Stretching the Market
This Minneapolis-area carbon flat-roll distributor stretched its market reach by adding new leveling technology while moving to a larger facility.
By Tim Triplett,
If you had the chance to start business all over, what would you do differently?
2500 West Country Road B
Roseville, MN 55113
Key Personnel: Mike Ratner, owner/president; Steve Gottlieb, vice president
Total Employees: 40
Facilities: One 150,000 sq. ft. location
Products: Carbon flat-roll steel, including hot-roll, hot-roll pickled and oiled, cold-roll
Services: Slitting, cut-to-length, blanking, shearing
Equipment: One slitter, two cut-to-length lines with both roller and stretcher leveling technology, 11 cranes, three shears
Markets: Energy, agriculture, general manufacturing in Upper Midwest U.S.
Two years ago, that’s the question Mark Ratner found himself contemplating as his company prepared to move its operations about 100 feet to an adjacent warehouse. Though only a short hop in terms of distance, it was a major leap in terms of competitiveness for Ratner Steel.
Ratner founded the carbon flat-roll distribution company outside of Minneapolis about 25 years ago. When his lease was up and his long-time landlord wanted to reclaim the space, Ratner considered all his options for relocating. In the end, he decided on a bigger structure right next door.
“The building worked great for us, in the right location with the right rail line. The employees all live in this area. We felt it would be the least disruptive to stay right here,” he recalls.
Ratner saw in the project not just the difficult logistical task at hand—to move two heavy coil-processing lines, a slitter, three shears and 15,000 tons of inventory while continuing to serve customers—but also the opportunity it presented to reshape the company. “We had the luxury of taking an empty, 150,000-square-foot box and planning how to improve our operation. We explored everything, including how the market had changed and how we could best serve ourselves by investing in new technology,” he explains.
The most significant change Ratner recognized was the growing demand for extremely flat steel. “After analyzing the markets, we knew we needed to do something. Most of the manufacturers we service now operate lasers. So we needed to be able to supply a laser-quality, memory-free product. Getting temper-passed metal from the mills was just not good enough.”
One possible solution, Ratner thought, was stretcher leveling technology touted by Red Bud Industries, Red Bud, Ill. Ratner had invested in a new half-inch Delta cut-to-length line just two years before, and also had a quarter-inch Bradbury/Strilich cut-to-length line that had been in service for a decade, both equipped with conventional roller levelers. Ratner was not in the market for a new line, but wondered if Red Bud could retrofit his existing lines with stretcher levelers as they were reassembled in their new location. Red Bud had never tackled this particular engineering challenge, but jumped at the opportunity. “We hoped that could be a very cost-effective method of getting into the stretcher business,” Ratner says.
Some equipment vendors still debate the relative benefits and drawbacks of roller leveling vs. stretcher leveling, especially for processing heavy-gauge, high-yield, high-strength steels. Rather than compressing the coil between rollers like a conventional roller leveler or temper mill, the stretcher leveler repeatedly grips and stretches the entire cross-section of the strip without the use of bending or compressive forces. Applying up to 2 million pounds of stretching force, the tension equalizes the stresses throughout the strip and makes the material stay exceptionally flat, according to Red Bud.
“The roller leveler can clearly take the coil set out and provide a flat product, but it cannot provide a memory-free product so cut parts stay flat. Stretchers take metal and stretch it the same every time. Every sheet that comes off these stretchers is consistently flat,” says Ratner.
The company placed the order with Red Bud in December 2007 so the equipment would be ready for retrofitting a year later as the processing lines were moved to their new home next door. The move was completed during the first quarter of 2009 at a project cost totaling about $9.5 million, which included approximately $5 million for the two stretchers, plus the cost of three new overhead cranes, coil transfer systems, 3,000 yards of concrete to reinforce the floor, the labor to take apart, move and reassemble all the machinery, and various other upgrades to the facility. To continue servicing its customers without interruption, Ratner moved one line at a time while processing orders on the other.
For Ratner Steel, it’s not a question of roller leveling or stretcher leveling. They do both. After the steel passes through the existing roller levelers, it is then stretched by Red Bud’s retrofitted equipment to relieve any residual stresses in the material.
“The only drawback with the stretchers is that they operate in a start-stop mode. The line has to stop, stretch the steel, then proceed. Total processing time has actually increased, however, because the stretchers are so efficient. We never have to back up coils or worry about the consistency of the finished product,” Ratner says.
Making a multimillion dollar investment in new equipment and a new facility just prior to the economy’s collapse would seem like bad timing, but Ratner considers himself fortunate. “In 2009, without the stretchers, we would have been off 40 to 50 percent in tonnage just like the rest of the industry. Because we were able to offer a new product to laser houses and process higher-strength steels, we added new accounts and grew our business with existing customers,” he says.
Steve Gottlieb, Ratner vice president, admits the $5 million price tag for the two stretcher levelers was initially daunting, “but once we put pencil to paper to calculate the savings, it was a no-brainer.” He describes the main factors that convinced the company to go forward with the move and equipment upgrade.
“First, it was the only way for us to grow our business. The direction of our company is to supply steel to fabricators and manufacturers, the bulk of which are now using lasers. We wanted to be able to guarantee to our customer base that we would provide flat steel with no memory. To get into the major shops in the Midwest, we had to guarantee a better product.”
Second, the stretcher levelers promised to save Ratner $25 to $30 per ton on temper passing charges from suppliers, which amounted to more than $75,000 a month.
Third, Gottlieb estimates stretcher leveling cuts the yield loss on a typical coil down to just 1 or 2 percent, adding about 200 tons per month that the company can now sell as prime rather than scrap. The difference of perhaps $300 per ton nets Ratner an additional $60,000 each month.
Fourth—a factor more difficult to quantify—Ratner can now optimize its sources of supply. The quality of steel tends to vary from mill to mill, making some coils more difficult to level than others, Gottlieb says. Today, with its roller/stretcher leveling combo, Ratner can get almost any coil flat. That means it can always buy from the mill offering the lowest price or with the cheapest freight cost.
Fifth, also difficult to calculate, is the value of new business attracted by the company’s new capabilities, as well as existing customers it has retained but might otherwise have lost if it had not improved the quality of its product.
All total, Gottlieb estimates Ratner Steel saves over $150,000 a month, offering a three-year payback on its investment in Red Bud stretcher levelers.
“In 2009, without the stretcher levelers, we would have been down in tonnage somewhere around 40 percent. At the end of the year, we were down around 15 percent. So we know for a fact these stretcher levelers have sold steel for us. We have been able to significantly outperform a very poor market because we had a new product to offer,” Gottlieb says.
Ratner has always believed in reinvesting in his business, estimating he has spent $20 million on new equipment in the past decade. “In 2009, we had a great story to tell. Our salespeople were out in the marketplace talking about our investment in innovation and technology. We also upgraded our computer system in the summer of 2008 [to an Enmark ERP system] in anticipation of the move, so we’ve set ourselves up for the future. The timing was great.”
Ratner has no plans to get into the laser processing business, however. “We are just a coil processor. We don’t laser cut, we don’t flame cut, we don’t fabricate, we just process coils, and that is how we drive costs out of the equation. Whereas other service centers are going the other way, adding as many value-added services as they can, we feel we will add value by having the best equipment in the region and just processing steel. We’ll let our customers fabricate. We don’t want to compete with them.”
Fabricators represent about one-third of Ratner Steel’s business, OEMs one-third and other service centers one-third. Its new leveling capability has helped the company expand its toll processing business. “Our toll business has grown among service centers that don’t have the same capacity. Large OEMs in the region that were buying steel at the mill level and sending it to toll processors in the Chicago area can now send it directly to our facility,” Ratner says.
“2009 was a very difficult year, but we probably fared better than others because of all the investment in our business. Without it, it could have been a really disastrous year,” he adds.