That’s the Spirit!
New Berlin machine shop wins project back from Mexico
By Charles Rathmann, of SBT
While headlines scream about the loss of American manufacturing jobs to China, one New Berlin manufacturer of machined components is bringing jobs back into the country.
But success does not result from complacency, according to Spirit Manufacturing Inc. president Tim Pilat.
Pilat says the company he co-founded with vice president Dan Himsel in 1987 is leaner, faster and more competitive today than many manufacturing firms being bled by lower-cost competition abroad.
Pilat and Himsel in February announced they had won a $3 million contract with Bendix Commercial Brake Systems, Elyria, Ohio. The order for air brake crankshafts for commercial trucks has led to the hiring of additional machinists and a need for larger quarters.
Prior to Spirit winning the Bendix project, the crankshafts had been manufactured in Mexico.
"We were able to achieve price parity with Mexico," Pilat said. "Our tooling package was less expensive than out of Mexico, and our speed was greater. Besides, we have proven to this customer our ability to satisfy their needs."
By the end of the year, Spirit Manufacturing will move from the company’s existing New Berlin facility at 2817 S. 171st St. to 24,000 square feet at 5340 Emmer Drive.
The impact of the Bendix job to the region will be felt beyond the walls of Spirit Manufacturing’s plant.
Other local firms that are completing portions of the project include Precision Gears Inc., Pewaukee, and the Milwaukee location of Elk Grove Village, Ill.-based FPM Heat Treating Inc. Forgings were supplied by Moline Forge, Moline, Ill.
"They priced those forgings very aggressively," Pilat said of the Moline firm. "That made a big impact on our competitiveness."
Tom Steberl, sales manager with Precision Gears, said that while the Bendix job is a relatively small one for his company, winning the project away from a foreign competitor is a good feeling.
"It’s not a major project," said Steberl, whose company has about 50 employees. "It is a very quick operation. It might keep a guy busy 10 hours a week. But hey – that’s something."
The local manufacturers said technological advances were key to winning the contract.
"We have used technology to reduce the steps in the processing of parts." Himsel said. "While some of our competitors might have as many as 12 to 15 steps, we might have three or four. Within an hour of picking up a part, I want to put a finished part in a box."
Structuring the company so roles typically filled by different people are integrated into a single person also has been essential, according to Himsel.
"I can’t afford someone to make parts and have someone else inspect them," Himsel said. "We need to reduce waste everywhere possible."
Contract manufacturers are experiencing pressure from their customers to produce the same or improved components for less money each year.
The New Berlin machining firm is building a reputation for aggressive, internationally competitive, pricing according to Pilat.
"On the Bendix project, we came in a little bit above China, but worth it," Pilat said.
Spring Manufacturing has targeted customers who require parts that perform under grueling conditions and conform to tight tolerances.
"The customer wants this to be a very robust application," Pilat said. "The parts are made of hardened, forged steel. The tolerances are the most exact of any crankshaft ever designed."
While cutting unnecessary costs and steps from the manufacturing process has made Spirit Manufacturing competitive with Mexico, Chinese components are still cheaper.
However, quality concerns, lead times and the ability to communicate have given the New Berlin firm an edge.
"China is clearly less expensive than we are," Himsel said. "But to our customers, it is a matter of whether they want to take a risk. There are suppliers in China for the components we make. But if a component is part of a production line that costs hundreds of thousands of dollars per day if it goes down, do you really want to take the chance of that happening?"
"The material is one big objection," Steberl of Precision Gears said. "They are getting very dirty material that doesn’t meet print specs. Spirit is not the first company to see a customer pass up these huge savings to come back to the United States."
In one case Steberl has first-hand experience with, the Summersong Investment Inc., a Chinese company, actually bought Precision Gears’ US-based customer – Murray Inc., which manufactures bicycles, lawn mowers and other consumer goods.
"Of course, they are now making everything over there – including the engines," Steberl said. "They were trying to make gears we have been making for them, but have not been successful. So far, they have not been able to do what we are doing for them."
Himsel and Pilat said gravitating toward short production runs that have tight turnaround times will also help them remain competitive.
However, in some cases, the company can be profitable with a relatively long production run. Since longer runs led to predictable, steady revenue, they are very attractive.
"I’m not going after a million of something," Himsel said. "But if I can ship 30,000 of a part with multiple processes, it really helps us be competitive … We have some parts that have run every day for five years. We do have some high-volume parts – mostly internal engine components. "
The ability to become part of the design process is also key, according to Himsel.
"Certainly, the ability to communicate is a huge positive in the United States," Himsel said. "We get involved in the ground floor of an engineered product and help them take cost out of the product from day one. Then there is a lot of pressure on purchasing to use people like ourselves."
Both partners point to correct use of automation and technology as an edge.
On the manufacturing floor of Sprint Manufacturing’s new location, new equipment stands, waiting to be commissioned. The company purchases turning centers, grinding equipment and other tools, mostly from Japanese manufacturers including Morisiki and Okuma.
According to Pilat, the prevailing seller’s equipment market, falling interest rates and the rapid capital equipment depreciation allowed by President George W. Bush’s economic recovery package have made it easier to afford new equipment.
"Let’s say it was a factor," Pilat said of the impact that the rapid depreciation allowances have had on the company’s success. "It sure helped. Would we be able to do it without rapid deprectiation? Yes. But it has let us be much more aggressive."
Pilat sees automation as an almost ethical necessity.
"I believe in exploiting technology and not people," Pilat said, adding that companies that send manufacturing work overseas to take advantage of cheap labor are missing the point.
"I challenge that these people don’t think hard enough," Pilat said. "The ultimate solution is to produce products with no labor. Look at an automated car wash or a vacuum cleaner … Consider the plant in Japan that manufactures industrial robots. They have robots making other robots. A human has to enter the plant once every four days or so – there is almost no human involvement."
Shorter-run jobs are hard to automate, Pilat said, and the people involved need to be more than mere automatons.
"We need people who are experienced and have the right judgment," Pilat said.
Both Himsel and Pilat talk a lot about reducing waste and eliminating unnecessary steps from the manufacturing process.
"We do things that make sense, and long after that, we heard people calling them lean manufacturing," Pilat said. "We were doing lean before it was called lean."
"It is not necessarily lean as much as it is reducing waste from the process," Himsel said.
Linda Kiedrowski, president of the lean manufacturing-oriented Paranet Group, Brookfield, said that the partners, in using cellular manufacturing and working to cut unnecessary steps and material from their operation, are incorporating some lean concepts.
"That is not that uncommon," Kiedrowski said of lean manufacturers who disown the word. "Lean is really the latest name used for the last 15 years, or maybe more. What we are really talking about here is continuous improvement."
March 7, 2003 Small Business Times, Milwaukee
