“We are a family firm, but everyone we do business with is part of the family, from the vendor to the customer,” says Brian Robbins, CEO of Mid-West Materials Inc., who is convinced his midsize company can “out-relationship” both smaller and larger competitors.

By Myra Pinkham,
Managing Editor

• Quick Facts
  

In 1996, Brian Robbins left a successful law practice on Wall Street to relocate to Cleveland and join the family firm. Mid-West Materials Inc. was at a critical juncture in its transition to the next generation of family management.

Robbins admits that the move from New York law office to Cleveland steel warehouse did not seem like a good fit initially. “When I first contemplated coming here, my wife said, ‘We’re going where? To do what?’” They awoke from their first night in Cleveland to waist-high snow drifts, lamenting aloud: “What have we done!”

Since accepting the job as Mid-West’s chief executive officer, however, Robbins has no regrets. He and his family have grown to love the community, and he has grown to appreciate the special opportunity he was given as the third generation to steward the family business. Robbins says he is particularly proud to carry on the legacy of entrepreneurship and integrity established by his grandfather and company founder Joseph Koppelman.

“Three generations of family history is something I cherish,” Robbins says. “I realize how special it is to be with family and work with them in an atmosphere of personal and professional rapport and respect.”

Robbins’ mother, Noreen Koppelman Goldstein, is president of the company. An attorney with an MBA, she handles various legal and corporate affairs. Robbins’ aunt, Sharon Koppelman, serves as company treasurer. Cousin Scott Koppelman, whom Robbins credits as a valuable mentor, was executive vice president with the company for over 20 years before moving to Florida to open his own steel business.

Mid-West was founded by Joseph Koppelman, along with his brother Harry and a third partner, Eugene Fant, in 1952. Fant eventually left to focus on his other investment, a steel business in Texas now known as Houston-based New Process Steel, while Harry passed away unexpectedly at age 57. At age 88, Koppelman remains active as company chairman, patriarch and inspiration.

“The steel business has always been feast or famine. For one or two years you make a lot of money, then you go through two or three years where you lose a lot of money,” says Koppelman, reflecting on his half-century career in steel.

Today, the steel cycles are not as volatile because there are fewer producers, but prices are bound to drop to more normal levels soon, he predicts. “If we stay in our niche, we can’t get hurt very much because we are too small. But we are big enough to have some staying power,” he adds—a theme echoed by his grandson.

“My grandfather has been a steel guru for 54 years. It astounds me how he can still forecast the market,” comments the 37-year-old Robbins.

Mid-West began life as a telephone brokerage with a small warehouse in downtown Cleve-land, dealing in excess and secondary steel. In the early 1960s, the operation expanded to a larger facility downtown, selling to both end-users and other distributors, as it still does today.

In 1969, Mid-West made a major investment in a 70-acre site with a 10,000-square-foot warehouse in Perry, Ohio, 35 miles east of Cleveland. A year later, Mid-West consolidated its operations in Perry. Today, as a result of a series of expansions over the years, the facility has 240,000 square feet and houses 30,000 tons of inventory, 17 cranes, three levelers, four slitters and three shears. The building can simultaneously accommodate eight tractor-trailers under roof for loading and unloading. A rail line running directly into the warehouse enables Mid-West to bring in and process up to 40-ton coils. A union shop, Mid-West has a total of about 70 employees. Its market area is primarily east of the Mississippi, though its customers range as far west as California, as far south as Texas, as far north as Minnesota and as far east as New Hampshire.

The Koppelmans have always believed in reinvesting in their business. As demand for processing services grew from the 1970s to the 1990s, they invested heavily in levelers, slitters and other equipment, as well as staffing.
Meanwhile, their product line evolved from hot-roll and cold-roll into more coated steel. By the early 1980s, galvanized products accounted for more than 35 percent of their business, selling to the appliance, construction, HVAC and automotive markets.

With the $7 million, 1997 expansion already in the works when Robbins arrived, the company was in a vulnerable position as the economy began to slow. “That was one of my big challenges here, to bring a different perspective to the corporate climate. The economy had changed, but within the business we had only changed to a point,” he says. Mid-West needed to get smaller before it could get more profitable.

The challenges were both external—achieving efficient, profitable growth—and internal—maintaining each generation’s goals, strengths and management styles. Family involvement in company management adds a layer of complexity on both a personal and professional level, he notes. “The challenge has been to shift the focus of a company that grew up a certain way and mold it into a more modern business model with more flexibility. Flexibility has become my motto here,” Robbins says.

When the new CEO arrived in 1996, Mid-West was a significantly larger company than it is today, with 160 employees and five months of inventory on hand, or just 2.4 turns per year. Today, Mid-West has less than 70 employees and turns its inventory four to five times per year, double its previous rate with half the staff.

Had the company not dramatically downsized during the recessionary years from 1999 to 2001, it may very well have been among the many service centers that failed. “There were definitely dark days when we wondered how we were going to survive,” Robbins says. “It was a heart-wrenching situation. But we rolled up our sleeves and made it work.”

After streamlining the staff and moving from two shifts to one, Mid-West management turned its attention to the company’s product mix. The latest expansion, which added the rail spur and heavy-duty cranes, helped facilitate a move away from galvanized steel toward more high-volume hot-roll business. Today, hot-band makes up 85 percent of Mid-West’s business, and coated steel just 15 percent.

Galvanized is a higher ticket sale, Robbins says, but it also costs more to inventory. The industries consuming galvanized were hit particularly hard by the recession, buying less, paying more slowly. “I was spending more of my bank line on coated product, but the margin wasn’t any better than on hot-roll,” he adds. “It was definitely a less stable environment vs. hot-roll markets such as truck-trailer, construction, fabrication and stampers.”

Though it’s more of a commodity, focusing on hot-roll has opened business up to a larger potential customer base. Mid-West still strives to deal in grades that are a little more specialized and diverse. “Currently our focus is on the high-strength end of the hot-roll world,” Robbins says. “We sell high-strength steel up to 100 yield, which is a bit more of a specialty. Not as many can stock it and process it.”

Mid-West sources steel from all over the world, though it favors domestic mills due to proximity and cost. “We are very loyal to our suppliers,” Robbins says. “We continue to stick with a core group of vendors, but within that group is an international piece. Whether it is direct with a foreign mill or through a trader, I think it is important to always keep that option open to ensure product availability. It’s a hedge.”

The process of picking and choosing product lines actually began with picking and choosing customers. “We had to fire some customers,” Robbins explains. By studying the profitability of each account, the company was able to tailor its inventory to meet the needs of its best customers—and walk away from the low-margin ones that no longer fit the new product and service mix.

Mid-West offers customers a range of traditional service center processing options including cut-to-length, slitting, shearing and packaging. They strategically and intentionally have stopped short of some services. “I would have to think long and hard before I would go into laser or plasma burning, because at that point I would bump up against some of my biggest accounts,” Robbins says. “We will continue to add new equipment and value-added processes—but stop short of competing with customers.”

Robbins acknowledges that midsize companies like Mid-West Materials are threatened by industry consolidation and the polarization of the service center market. Experts say the clear winners will be the very large players who benefit from abundant capital and economies of scale, and the very small who can survive in a customer-service-oriented niche.

“I buy into that argument [that midsize companies are in danger]. We’re in the middle, and it has definitely been a challenge to manage costs,” he says. Yet he remains resolute that Mid-West can succeed in the long-term based on its strong foundation of family and family-like relationships with customers and suppliers. “The stability of the relationships has definitely transcended the difficult times and allowed this company to grow. Perhaps we have sacrificed some growth by not being bigger or more transactional,” he says, “but we are not a transactional company, we are a relationship company.”

Because of its size, Mid-West has the resources to take advantage of strategic opportunities, yet is not so big it can’t react to change, Robbins says. Its officers remain very accessible to vendors, customers and employees. “Issues that come up are communicated quickly and decisions made quickly,” he says.

Low staff turnover—the average tenure is 18 years—has led to high levels of professionalism and consistent performance by employees. “Customers and vendors have been dealing with some of the same people here for 15 or 20 years,” Robbins notes. “I see that as an extreme advantage.”

Just as Mid-West seeks to work with only solid, reliable customers, it strives to be a good customer of the mills, placing predictably consistent orders and paying on time. By being a good customer of the mills, Mid-West can be a better supplier to its customers. “Our relationships with the mills have always allowed us to get steel. Our candor and integrity has kept those mills close to us even through the tough times,” Robbins says.

Mid-West values customers who can appreciate that success is not just a matter of low price. “I may not give them the cheapest load of steel, but the value of the services we are providing ultimately saves them money,” Robbins says.

The price of steel today is double what it was a decade ago, which is fueling record revenues across the industry—but not necessarily record profits. “The higher price of steel hasn’t been a boon for us. It puts greater cash constraints on us, and especially on our customers. It doesn’t serve me well if my customers are in a cash-tough position. That just makes me nervous. I want them to be able to succeed,” Robbins says.

Higher prices mean customers buy less for stock, and rely more on the service center’s inventory. When prices are high, the service center is less apt to buy extra material, as well, which can result in shortages of certain items. “I want to turn my inventory, but there are times when the cost of steel becomes a chokehold on our ability to perform,” Robbins says. “So it has translated into us being a bit more analytical on the buy side.”

Service centers, especially small to midsize ones like Mid-West, can no longer afford to speculate on steel, hoping to place a big order just before the next price hike. “We’d all like to beat the market, but we can’t. The day of hitting the home run is over. I am not big enough to absorb that possible wrong guess. It could be a multimillion dollar mistake at today’s prices. I’m content with singles and doubles.”

Robbins offers a laundry list of the ways Mid-West differentiates itself from other service centers: Through its stable family management; expertise derived from over 50 years in the business; close relationships with suppliers and customers; longevity and dedication of employees; depth of product line; extensive value-added service offerings; on-site test lab; private truck fleet; rail access; and custom-designed computer system.

Robbins points to his company’s active involvement in industry trade groups as a source of strength, including the Metals Service Center Institute and the Association of Steel Distributors. His grandfather was a founding member of ASD and its national president in 1968-69. Robbins has served on ASD’s board since 2004. “ASD has been a great part of my personal and professional development and has contributed substantially to the success of Mid-West,” he adds.

Given Mid-West’s middle-market position as a $70 million service center, has the family ever been tempted to sell? “Sure, we evaluate our worth regularly,” Robbins says. “But we would love to keep this a core family business.” Indeed, with its ship righted, Mid-West is once again in a growth mode, looking at sites for a new depot somewhere in the Midwest.

Robbins believes in sharing information with suppliers and customers in a totally open manner. “To me, it’s not about secrets anymore. In the old days, we used to make sure nobody followed our trucks to try to steal our customers. Let’s be real. Today everybody knows all the customers. All you have to do is look them up on Google. The secret is not who’s out there, but how to keep them.”

He recalls one customer who characterized Mid-West as “the little engine that could,” an analogy that he embraces. There is a certain intangible about a company like Mid-West that defies the experts’ predictions. “You can’t put a dollar value on integrity, stability and trust. Yes, we are medium sized, but what we lose in economies of scale we make up with flexibility and relationship management.”