Above: NSPS Metals poured machinery foundations at its 130,000-square-foot processing and distribution complex outside Houston, to open late this summer.

Leveraging data and analytics, and communicating with clarity, can demonstrate how an industry must evolve

May 2020 - “Winning is not a sometime thing; it’s an all-time thing. You don’t win once in a while, you don’t do things right once in a while, you do them right all the time. Winning is habit,” said Vince Lombardi, Super Bowl winning coach of the Green Bay Packers.

NSPS Metals is an upstart—albeit one backed by decades of wisdom—that has a strategy to win in North America’s service center sector. Forged through an agreement between Nippon Steel & Sumikin Bussan Americas Inc. (NSBA) and Pacesetter, NSPS Metals will open a 130,000-square-foot metal processing and distribution center outside Houston late this summer.

Justin Philipp, COO of this joint venture, came to the metals game by chance and not through the usual channels of sales, production or finance, but through his human resources management and employee training experience. And although he was born and raised in Pittsburgh, Aviva Leebow Wolmer, former CEO of Pacesetter, had to explain to Philipp what a service center is.

“I pictured the dirty environment of Pittsburgh. I was afraid to come out with black lung disease. But Pacesetter is immaculate and modern. So my first impression was wow, this is not what I expected.”

He started with Kennesaw, Georgia-based Pacesetter in a talent management position, moved up to head the HR department and, along the way, “fell in love with the metals industry.” Philipp eventually entered sales and when Pacesetter sought a leader for the NSPS Metals joint venture, he threw his hat in the ring.

“So many other industries don’t have as much room to grow and be successful,” he says, but metals offers “unlimited potential for someone with abilities.”

Processes

NSPS Metals will specialize in carbon and stainless and aluminum flat-rolled, bringing in master coils weighing up to 30 tons from domestic and foreign producers. Initial processing and distribution capacity will be 120,000 tons per year.

The facility will house two Red Bud Industries multi-blanking lines, one relocated from Pacesetter’s suburban Chicago service center, very near a Ford stamping plant, and the second from its existing Houston plant. The Red Bud multi-blanking lines can take in coils up to 25 tons, gauges up to 0.135 inch, and widths up to 75 inches. The blanking line from Chicago has been completely overhauled, according to Philipp. “It will purr like new for us.” Machine Concepts built two new in-line cassette levelers, one for thicker material and one for light gauge.

A newly built slitting line from Alcos Machinery Inc., Newmarket, Ontario, will be installed by the end of April. The slitter will handle hot-rolled pickled and oiled, cold-rolled and galvanized coils up to 1/4 inch thick and 72 inches wide. The service center will also operate what Philipp calls a mini-CTL line.

Freight

As for transportation and logistics, “We designed the facility around rail. We have our own spur; we can fit four railcars under roof and eight more railcars outside. That will be our major mode for inbound material. Barge is important for us, too. We are about 35 miles from the Port of Houston, so we do bring in half of our material from the port by truck.”

The warehouse includes 10 truck bays, accommodating four flatbed trucks on the receiving end and six on the shipping end.

NSPS Metals plans to ship within a 300-mile radius—primarily Texas, Oklahoma and Louisiana but also across the border into Mexico. It will deliver metal “through one of the largest flatbed carrier networks in the world,” one that has a transportation management system and managed assets, Philipp says.

This carrier “ships millions of tons of goods across the border” and has its own load transfer facilities at the border. “We are not freight and logistics experts so they handle all the administrative paperwork.”

NSPS Metals expects to employ up to 60 people at its new service center by the end of 2020.

Customer base

In terms of end-use markets, NSPS’s “bread and butter is construction products,” for such residential and commercial applications as metal buildings, metal roofing, roll-up and overhead doors, but also HVAC. Truck trailer manufacturers and stampers round out the client base.

“Pacesetter has steered clear of automotive, but our Nippon side is a huge automotive supplier, so we might be cracking that open with Tier II and stampers,” Philipp says. “There is a huge automotive population in the South. We are open for opportunity.”

NSPS Metals expects the new service center will be fully functional in August, September at the latest. Inventory for production will start arriving in April/May.

“We are in the market to move metals,” he says. “We are leveraging Pacesetter’s skills with those of Nippon and its trading company. The partners have very ambitious growth targets. There exists a need for a company that is willing to work hard and supply material. We are pushing for high volume and pretty quickly,” he says.

Tools + people

As of mid-March, NSPS Metals had hired 45 people and will add another 15 by year end. “We are working one shift now and a second shift will start cross training shortly,” says Philipp. As a former HR executive, he understands employees need the right tools and training to perform optimally. NSPS Metals is spending a lot of time right now on both efforts.

Although the startup is now using SteelMan software, it is considering a new ERP platform with Microsoft Dynamic and metal-related features bolted on. That migration will occur within two years.

“We are very much a data and analytics driven company. We are focused on making decisions on data, not gut instincts,” says Philipp. “We have visual software the way executives can see and drill down into, and CRM and SalesForce software.

“We are putting protocols in place around the data,” he continues. “Using data to make decisions is very important. As we build and design everything from our organization chart forward, we want people from data-driven environments. We hired people from outside the steel industry, people who know how to react and analyze. We want to teach them metal, and they bring us correct ideas on how to do things better.”

He contrasts the “stacks of printed reports,” of which “executives look at less than 5 percent,” with screen views, tableaus and user interface, whereby “you can see issues, trends and get minds flowing” into the soundest direction.

He concedes there are growing pains while training new employees who don’t know steel. “There are well-intentioned mistakes. We don’t come down on them for that. We can deal with the customer but we want to know how the employee came to their decision. It is a learning curve that we, too, can learn from. Lightbulbs go off. It is OK to apply what you know and make a decision and learn from your mistakes.”

NSPS Metals will carry carbon and stainless and aluminum flat-rolled, bringing in master coils weighing up to 30 tons from domestic and foreign producers. Its overhead cranes are installed.

Cross culture

Philipp says he is learning a lot from Wolmer and from NSPS Metals CEO Takenori Nakano, who comes from NSBA. “The Japanese style is to have absolutely the minimum inventory, 30 to 45 days. That is not always the successful model for North America. But as opposed to discarding that, we want to find out why they do it that way.

“We are not jumping on the idea to be that thin but we may be thinner than our peers, and that is based on the length of contracted tons—quarterly, half-year or annual buys. There is going to be flexibility.”

The way to manage that, he says, is to “beat into the heads of commercial to communicate: Where is the material? When is it coming in? Let customers know everything that happens from the time the purchase order is received.”

The sales staff will be urged not to “run from those conversations when they are behind. We push the communication outward. And there has been a fantastic response from customers. As long as they know what’s happening, we are catching their needs early and responding quickly.

“You aren’t just a steel supplier,” Philipp says, “You are providing a value-added service that they didn’t know was value add, in terms of market information and what inventory matters most to them.”

Gas on the fire

NSPS Metals is not strictly a raw, unproven startup, according to Philipp. “We took Pacesetter employees and customers with us.” But while ramping up a new service center, “you cannot drop the ball with any current customers.

“We already won a bunch of new customers,” he says. “I like to set up shop quickly and then pour gas on the fire. We hired new salespeople who are going after new customers—that is their 100 percent focus. We have a hyper-focus on commercial activity, and we are already selling tons from the new facility.”

Purpose

Some might argue that there is enough processing and distribution capacity in North America without a large new entrant. “You see a lot of expansion on the mill side—SDI and Nucor and Big River—but you don’t see the same growth and innovation among service centers. People are kind of taking business from each other,” Philipp says.

“We recognized a need to have a company with deep roots in the industry but a forward-thinking approach. We merge cultures and leverage two sides, Nippon and Pacesetter, to help our customers be very successful. Our idea is to win big and show the industry how to evolve. And by doing so, you can do well.”

By year five, he expects NSPS Metals will move 135,000 tons a year, and at a speculative $1,000 per ton, that’s a $135 million company.

“The best representation of what we are is a mid-30s American COO [Philipp] and a mid-50s Japanese executive [Nakano] doing this together. It’s wisdom and aggressive, forward thinking being pushed together.” MM