WIP; and stored finished goods.

Getting the inventory strategy right is critical, especially now considering the volatile material price situation. Like many fabricators, F3 Metalworx is holding more raw stock inventory, spot buying, and taking advantage of deals when it can find them.

For WIP and finished goods, managers analyzed past demand cycles to find opportunities to adjust reorder points. In many cases they actually increased the amounts of stored WIP and finished goods. This helped them improve rapid response and deal with variations in customer demand.

Of course, simply increasing inventory can be a risky, cash-draining affair without other shop controls. This is where the fabricator’s new scheduling strategy comes into play. With inventory levels determined for those repeat orders, Dusicsko and his team could start building a new scheduling system based on work center capacities.

Using their enterprise resource planning system, they built standard process times around historical job data, then determined how much capacity they could fill at each work center—that is, the percentage of time during a shift that the resource could be expected to produce.

Dusicsko pointed out that the capacity percentage metric the shop uses describes “job clocked-in time”—not “arc-on time” in welding, “bending time” on the press brakes, or other “value-added time” (to use lean manufacturing parlance) for each operation. Regardless, determining that “job clocked-in” time gave a good estimate of a resource’s availability. For instance, the company’s laser cutting machines are available nearly 100 percent of the time during a shift, while the welding department can be expected to produce 95 percent of the time. If demand surpasses the availability, they know they will have a bottleneck that needs to be cleared—be it with overtime (more machine production time), more people, or both.

With overtime the team uncovered another efficiency. Previously, if jobs were late, everyone came in for overtime, regardless of whether they were part of a constraint operation or not. Today the company employs a focused approach to overtime. First, constraints are identified immediately, ideally before jobs are late to the customer (avoiding the necessity for all-hands-on-deck firefighting late into the night). Second, the fabrication shop schedules overtime only on the work centers causing the constraint or bottleneck. With the constraint freed, jobs are back on track when people arrive the next morning to start their shift.

Job visibility has been key to all this. Previously someone would observe that a stocking level for a certain item was getting low, so he’d inform the scheduler, who would then issue the order. Problem was, that person didn’t have a real-time view of available capacity—and without that, it was next to impossible to predict how long it would take to make the parts and replenish the stock. Parts would be replenished eventually, but sometimes not before the company ran out of stock completely, which in turn triggered the all-hands-on-deck firefighting and overtime.

Managers knew they had to change this reactive approach into a proactive one. Ultimately, they transitioned from a homegrown scheduling technique (common among many job shops) to a backward-scheduling methodology, with everything scheduled backward from a due date—factoring in available capacity and potential constraints.

Orders now are released to make maximum use of available capacity while considering the lead time to make the part. The scheduler can see what jobs are where, how close to maximum capacity each work center is, and how inventory is being depleted. “We now have visibility and can see the actual hours spent on the machines,” Dusicsko said.

When the team put all of these ingredients together—new approaches to inventory, batch sizes, and scheduling—lead times shortened to two or three weeks, and on-time-delivery performance soared. In June F3 Metalworx’s sheet metal fabrication operation achieved perfection: 100 percent on-time delivery.

After making these improvements in fabrication, the team now is exploring how they could apply these practices to other branches of the operation, including custom coating. Again, before the merger and rebranding under one name, each entity operated as a separate business, and as such, the custom powder coating operation did what many independent coating operations do: maximize line density and batch sizes and minimize the frequency of color changes.

But changes are in the works. “The potential for change is being looked at right now,” Dusicsko said. “It’s a work in progress.”

Never Fail Slowly

Will the scheduling methodology apply to other areas of the business? Sources couldn’t say. But the team is exploring options while at the same time avoiding analysis paralysis.

“We never want to get bogged down like that. A good example is the change we made in inventory,” Paglia said. “We could have gone through every piece of historical data, tried to forecast demand to determine the exact level of inventory we needed, down to the fourth decimal place. But at some point it doesn’t matter. You look at the historical data, see that it’s consistent, then adjust the inventory. It’s a no brainer. And guess what? You can also make adjustments later.”

The same thinking applies to certain changes in the org chart, which of course had to be adjusted as the three companies merged under one umbrella. It sometimes makes sense to shift or expand a person or department’s responsibility—to find efficiencies and resource sharing between the store fixtures and fabrication divisions, for instance. Managers conceded that changes to the org chart have occurred more than once. If one strategy didn’t work, they tried something else.

“Again, unless you’re talking about big changes with high risks,” Paglia said, “if these smaller changes end in failure, that’s fine; we can adjust and adapt.

“Failing shouldn’t be thought of as a negative thing,” Paglia continued. “Our whole model here is centered around an idea that if we do fail, we fail fast. The worst thing you can do is fail slowly, because that costs you a ton of money and energy.”

Failing slowly is analogous to recognizing a problem—be it poor delivery, quality, or anything else—and doing nothing about it. If F3 Metalworx had scrutinized every change to the nth degree, the company’s recent success, including its 15 to 20 percent boost in sales this year and the fabrication division’s on-time-delivery perfection in June—might never have happened.

Images courtesy of F3 Metalworx, www.f3metalworx.com.

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