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Fabrication Opportunities

Heading Downstream

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MCN Editor Beth Gainer Some service centers and distributors have added even more value to their offerings – through fabrication.

Metal industry professionals in the service center and distributor space find that, when it comes to adding value for their businesses and their customers, more processing is better.  Providing a greater number of services fulfills their customers’ needs – and their own.

Long Beach, Calif.-based Phillips Steel Company, a family business more than 100 years old, is a distributor that has branched out to offer fabrication services, which now make up 60 to 70 percent of the business. The company has focused on heavy structural steel fabrication, as well as what it considers light processing fabrication services, such as cut to size, punching, drilling, shearing, saw cutting, waterjet and plasma cutting, bending and forming. 

“It turned out to be a really good business – and additional business for us,” says President Sara Phillips Brown. “The majority of what we deliver and provide for our customers is modified in some way. We’re a smaller family business that’s been around for a long time. It’s allowed us to remain really nimble through all the different generations and changes so that we really try to keep our ear to the ground and follow what our customers are looking for.” 

Another service center that offers fabrication is Alliance Steel, Gary, Ind., which ironically has a symbiotic relationship with its fabricator customers.  “The Alliance model is to really be an extension of our fabricators’ capacity,” says President and COO Drew Gross. He adds that Alliance Steel sells to them on the raw steel side, but sometimes these customers have capacity limitations, so the business can fabricate parts to help satisfy its customers’ needs. 

For example, fabricator customers might have a machine go down or have more work than they can handle. Alliance Steel takes over the overflow, all while maintaining a good relationship with its fabricator customers. “We don’t ever want our customers to feel like we’re competing with them. We want them to feel like we’re an extension of them,” Gross notes. “This, for us, is about finding value-add processes that benefit both our customers and Alliance Steel, ingraining ourselves deeper with our customer base and becoming a stickier vendor to our customer base.” In addition, Alliance Steel helps fabricate for OEMs, thus fulfilling a supply chain need. Generally, Gross has observed that service centers doing fabrication has become more acceptable in the fabricator world.

In 2010, Wisconsin Steel and Tube Corporation, a service center in Milwaukee, branched out to create a separate fabrication entity, WST Fab, Manitowoc, Wis. A contract manufacturer that serves the agriculture and construction industries, as well as lawn and garden and oil and gas, WST Fab offers flat laser, cutting, press brake forming, CNC machining and robotic welding for its own customer base. 

In fact,  WST Fab prides itself on laser cutting 20 million pounds of flat-roll each year. Services also include large format laser cuttings, fiber lasers, press brakes, many CNC machining centers and three robotic weld cells.

A catalyst to WST Fab’s success was when the company picked up a cast iron contract for a large OEM. “We started doing a lot of cast iron machining that really grew and then in 2020 was our first flat laser and press brake in Manitowoc, and we have since added additional equipment,” says General Manager Charlie Lenn, adding that half the business now involves metal center fabrication, with the remaining part of the company devoted to machining.

One-Stop Shop
A huge advantage of distributors and service centers offering fabrication services is that these businesses can offer their customers a one-stop shop experience all under one roof. Clients therefore do not need to obtain metal from one business and have it fabricated from another. Phillips Steel Company does the metal procurement, processing and fabrication for its customers. In addition, clients can speak directly with the foreman or the certified weld inspector if they so desire, allowing the business to become an extension of the customers’ team as well. 

Phillips Steel Company considers itself one of the pioneers in being able to offer a wide variety of services. “We’ve provided this service for [clients] for so long, that we’ve really built up the resources and the knowledge to overcome some of the obstacles in the field that may be more difficult to overcome,” says Phillips Brown. 

For example, if, at the job site, clients discover that something doesn’t fit right or needs to be reworked, they would normally have to get it back to a shop. But the one-stop shop model ensures that Phillips Steel Company finds these errors early and resolves them before the material is delivered. 

For years, customers would seek out this business, which would initially cut metal pieces to size, and then another company would fabricate them. Yet, once Phillips Steel Company expanded its fabricating abilities, customers would solicit a fabrication job, and the company would execute it. Phillips Brown adds that some of the company’s clients own a small fabrication shop as well, and if their workload is too high, they trust Phillips Steel Company to fabricate for them, echoing Alliance Steel’s professional relationship with its fabrication customers. 

“At the end of the day, many customers like to deal with just one vendor,” says Phillips Brown. “Sometimes we’ll have a customer that will just ask for the material, and then halfway through, they say, ‘You know what? Just fabricate the whole thing; our guys are backed up.’ It is nice for our customers to know we have that support for them.”

Also a fan of the one-stop shop philosophy is O’Brien Steel, Peoria, Ill., which is a distributor also strong in next-stage operations, such as laser, plasma oxyfuel bevel forming and rolling. 

The business boasts several divisions, three of which distribute steel. Included in the other divisions is one for heavy machining, one for heat treating, and three fabrication divisions.  The company does commercial heat treating for a lot of the OEMs, job shops and machine shops. Customers include structural fabricators, as well as manufacturers of heavy equipment, construction equipment, mining equipment and material handling equipment.

Fabrication, which includes welding and painting for O’Brien Steel, enables the business to provide one-stop shop service.  “Our customers can go to one company for fabrication. By controlling all those things, you can reduce your lead times, your costs, mark-ups and so forth,” says Mike O’Brien, co-owner. “We’re all under one roof and have one ISO certificate for quality. We can control the whole process. It’s easier for the customers.”

What’s not so easy, however, is the intense competition between businesses offering fabrication services. More than ever before, businesses in the metals industry are offering more of these services.

Gross knows that offering fabrication services is profitable. “I think many service centers recognize the margins are greater for downstream [work]. It’s a way to bolster the overall profitability of the company,” he says.

Phillips Brown concurs, saying that fabrication in the metals industry is fluid. She points out that competitors continue to offer “broader, deeper services.” The company believed it was unique in its offerings, yet far more companies are taking on that business model.

“More and more service centers are getting pushed that way [downstream] by their customers. For the service centers, there’s more value added there,” says O’Brien. He adds that selling a bundle of metal is simpler than fabricating parts according to specifications. 

So what percentage of service centers are taking on this downstream model? “A thousand, million percent,” Lenn says, adding that so many service centers offer next-stage processing primarily because OEMs are requiring it. More money is to be had in fabrication than just offering a bar of metal, he notes. He says that in order to continue to grow and be profitable, “a business has to add value, and the business does this in abundance, thanks to fabrication, such as welding, and production precision machining.” 

He predicts the need for fabrication will only continue to increase. Such an increase might cause those going downstream to worry about whether they’re going to remain profitable. In the industry, competition will always exist – especially where processing is concerned. “All we can do is continue to provide the service and relationships that make our customers happy. We know the landscape is changing. We always have our radar out there,” says Phillips Brown.  
 
She is confident that, despite the influx of competition, what differentiates the company is being flexible, resilient and providing quick service with quality products. She adds that her team has many years of experience in this industry, and they are knowledgeable. “That’s what sets us apart and continues to give me confidence even in this competitive landscape,” she says. 

While the heavy competition might be a concern to some industry professionals, Lenn is also optimistic: “People tend to forget that there’s probably enough work out there for all of us.” 

Caption: This employee is taking a grinder to the material to clean up the welds. 
(Photo courtesy Phillips Steel Company)