The recession won’t halt one service center’s desire for growth
December 2012 - During tough economic times, most companies scale back, focusing on saving time and money. While financial preservation was the goal for many companies during the Great Recession, Penn Stainless continued to forge through these economic struggles to get ahead. With a facility expansion and multiple equipment upgrades, Penn Stainless is doing more than just powering through.
“It has always been the company’s philosophy that a down market can be a great opportunity to expand,” says Jason Martineau, national sales manager for Penn Stainless, Quakertown, Pa. “They’ve always invested very heavily in the future.” Penn Stainless’ business model focuses on taking advantage of favorable pricing and making investments that produce slow but steady growth. And the most opportune time to do this, Martineau says, is during an economic downturn.
“I think the recession kicked off [the expansion] to a certain extent because we were able to buy things at a lower cost,” says Martineau. “Some of the equipment was offered at reduced pricing, so if you’re in a good financial position, like the company is, it can be a great opportunity to take advantage of that.”
Taking advantage of competitive pricing not only enabled the company to expand its 120,000-square-foot facility by an additional 75,000 square feet but also helped boost profits. “We’ve grown the business anywhere from five to nine percent a year in terms of the amount of weight we’ve shipped,” says Martineau.
Making the grade
On top of the new expansion, the company also invested in equipment upgrades, adding a waterjet, two plasma cutters, a laser cutter and a plate-leveling line.
“We inventory heavy plate, and until we got the new plasma machine, we were limited to cutting only up to 4 inches thick,” says Martineau.
With the new plasma, Penn Stainless can cut up to 61⁄4 inches thick. “So now, we can use the plasma machine to process that heavy plate, where before we would have to rely on saw or waterjet cutting, which is a more costly method, depending on the application,” says Martineau. Being able to use less expensive equipment for heavy-plate cutting is a significant cost benefit for Penn Stainless. And for current Penn Stainless customers, the new equipment upgrades have made ordering more efficient.
“[Penn Stainless] added a whole complement of additional equipment that really plays well into the types of sheet and plate products that we buy,” says Tim Schlichting, director of sales administration and supply chain management at Swepco Tube Corp., Clifton, N.J.
Before the upgrades, Swepco had to request material cut from plate-mill plate, which would leave drops for Penn Stainless to manage. “But with some of the added equipment, particularly the wide coil cut-to-length line, they’ve brought additional coil product to the northeast that hasn’t necessarily been available to us,” says Schlichting. Using coiled products means Penn Stainless now can level and cut-to-length, which yields far “less waste and really give us a cost advantage,” he notes.
Adding a laser cutter also has created more options for the company’s existing customer base. “The laser cut sheet product has opened an opportunity to do some lighter-gauge tubular products in nonstandard gauges and diameters,” says Schlichting.
For Swepco Tube, the combination of multiple equipment upgrades has really boosted order-processing efficiency at Penn Stainless. “The new wide uncoiling line really is bringing that additional product to us,” says Schlichting. “In addition, we have been able to utilize some of their laser cutting on sheet product items for precision tubing. Their plasma cutting also does a lot of processing for us.” Swepco Tube, which provides pipe products to refineries and chemical plants, needs products in a hurry, and Penn Stainless is able to deliver. With the new processing equipment and capabilities, Schlichting says, “Penn has certainly given us access to these products a lot faster.”
What makes Penn Stainless stand out, even among the expansion and the equipment upgrades, is the unique inventory it carries. “I think they take chances with some of the in-between plate and coil sizes that others would shy away from. They fit perfectly into what we buy so that we’re not having to deal with large drops and wasted material that we don’t need,” says Schlichting.
Because Penn Stainless stocks certain inventory other service centers have chosen not to, the customer payoff is significant. “We also make large-diameter pipes that come from wider plate, and a lot of the bigger service centers have no interest in making an investment in those products; they are a bit more expensive,” says Schlichting. “But with the additional capacity and the bigger warehouse, it allows [Penn Stainless] to put some of these things in stock, and that’s been a big help to us.”
For Penn Stainless, not all expansions are financial ones; some are personal. “The other way you expand is by having very strong partnerships with your customers and suppliers,” says Martineau.
Being able to expand and grow with its customer base, as Penn Stainless has with Swepco Tube, means it can better embrace what its customers do.
“They are talking to their customers now [and] asking, ‘What are you doing with the plate?’ ‘Do you need anything changed in shape to a round or a rectangle?’ They’ve really run with the concept,” says Schlichting. “There is a very strong back-and-forth relationship at this point with them contracting us to do some value-added services to their plate products, as well as making pipe and tubular products for their customers. So unlike a lot of other suppliers, they’ve also become a very good customer.”
“One of the things you need to emphasize today is the need for partnerships with suppliers and customers to try to work together to solve some of the pain points that come up,” says Martineau. “I think we’ve been successful because we’ve really tried to emphasize customer service.”
Penn Stainless wants a reputation for more than just the unique inventory and technology it carries. “We don’t want to be known as just the guy that stocks four-by-10 plates,” Martineau continues. “We want to solve problems. We want to add value to our customer supply chain.”
Penn Stainless has boosted its local economy by investing in these plant expansions and equipment upgrades, which has added more jobs to the job market. In 2011, Department of Community and Economy Development secretary Alan Walker said in a press release, “homegrown businesses like Penn Stainless are not only the driver of our economy but the cornerstone of our communities as a key source of family-sustaining jobs.”
Martineau says it’s an exciting environment. “I’ve been with the company for 12 years, and when I was hired there were 86 employees. Today, there are roughly 160 employees.”
Martineau also has seen two plant expansions, four waterjet installations, four new Kasto saws, the new laser upgrade and a new Herr-Voss Stamco plate-leveling line, to name a few. “It’s really been a complete modernization of the equipment, inventory and personnel over the last 10 to 12 years.”
Although this shaky economy could easily frighten away a company’s desire to invest, Penn Stainless has embraced the opportunity for growth fully. “We are persevering despite the conditions,” says Jim Seward, president of Penn Stainless. “We are committed to our customers and our market and also adapting to change in both the market as well as our capabilities, and we feel we answered both of those markets.”
“One of the reasons I enjoy working here so much is there has never been a layoff in this company in the 34 years they’ve been here,” says Martineau. “And even during the Great Recession, we were able to keep all our employees, which I think is a testament to the business model that’s been here and the commitment of the ownership to work with their employees through good times and bad. It’s a very nice place to work.” MM