In the midst of challenges, we face exceptional opportunities
During the last year, our industry has faced a whirlwind of challenges and opportunities. But rather than being buffeted by them, we have decided to face them head-on. Here’s what we’re up against, and how we’re proactively responding.
For example, the last several years have shown us that the global supply chain is more fragile than most Original Equipment Manufacturers (OEMs) thought it was. The problems accelerated 20 years ago when China was admitted to the World Trade Organization. Many castings moved overseas, which led to a steady decline in the strength and vitality of our domestic metalcasting industry.
Today, many older foundries in North America are struggling to stay in business, with aging workforces, technology, and ownership, with little or no capital for modernization. As a general rule, domestic foundries don’t play well together. As a result of many of these factors, this country’s domestic metalcasting capacity has steadily declined.
To make matters worse, our government started a trade war with China two years ago. We’ve also been battered by ongoing currency fluctuations, a decline in young people wanting to work in our industry, and the effects of technology.
But the problems got even more challenging when the coronavirus or COVID-19 pandemic hit. Many domestic OEMs suddenly weren’t able to get castings from their overseas suppliers. That caused severe component shortages in their North American factories. As a result of that experience and other developments, like the trade war and more sophisticated comparisons of true costs, many of them are now planning to “re-shore” many of their castings to North America.
That sounds like good news for the domestic metalcasting industry, right? But it may not be all that great for OEMs. Here’s why.
Because of the relative weakness of the domestic foundry industry, re-shoring castings can be like jumping from the frying pan into the fire for some OEMs – trading a brittle overseas supply chain for a brittle domestic one.
Here’s the silver lining: Despite these unprecedented challenges, we saw an opportunity to provide domestic OEM operations with another option – a business model that will bring new energy, sophistication, and progressiveness, as well as new investment, to our industry.
That’s why we formed a new metalcasting platform that combines the best resources of multiple foundries. Our goal is to use our integrated resources to solve a wider range of problems for OEMs. Working together makes us a more robust supplier.
To use a restaurant analogy, we’re trying to put together a broader menu for our customers. Our goal is to have more capabilities by metal type and casting size. We want to solve a wider range of problems for them.
Lawton has always had a one-stop shopping mentality toward gray and ductile iron castings. We’ve offered castings plus engineering, project management, tooling, machinery, sub-assembly, and paint to our customers. But our new metalcasting platform takes that line of value-added thinking to the next level.
Our goal wasn’t to create a holding company that owns a bunch of foundries that may or may not play well together. It was to build an organization that is genuinely integrated, where the whole really is greater than the sum of its parts.
This platform enhances our ability to provide our customers with the best solutions for their needs, no matter what material or casting size they need. It enables us to deliver more of the parts they want, when and how they want them.
Think about it from the OEM’s perspective: The more organizations they must interact with to get what they need, the more burdensome it is. The flipside of that is the fewer suppliers they have, the simpler their lives can become.
From their standpoint, consolidating their spend with a supplier that has a wide range of capabilities and deep capacity to meet their needs is a real plus. That’s what we’re building.
Internally, this new platform enables us to franchise the best practices from each location in ways that make the most sense for us internally and for our customers.
For example, if the best maintenance and reliability practices are coming out of Ohio, then we’re going to franchise them to the other locations. If the best continuous improvement and productivity initiatives are coming out of Wisconsin, then we’re going to adopt them at the other locations, too.
But that doesn’t mean that we’re going to force-fit changes in culture, technology, and processes across every location. We’re going to make these changes on a case-by-case basis. There are some things, such as IT systems and continuous improvement practices, that transfer well across all our locations. Those will be rolled out quickly.
In other cases, where one location may have specialized knowledge or processes, we’re going to take our time to truly understand them and decide what’s unique and valuable at that location. We’re going to be patient and inquisitive because we want to preserve the best of what they’re doing.
For example, casting stainless steel and manganese out of different sand types at Temperform in Novi, MI is not the same as casting iron in De Pere, WI. We plan to honor operational and cultural differences. But we should never compromise on safety, quality, or the environment.
Longer-term, our best customers, the ones with whom we will be most intimate and integrated, will have an opportunity to help design the future of this platform. They will help us decide when and where we should build additional capacity and even what future acquisitions we should make to enhance our portfolio.
For the first time, this platform approach allows us to go to our best customers and ask, “What is it you need?” We can then construct a supply chain to meet them, using the best of our assets and capabilities.
In other words, the OEMs that partner most closely with us will enjoy the significant benefits of vertical integration without having to own foundries. They’ll get 60 to 80 percent of the value with only 20 percent of the headaches.
As I see it, the next 10 to 20 years of our industry could go in two different directions. If the domestic metalcasting market experiences real growth, driven by re-shoring and actual business growth, our platform should also enjoy a significant amount of growth.
But even if the market remains static, I’m still confident in our odds of growing this business via market share gains and adding tremendous value to our customers.
If you’re a stakeholder in our company – if you buy from us, work for us, supply to us, are an owner, or bank us – I think there’s plenty to be excited about!
CEO Alex Lawton has over 15 years of experience operating businesses as an owner and executive. Now with oversight of not only The C.A. Lawton Co. but also Temperform and Damascus Steel, that experience is being put to work across a growing platform of metal-casting businesses.