Service center takes the plunge, becomes a fabricator almost overnight

With more than $10 million in inventory in two locations in Wisconsin, Milwaukee and Manitowoc, and equipped with a robust and growing machining and fabrication capability, WST is well-positioned to serve customers across the state, region, and nation.

The days of opening a traditional service center and making a good living by using the conventional business model are long gone. One hundred years ago it wasn't too difficult to buy large shipments of steel at mill prices, break the bands, and sell small quantities to local manufacturers at slightly marked-up prices, making a little profit on each transaction.

Among three of the well-known names in the industry—Marmon Keystone, Chicago Tube & Iron, and O’Neal Steel—the youngest is almost 100 years old. Marmon Keystone's roots go back to 1907, Chicago Tube & Iron was founded in 1914, and O’Neal Steel was founded in 1921. Keystone's origin was a little different from the others, in that it was founded as a used pipe distributor, but its business model is similar to that of the others. Over the years all have modernized; they have grown, added locations, and added metal fabrication services. None rely solely on the razor-thin margins of the distribution business. Providing at least a few fabricating services is essential to making a living in the service center business these days. Marmon Keystone provides more than 20 fabrication services; O’Neal Steel lists a half dozen and boasts that its PRONTO app makes ordering steel as easy as ordering a pizza; and in addition to providing metal fabrication services, Chicago Tube & Iron opened an entirely new fabrication division, CTI Power. Located in Charlotte, N.C., it specializes in making components and assemblies for power boilers and other pressure applications.

Wisconsin Steel & Tube Corp. (WST) got into the market a little later than some, opening for business in 1952, but it did well nonetheless. Most people probably associate Wisconsin with vast fields of corn and wheat and no shortage of dairy farms, but indeed the state has long been a robust member of the manufacturing belt that spans the Great Lakes region. Within the state, WST was founded in an ideal location, Milwaukee. The home of the venerable Harley-Davidson and many other manufacturing firms, the metropolitan area is big, home to 2 million people, and isn't far from the Chicago metro area, population 10 million.

Like most service centers founded decades ago, it did a brisk business using the transaction business model, but dealing in commodity products eventually becomes a challenge. Change is inevitable, markets are unforgiving, and price competition becomes unbearable.

In 2010 the company embarked on a mission to provide machining services and founded a separate company to handle metal fabrication, WST Fab LLC, in Manitowoc, Wis.

It might seem hard to believe, but the company ran for 45 years on transactions and just a few value-added services. WST bought its first band saw to provide cut-to-length services in the 90's. The company bought a cold saw sometime after that and then made no further investments for more than a decade, when it purchased 20 machining centers to start up WST Fab.

WST worked its way into quite a few markets as a service center, building a loyal contract base for customers that make agricultural equipment, construction equipment, heavy trucks, consumer-grade power equipment, lawn care machines, and products for the oil and gas industry. Wisconsin being Wisconsin, known for cold, snowy winters, the company also staked out some turf in a market that is regional, rather than national or international: snow removal equipment.

WST's work in machining mirrored its efforts as a metals distributor. The company's DNA consists of one thing and one thing only: volume. It doesn't do any work in low-volume or custom work.

"We’re very heavy in contract OEM business," said Charlie Lenn, general manager of WST Fab LLC. This involves essentially everything OEM customers need: parts, assemblies, and kitting.

After outsourcing a tubular part made from rectangular steel for a decade, Wisconsin Steel & Tube invested in a bender to bring the part inhouse. It was part of a multimillion-dollar program to shift the company's business model from 100% transactions to 70% transactions and 30% value-added services.

After several years developing a reputation for machining, the company was ready to branch out again. This time, it would become a member of the metal fabrication community.

"Since 2018, the company has invested close to $10 million in new equipment" Lenn said. The emphasis was on metal fabrication—cutting sheet and tube on laser machines, forming sheet on press brakes, and bending tube on CNC tube benders. Although many fabricators invest in just one or two brands, WST didn't take that approach.

For cutting sheet, WST invested a fully automated fiber laser system, a 12-kW machine made by Bystronic, that handles raw material in sizes up to 8 by 20 ft. A downstream complement is a 20-ft., 350-ton press brake, also made by Bystronic. Another key investment was a Fabri Gear 220 from Mazak Optonics Corp. A 6-axis laser with 3D cutting capability, it's suitable for cutting mill-length tube, pipe, beam, channel, and any user-defined shape. Its chucking capacity goes up to 8.6 in. in round tube and the equivalent in other shapes.

For 2D tube fabrication and pure speed, WST invested in a TRUMPF TruLaser Tube 5000 fiber. As the name implies, the machine uses a fiber laser source, which runs much more efficiently and cuts more quickly in many wall thicknesses than a comparable unit outfitted with a CO2 resonator.

WST made another large investment when it purchased a Bystronic ByTube 130, another fiber laser for tube applications, and a Bystronic FL300, a CO2 machine. Both set are scheduled for delivery early in early 2021.

This fleet of equipment and the services it offers has enabled WST to gain many new customers along the way, but the company also has leveraged the position it has had in the marketplace since 1952.

"Some of this isn't new business," Lenn said. "We’re shifting the supply chain." Where formerly WST sold raw material that ended up in combine harvesters, end loaders, or snowplows, it now sells components and assemblies that end up in combine harvesters, end loaders, or snowplows.

"By bringing some of this work in-house, we feel that we can offer better parts made with better consistency in less time at lower cost," he said. Investing in state-of-the-art equipment and hiring the right people are two big factors in achieving quality and consistency, and rather than shipping the materials to a fabricator, WST cuts out some of the processing cost and all of the excess transportation cost.

While an OEM occasionally tries to increase its supply base, seeking more options and lower prices for the items it purchases, most OEMs try to consolidate, and the same goes for each specific supply chain they deal with.

"Ultimately our goal is to move steel," Lenn said. "We’re moving more fabricated and machined steel than before, and as we build those areas of expertise, we find it easier to add more value-added business. OEMs send out RFQs all the time, but as a company like ours gets a reputation for machining and fabrication, and we demonstrate good quality, consistency, and delivery, it changes. They send fewer RFQs, and eventually they simply say, ‘I want this part from you.’ As WST moves up the supply chain, we become less a supplier and more a partner."

While the company's investments are heavy on the laser cutting side of the business, its goal from the outset was clear: Becoming a full-service fabricator with more than enough tube bending capability to be a heavyweight contender.

"We spent 10 years outsourcing all of our tube bending work," Lenn said. Nobody wants to see a steadily rising share of the work get outsourced, and eventually enough was enough.

One of those parts is a heavy-duty rectangular component. The staff at WST didn't know a lot about the details and intricacies of bending tube, but it did know that this component was a challenge to make. Over the years the company had put the part out to bid to several tube shops, and many had responded with no quote.

The company also had other potential work to consider.

"The lawn and garden sector has become a viable market for us," Lenn said. "Lawn and groundskeeping equipment is more varied that ever before, especially with the focus on zero-turn-radius mowing equipment." Hand-in-glove with such machines is the need to make reliable roll-over protection systems (ROPS).

"We’re in constant conversations with our customers about their needs regarding ROPS, but you can't just jump into making them," said Greg Head, general manager of WST. "Because of the liability, a fabricator needs the services of a professional engineer before it can build something as critical as a ROPS, and the testing has to be conducted by a third party."

The team realized that they needed more than a bender; they needed advice on bending. Familiar for years with Innovative Tube Equipment Corp. and its president, Brian Julien, Lenn asked Julien to lend his expertise.

A primary concern was the aforementioned rectangular part. Made from 1-1/2- by 2.5-in. material, it has bends on both axes (easy way and hard way). In comparing two tubes, one with a heavy wall and one with a light wall, the heavier-wall tube is easier to bend because as the outside of the bend stretches, it's less likely to split; but it's more difficult to bend because the tube is more likely to develop wrinkles on the inside of the bend. Also, Lenn could tell from fast-moving products in WST's inventory that the staff would need to bend many other sizes with moderate to heavy walls, such as squares as small as 2 in. and rectangulars up to 3 by 5 in., all of it for structural applications. ROPS applications meant that the company needed a bender with a lot of horsepower.

"ROPS are usually made from high-strength materials," Lenn said.

Julien recommended an all-electric machine from AMOB, a company that makes equipment from small pedestal-style benders for 1.5-in.-OD tube to machines that handle pipe up to 16 in. OD. The machine is model eMOB150, a one of AMOB's midrange machines, which is capable of bending materials from 1.25 to 6 in. OD. Outfitted with stacked tooling capability, it can bend several diameters without changing tooling. Another factor is its ability to perform both fixed- and variable-radius bending in one cycle, which is both efficient and versatile. It's efficient because it doesn't require a tooling change and versatile in that it allows bends with no straight between them. Finally, the company's software provides automatic springback compensation, as well as in-process bend corrections, to keep waste to a minimum.

The machine was just the ticket, making the rectangular part without a problem. And although the machine was installed just recently, in January of 2019, it was such a success that the company ordered and installed a second machine, and eMOB80, a few months later.

Building a complete fabrication operation from scratch, in a hurry, sounds borderline impossible. Every organization has growing pains, and typically they aren't problematic as long as they are addressed quickly. Both Wisconsin Steel & Tube and WST Fab were able to lessen such growing pains by hiring experienced fabricators in short order.

"Because of my extensive background in manufacturing, I was able to find the right people to hire and our president and owners are all in on investing in key people," Lenn said.

"It's not often that you get to build a process from the ground up," said Joseph "JT" Teich, president of WST Fab. "But this is exactly what we did, and at the risk of using a cliché, we found that there's lots of business to be had. Those who invest will get the business, whether it involves a $200,000 customer or a $2 million customer."

Despite the large level of investment, WST had to proceed with care, picking and choosing the specific services it would offer. The company had to negotiate the same minefield that every other service center has had to deal with as it added services. Going into the fabrication market with a little too much vigor risked cutting into its customers’ markets and potentially poaching their clients.

"We try to stay out of our customers’ way," Lenn said. The company doesn't take any low-hanging fruit, always looking for business that comes with high barriers to entry, such as steep requirements regarding quality or delivery. Certainly the company's tube bending projects—largely heavy-wall and high-strength tube for structural applications—meet this criteria.

Just as important as knowing who to hire, and making good equipment investments, was the knowledge that the executive team and owners were committed to the success of the company's fabrication initiative.

"The company president and the board of directors wholeheartedly supported the decision to go into fabricating," Lenn said. "They were invested in it every step of the way, from the idea stage to execution."