A Conversation with Alex: Reflections on the state of the economy, the foundry industry, and the future of Lawton Standard

The last three years have been a wild roller coaster ride. From COVID-19 and supply chain issues to a roaring recovery and global uncertainty, it’s been one of the most challenging times in recent memory.

But the challenges also contain seeds of opportunity. Despite the disruption, we’ve been making steady progress toward building a new model for serving the needs of our marketplace and its stakeholders.

Let’s look closer at where we are now and where we’re headed as a company.

The economy

I’m an amateur economist who consumes many reports and listens to many experts. From their advice, I try to assemble a cohesive and accurate picture of the current state of the economy, domestic and global, and what we need to prepare for as a company.

I see some encouraging signs. Such as consistent recent drops in the Consumer Price Index (CPI) tells me that inflation may be easing. That’s good news for Lawton Standard and its customers because inflation affects our costs. But it’s also good news for our employees. We’re always looking for ways to help them keep up with their cost of living.

Finally, the drop in the CPI, as well as the Personal Consumption Expenditures Index (PCE) and (Purchasing Managers Index (PMI), is good news for the economy. The faster the Federal Reserve and other policymakers can slow inflation, the better our chances of avoiding a major recession later this year.

Everyone I talk to is quite busy, encouraged that some costs may come down, and concerned that order volumes may slow during the first quarter of this year. We’re keeping a close eye on that and should have a clearer picture of demand by the beginning of the second quarter. Meanwhile, we’re approaching capital expenditures with more caution until we have a clearer picture of the economy and our industry.

The foundry industry

One ongoing challenge our customers face is lack of foundry capacity in North America. When things get busy, as during the last two years, they struggle to find foundries that can make their castings in a reasonable timeframe.

One solution to these big swings in demand is vertical integration. For example, one North American OEM recently purchased a mid-sized foundry to ensure a steady supply of castings to meet its needs. I expect several more supplier-manufacturer alignments to take shape this year.

Another approach is the one we’re deploying. As you know, we’ve acquired several foundries each year as part of our mission to help our customers meet their casting needs. But we’ve also started to look beyond foundries to other parts of the supply chain. That’s why we purchased a metal products distributor, American Iron, late last year. We believe the best way to protect and strengthen the domestic supply base is to blend and augment supply from various sources, not just our foundries but also within our national borders.

We recently announced that we would be distributing American Iron’s Versa-Bar products from our QESC facility in Houston. We saw an opportunity to utilize our real estate better to meet customers’ needs in the Gulf states. In the years ahead, we plan to investigate other opportunities for creative sourcing and storage of materials, spares, and other equipment so our entire platform can operate at a higher level.

These have been big changes for us. Watch for more evolution in how we do our work, expand our capabilities, and how we deliver value to our customers.

Leveraging economies of scale

During the supply chain disruptions of the last two years, our business model has served us well. It not only gave us greater access to raw materials to help us produce castings during the unprecedented shortages caused by the Ukraine war. But it also enabled us to have higher-level discussions with some of our bigger customers about strategically managing their needs.

The last several years of acquisitions have also given us the deepest bench of engineering talent in the foundry industry. It’s an area in which I’ve always over-invested because it enables us to solve more problems and add more value to our customers. I’m proud of our team and what they’ve accomplished so far. And the best is yet to come.

What is the Lawton Standard?

We recently adopted a tagline on our website encouraging customers to “make sure your castings are manufactured to the highest standard – the Lawton standard.” What does that mean?

Here’s what we’re trying to encapsulate in this statement: As time passes, we’re working hard to understand our customers’ businesses and how they win. As I said earlier, we’re building a platform that enables us to solve more problems for them.

We’re striving to create an organization that delivers not only technical excellence and high-quality castings but also an exceptional level of service. I think we can accomplish both goals. We want to attract employees, suppliers, and customers who want to align with us. This tagline also speaks to holding ourselves to a higher environmental and industry stewardship standard.

Building a culture that matters

In the early stages of our growth, we focused on systems and processes – the more technical side of our business. We’re now turning our attention to culture. Specifically, what does it mean to be a place where people want to work for, buy from and sell to? How do we treat our people with respect and dignity? We’re developing a clearer vision of what that should look like and making it a reality. On the flip side, we identify where we are falling short, especially with our suppliers, and are working on corrective actions.

If you think about it, we built Lawton Standard from the people, history, and traditions of all the companies we brought together. We can create something much greater than the sum of its parts – on both our business’s technical and people sides.

I’m excited about the future and what we can create together. Here’s to a successful and fulfilling 2023!