Service Centers
Tuesday | 01 May, 2007 | 8:08 am

Strategic placement

By Lauren Duensing

May 2007- When customers receive products wrapped in red bands from Heidtman Steel Products, Toledo, Ohio, there is so much that they don't see. Behind the scenes, the company follows a strategy that builds on its 50-plus years of innovation and expertise.

The company started in 1954 as just one facility, a small shearing and leveling operation, and remained a single-facility operation until 1979, when it installed its first pickler, says Mike Kruse, vice president of marketing. "In 1963, John Bates, our CEO and majority owner, came to work for the company. He was really the impetus to make the company grow and flourish. One of his operational initiatives in the early 1970s was to move away from shearing and leveling into slitting capacity. Our first really innovative move came shortly thereafter when he led us to become the first service center involved in the marketing of high-strength, flat-rolled steel. By the mid-to-late 1970s, we were known as the high-strength experts."

Building on knowledge
To this day, the company is still recognized for its expertise in high-strength steel. "When people have difficult applications or their present sources aren't working, often they will come to us, and even though we don't make steel, we understand how to marry the correct properties to their part's circumstances," says Kruse.

"Thirty years ago we were this little, not-very-sophisticated type of company, and a couple of years ago we built an automotive technical center in Gibraltar, Mich. It's a state-of-the-art facility housing a dedicated technical staff where we do a lot of testing and a lot of product-application work. We're really working hand-in-glove with our customers on existing and future designs to ensure that the best products are tailored to keep our customers technically and economically competitive in a complex global market."

Despite the loss in market share by the Big Three, the automotive industry is still Heidtman's bread and butter. "As they've shrunk their supply base, we've actually grown with some of the Detroit Three in business, and I think a lot of it has to do with our size, integrity, flexibility and innovation. They know that they can come to us as someone they can partner with," Kruse notes.

A variety of capabilities
Much like any service center, Heidtman's capabilities are dictated by the needs of the market, but it has also been a leader in taking on some of those processes. "A lot of times we're trying to get in on the ground floor of new innovations and new markets," says Kruse. The company led the way in becoming active in the galvanizing process in 1984 by forming a joint venture with National Materials to create National Galvanizing.

"At that point in time because of the heavy-gauge nature and furnace design, the technology was risky," says Kruse. "We felt that more galvanized was going to be used in structural components and not just the tandem product applications. So we started looking at a line that could coat heavier gauge, and that turned out to be a very good venture for us. There are other service centers since then that have expanded into galvanizing, but we were the first one."

Keeping in touch with customers is important when it comes to adding capabilities. "We have always had precision leveling capability, but found that a lot of fabricators and people who are serving the trucking industry needed absolutely panel-flat sheets to run through their laser machines and turret presses. They needed a product that was either temper-passed or stretcher-leveled to ensure no springback, so we've added stretcher-leveling capacity in recent years," says Kruse.

The SCS process was another cutting-edge technology that the company followed from the beginning. "We decided to get involved early on with the SCS process," Kruse notes. "The Material Works [Red Bud, Ill.] had developed it as a stretcher-leveled sheet product and came to us looking for a partner in developing SCS as a coil process. Some people thought we were crazy to do that. They said, 'You already have seven picklers in your organization. Isn't this competing with your picklers? Why would you get involved with this technology?' But we understand that we are really in the descaling business and feel this technology is preferable to pickling in some applications. If we didn't get involved with this technology early on, then somebody else would."

Positive interaction with customers, mills
In addition, Heidtman builds its customer relationships by asking the right questions in order to customize its approach to each customer. This might include "innovative inventory programs or doing certain types of testing for customers," says Kruse. "Some customers are asking for stocking, just-in-time or consignment programs. In other cases, customers have actually approached us about the possibility of putting some of their processes in our plants or leasing space from us so they can gain the same freight efficiencies we enjoy by being mill adjacent."

Mill adjacency is another strategy the company employs to give its customers first-class service and distinguish itself from the competition. "Anything that's been built in the Heidtman family since the mid-1980s has been adjacent to a steel mill," Kruse notes. "We started pursuing a mill-adjacent philosophy as we had to take costs out and lean down our cost structure. We really have to be the most cost-effective solution to our customers, so minimizing or eliminating inbound freight is huge."

In addition, the company also benefits from a fleet of about 130 trucks that operates between its northern plants. "That enables us to service our customers effectively," says Kruse. "We can really provide the whole value-chain management."

Building right next to a mill also allows the company to firm up its mill partnerships, bringing even more value to its customers. "You're across the street," Kruse says. ?If there is something that needs to be addressed, somebody who can help is just hundreds of yards away." The company can then work closely with the mill at several levels because the people in each company know each other well.

"We've even had someone from one of our mill sources climb into rail cars for us to find a particular coil that we needed due to a last-minute change by our customer," he says. "There are other points in time where we might have been full, but we found a way to make the space to accommodate extra tonnage the mill needs us to take."

Keep the best employees
"The best executive is the one who has sense enough to pick good men to do what he wants done and self-restraint to keep from meddling with them while they do it," said Theodore Roosevelt, illustrating why good employees are so important. At Heidtman, employees" opinions are invaluable. "We have very little turnover," says Kruse. "I think that speaks to the management style and the entrepreneurial aspect of the company. And as the company makes money, it invests it back in the employees through their pension plan and incentive programs."

Because of low turnover, the employees have a familiarity with the company that helps Heidtman fine-tune its strategy. "Because we have so many people at all levels who have been in the company for a long time, there is just a wealth of knowledge that we are able to tap into," says Kruse. "Opportunities of innovation, cost-saving ideas and the better ways of doing things are coming not just from the shop floor but from various levels of the organization as opposed to being driven down by management. When people feel engaged in the process, they are more productive and stay with the company."

Don't fix it if it isn't broken
Down the road, the company will continue to follow its business model. First on its list is to continue its partnership with mills. "We are one of the partners chosen by SeverCorr, in Columbus, Miss., and we've announced stretcher-leveling, multi-blanking and SCS capabilities to come on-stream next year," says Kruse. "The stretcher leveling may be switched out by an inline temper-mill cut-to-length line. Due to market considerations, we're re-evaluating that right now. The multi-blanking line will actually be delivered late this year when the building is ready."

Kruse says that future plans for the company could also include expansion in Mexico. "We're seeing a rebound from a lot of material that went over to the Pacific Rim that is now coming back to Mexico. We are also seeing a lot of existing U.S. and Canadian business in metalforming and stamping industries now moving to Mexico. As we look to the future, we need to be where the business is gravitating."

Of course, all of Heidtman's future plans involve not only maintaining but also enhancing its position as the high-strength experts. "We're seeing more and more advanced-high-strength steels being engineered into our products," says Kruse. "We're looking at partnering with the sources that can grow with us in those materials."

Of its numerous assets, Heidtman considers being privately held to be one of the major influences for its success. "We don't have a lot of layers of management, and we don't have a list of public shareholders," says Kruse. "We have one guy to keep happy--our CEO John Bates. He's very active in the company and decisions get made pretty quickly around here. The lack of bureaucracy allows the company to focus on decisions that are good for our stakeholders. Not having to answer to Wall Street is a real plus in exercising a long-term strategy. Maybe we have to wrestle through a strategy in the short term, but we really know it's going to pay off in the long term. We don't have to worry about shareholders looking over our shoulders and second-guessing what we're doing." After 50-plus years of success, second-guessing should be at a minimum, anyway. MM

By Lauren Duensing, from the May 2007 issue of Modern Metals.




















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