11.03

New extruder targets service centers

Service Center Metals ran its first billets only four months ago, but it is already a serious competitor in the distribution market.

By J. Neiland Pennington, Executive Editor

The name of the company says it all. Service Center Metals is focusing exclusively on the distribution market for its standard-shape extrusions. And the startup firm in Prince George County (east of Petersburg), Virginia, which broke ground at the end of September 2002 and extruded its first profile the last day of July this year, has charged into the market at a full gallop. It has begun three-shift operation at its $13 million, 25 million lb./year plant, initially has more than 350 Aluminum Association-specification shapes in its catalog and is already mulling expansion plans.

You gotta know the territory

Like the salesmen on the train in Meredith Willson's "The Music Man," the three founding partners know the territory; they are veterans in marketing to service centers. Despite their relative youth - ages range from 36 to 42 - they combine 48 years of experience in the extrusion business, the majority in serving the distribution industry.

"I spent 15 years in sales and marketing, primarily with the service center customers at both Reynolds and Kaiser," said R. Scott Kelley, company president and CEO. "Randy [R. Randolph Weis, vice president of sales and marketing] did about 12 years in sales as well, with Reynolds, Cressona, Alumax and Alcoa. With that experience, we know the customer base very well. We worked inside and outside sales, and were both national sales managers. In addition, I was a national marketing manager for service centers."

Service Center Metals emphasizes that it spends 100 percent of its resources on helping distributors increase their business, and that service centers are a growing buyer of extrusions. "As more and more OEMs outsource their inventory management," noted Lloyd S. (Chip) Dollins, vice president of operations, "the volume of extrusions moving through distribution channels is increasing faster than the total market."

A niche worth pursuing

On paper, it's not a dramatic growth. The company estimates that 16 percent of all soft alloy extrusions are sold by service centers, and the percentage will be 17 to 18 percent over the next five years. But it is a market niche that is worth pursuing, particularly by a company that can cater to specific customer needs and reduce supply chain costs.

"With the consolidation among extruders, the industry can use a lean, agile and focused company that specializes in the service center market," Scott Kelley pointed out. "As large companies get larger, it opened the opportunity for a niche player.

"Randy Weis has the best story to tell regarding consolidation," Kelley related. "Randy began with Reynolds Metals Co., then went to Cressona Aluminum. Cressona was purchased first by Alumax and then by Alcoa, which later bought Reynolds. So he came full circle, working for three companies that became part of Alcoa without ever resigning from any of them."

Eliminating inventory is one cost-cutting tool. "Most larger extruders have depot programs," Kelley said. "They have inventory sitting on their floors that they sell from. Every inch of metal we extrude is already sold. That's a significant difference.

Don't reinvent the wheel

"We see inventories as a cost that we want to eliminate from the process," he continued. "Service centers stock products, so we can cut costs by eliminating another layer of inventory. We don't want to do what our customers do."

Service Center Metals has customized its plant for rapid tooling changes and minimum downtime. The Presezzi 3100-mt, 9-in. circle direct extrusion press is a compact design with a shifting stem to reduce dead cycle time to under 20 sec. A combination of a chest-type OMAV electric die heater and four single-cell Castool electric heaters assures an unbroken flow of prepared tooling. Twelve die changes per shift are routine.

"We can meet delivery deadlines without holding inventory on the floor," Chip Dollins pointed out. "If you are a regular customer, the standard order lead time is currently two weeks. But on a special order, we could deliver in as little as 48 hours."

Service Center Metals' press and extrusion handling equipment are geared to processing a wide range of extrusion weights, from 0.250 to 15 lbs./ft., an advantage in serving the distributor market. Alloys include 6061 machining grade and 6063 architectural metal. The OMAV stretcher has a 100-ton capacity, making it one of the largest in North America.

Depth of experience

The executive team isn't the only experienced group in the operation. Key people for inside sales, quality and production control, press operation, and shipping and receiving were drawn from the pool of extrusion talent that resides in the Richmond-Petersburg vicinity. They have been augmented by eager newcomers motivated to learn the business.

"The advertisement that we ran in the newspaper classifieds said 'Wanted: Team Players,'" Dollins said. "We worked with the Virginia Economic Development Partnership in Richmond and the Chester campus of John Tyler Community College. We used Tyler's facilities for the job fairs we conducted, as well as its network of contacts to recruit qualified applicants. The results were overwhelming; we had well over 700 applicants for 34 production and maintenance slots.

"We did our own screening, and had a list of qualifications. We got some input from the state and also from John Tyler in compiling the list. The profile gave priority to a can-do attitude and willingness to be a team player, rather than experience in the industry."

Care, urgency and attention to detail

"We are a small company that incorporates many aspects of lean manufacturing," Scott Kelley added. "We have a total of 44 people for all three shifts. So we can create an organization that elevates care, urgency and attention to detail. Those principles extend to how we treat our customers, our suppliers and each other. Our employees will soon make the transition to a performance-based incentive system centered on safety, productivity and quality."

Company officials consider maximizing their process capabilities to be an aspect of customer service, and Six Sigma principles have been adopted for systematic problem-solving. The five-step process - define, measure, analyze, improve and control - is the basis of their continuous improvement program, and extensive data collection ensures that corrections are quantified and maintained.

Quality is monitored in the company's testing laboratory, equipped with a 60-ksi Tinius Olsen tensile tester and an Instron Rockwell hardness tester. Calvin Wiggins, director of quality and technical services, presides over the lab, which documents the ultimate tensile, yield, percentage of elongation and hardness of every order shipped.

The King plus the Boss

Production began only four months ago, but company officials are already hinting at expansion. The 77,000 sq.-ft. plant can be doubled in size by removing one wall and extending outward. And it's possible that the existing press - nicknamed Elvis - may be joined by the Boss, a press of at least 5000 mt and 14-in. circle size.

Production is expected to include more custom shapes. For the time being, however, the company is focusing on rod, bar and standard structural shapes, rather than Class 2 and 3 hollows and asymmetrical profiles.

With its current capacity and potential for growth, will Service Center Metals be tempted to expand its mandate and become Service Center & OEM Metals? "Absolutely not, "Scott Kelley affirmed. "We believe that the market is big enough that we can continue to grow by specializing in distributors."

The Comforts of Home

The espresso maker in Service Center Metals' lunch room is testimony to how the company treats its suppliers. OMAV and Presezzi sent a total of 40 installers to the plant for up to six weeks, and rural Virginia was terra incognita for the Italian crews.

"We decided early on that we wanted them to feel at home," said Chip Dollins. "Cal Wiggins had the idea to install an espresso maker. We though it was a great idea, and so did the Italians.

"We got them a great deal on hotel rooms, and brought in lunch every day from a local Italian restaurant. We even flew an Italian flag under the U.S. flag to make them feel more at home. One Saturday, we hired a translator and a bus, and took them on an excursion to Washington.

"Our contacts in Italy told us that installers are typically miserable on field assignments, that they can't wait to come home. The crews that did our installation wanted to see home again, but they were pleased with how they were received."