Manufacturers in southeastern Wisconsin are coping with many pressures, including rising commodity and energy costs, difficulties in finding qualified employees, rising health care and transportation costs, and increasing foreign competition. Despite those challenges, many area manufacturers aren’t just surviving, they’re thriving, expanding or opening new facilities, hiring more employees, launching new product lines and buying new equipment.
Signicast Corp., which has operations in Brown Deer and Hartford, produces metal components using the investment casting process, which requires significant amounts of natural gas, electricity and metals,
Prices for nickel and natural gas dropped significantly several weeks ago, and Signicast tried to lock in long-term contracts for those materials, said Bob Schuemann, executive vice president.
“What we’re trying to do is some smart purchasing,” Schuemann said. “We’re challenging all of our employees to reduce scrap and improve their through input to not pass (costs) on to customers. We’re also looking for substitutes for any of the items that are possible to substitute.”
For other commodities, such as electricity, there is no getting around price increases.
“Electricity is killing us,” he said. “There’s not a heck of a lot we can do other than trying to minimize our use of it. But we are a 24-7 operation. We just have to absorb it.”
Despite those pressures, Signicast is poised for significant gains this year.
Signicast had about $130 million in sales for 2006 and expects about $135 million sales for this year. The company has about 650 employees at its two facilities.
Late last year, Signicast opened a fifth module at its Hartford plant, which increased its capacity and shortened its response time. Being able to fulfill customers’ orders quickly has helped the company deal with, and beat, foreign competition.
“We have used lean concepts before that became a buzzword,” Schuemann said. “We have the lowest lead time in the industry. We’ve turned products around in one week, where most of our competition is 12 to 24 weeks.”
At Signicast, most orders require a total of eight weeks to create a tool, run samples and do a production run, Schuemann said. Most of its competitors require eight weeks to make a tool, four weeks to make samples and 12 weeks of lead time for production. And if the competitor is in another country, shipping times come into play.
“Speed is everything here,” Schuemann said.
Lean manufacturing and the quick response times it generates have also helped SPI Lighting Inc., a manufacturer of commercial and architectural light fixtures based in Mequon. SPI has about 120 employees, which has decreased in recent years through lean manufacturing principles, said Kathleen Brehm, vice president of operations.
SPI’s revenues were flat in 2006. The company expects a slight increase for 2007 and an additional increase for 2008, Brehm said.
“We’ve hired people in our new product development group,” she said. “And we’re trying to incorporate lean into our new product development process, to see if we can decrease our time to market.”
New product development has helped Bradley Corp., a Menomonee Falls-based manufacturer of commercial plumbing fixtures and washroom accessories.
“When you have innovative products, if you have a value benefit you are generally able to get a higher price for it,” said Jon Dommisse, director of marketing and product development.
Bradley’s innovation has paid off. The company had 10 to 15 percent revenue growth in 2006, and anticipates 30 percent growth for 2007. Because projections show a slowdown in non-residential construction for 2008, Bradley is planning for slower growth, about 4 percent.
Bradley is not immune from price crunches in commodity pricing, but works hard to communicate with customers and distributors to inform them of price changes, Dommisse said. Often, the company will tell key customers about price changes before they happen, to allow them to place orders before prices rise.
Bradley’s extensive market research also makes it easier for customers to accept price increases because the company is seen as an expert.
“When they (the customer) know that you know what you’re doing, it goes a long way toward them accepting that price,” Dommisse said. “We pull pricing every week, if not more often.”
Milwaukee-based RES Manufacturing Co., a manufacturer of metal stamped products that are used heavily in the automotive market, also feels the pinch from rising metal and electricity prices, said Mike Grimm, materials manager. However, the company has been able to mitigate some of those increases by working with suppliers that are willing to be more flexible for small manufacturers.
RES also tries to standardize its different parts and processes as much as possible, Grimm said.
Even with rising commodity costs, RES is finding new work. The company recently inked a deal to manufacture seat components for a second-tier supplier for Toyota, Grimm said.
“We do a lot of work in automotive,” he said. “Most of it is to second tier Toyota manufacturers. We do Honda and Nissan also, and some work with Ford and GM.”
RES recently purchased five new robot welders and several additional welding stations, Grimm said, to prepare for the new work for Toyota.
The company’s revenues rose about 20 percent in both 2005 and 2006, Grimm said. 2007 looks about the same, and 2008 shows bright prospects because of the Toyota project.
“2008 is going to be the good year,” Grimm said.
Due to the industries they deal with, some manufacturers aren’t as vulnerable to commodity fluctuations.
Menomonee Falls-based Milwaukee Broach Co. Inc. is one of those companies. The firm sells many of its parts to the international aerospace and power generation market, industries that are seeing dramatic global growth.
“With commodity prices, our customers have been more than fair,” DeBakker said. “In aerospace, the stuff we’re using is high tech stuff that goes for $15 to $16 per pound. We build our pricing into every quarter when we bid stuff.”
Demand for supplies in the markets that Milwaukee Broach sells into is so high that the company has work on its books until 2010, DeBakker said. However, DeBakker said he has run into significant difficulties finding skilled labor in the Milwaukee area. The Menomonee Falls facility has 40 employees now, and Milwaukee Broach would have expanded there if it was able to find qualified workers, DeBakker said.
“We still have a tremendous difficulty here,” he said. “There’s no trouble holding onto them once we find them, but it’s hard to get (people) into here.”
Instead of expanding Milwaukee Broach’s main operations in Menomonee Falls, DeBakker will open a new facility in Norway, Mich. on July 9. When it opens, that manufacturing plant will employ 15 people.
The ability to not only survive, but grow during times of increased commodity, energy, transportation and health care costs and growing international competition shows the resilience of many of Wisconsin’s manufacturers, experts say.
“(People tend to) underestimate the capacity of innovation of (company) owners and workers to deal with the problems they’re facing,” said Mike Klonsinski, CEO of the Wisconsin Manufacturing Extension Partnership, a Madison-based organization dedicated to helping manufacturers improve efficiency and output. “They’re finding ways to get creative to handle commodity prices and being productive with lean manufacturing.”
Lean principles, which maximize efficiency during manufacturing, are vital to the future of Wisconsin manufacturing, said Linda Kiedrowski, president and owner of The Paranet Group Inc., a networking and education organization for leaders and owners of manufacturing companies.
“The goal of a company that practices lean principles is to take care of its customer first by getting rid of waste and non-value added products so they can price their product fairly and accurately,” she said.
