5-2010 MCN Case Study: Majestic Steel
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Majestic Has Coated Steel Covered

By Myra Pinkham, Contributing Editor

This Cleveland-based galvanized specialist believes it has only scratched the surface of the market for coated coils.

At a Glance

Majestic Steel USA
5300 Majestic Parkway
Cleveland, Ohio 44146
440-786-2666
Fax: 440-786-0576

Key Executives:
Dennis Leebow, Chief Executive Officer
Tom Innis, Director of Marketing
Josh Spoores, Market Research Manager

Major Markets: HVAC, energy, agricultural equipment, appliances, transportation, steel distribution

Products: Prime flat-rolled steel in hot-dipped galvanized, phosphatized/bonderized, galvannealed, galvalume, aluminized, cold-rolled, type 304 stainless, prepainted

Services: Slitting, cut-to-length, blanking, shearing

Processing Equipment: 72-inch Braner slitting line, 60-inch Herr-Voss Stamco cut-to-length line, 72-inch Red Bud blanking line, 120-inch shear
At a time when many service centers selling coated steel continue to struggle, Majestic Steel USA—claiming to be the largest distributor of prime flat-rolled galvanized steel under one roof in North America—is embarking upon a growth strategy that includes a new greenfield facility and expanded international sales.

Despite the fact that 2009 was an extremely tough year for the economy and the galvanized industry as a whole, Majestic was able to increase its inventory turns from 2008 levels, says Tom Innis, the company’s director of marketing. “That is a sign that our business actually expanded during a time when other companies were contracting.”

Majestic shipped as many pounds of metal last year as it did in 2008, in spite of the steel price volatility. The company also added about 25 workers, while most others were instituting layoffs.

“Certainly last year wasn’t a year without challenges,” Innis admitted. In fact, those challenges were substantial, says Josh Spoores, Majestic’s market research manager, who notes that U.S. hot-dipped galvanized production averaged about 2.2 million tons in 2009, down from the peak of 3.9 million tons in 2007.

“But we feel we were better positioned to weather the challenges than a lot of companies,” Innis says, attributing much of the company’s success to the efforts of its market analyst and inventory management teams, which continually “scour” the industrial information base for macro- and micro-economic developments. “To be forewarned is to be forearmed,” he says. “Getting in front of what was happening was our best weapon against falling into the same trap as a lot of other companies.”

Majestic even shares its market research. At least once a month, it sends customers and other interested parties its “Spoores Report” on the trends affecting the steel market. It also distributes this market research on Twitter under both MajesticSteel and SteelResearch.

This analytical approach has helped Majestic buy and sell steel more effectively, Innis says. “It helped us know when to buy it, how much to buy and what diversity of products to have on hand. Very savvy management of our inventories has allowed us to stay in control of the situation in a time that, for many others, was largely out of control.”

Now that the coated steel market has bottomed out, Majestic Steel is setting its sights on new growth opportunities. Founded in 1979 by Chief Executive Officer Dennis Leebow as a “one man, one coil” steel operation, Majestic currently operates a single 450,000-square-foot warehouse in Cleveland, from which it sells such coated steels as galvanized, galvannealed, galvalume, aluminized, phosphatized, bonderized and cold-rolled sheet and coil to both OEMs and other service centers. The facility also houses extensive processing equipment, including a 72-inch Braner slitting line, a 60-inch Herr-Voss Stamco cut-to-length line, a 72-inch Red Bud precision blanking line and a 120-inch shear.

Majestic services a wide range of OEM markets, including HVAC, energy, agricultural equipment, appliances, transportation and steel distribution, but has very little exposure to the troubled automotive market. Innis does not rule out further diversification in the future, however, including into automotive.

In November, the company moved its administrative offices out of its warehouse facility to a larger space in nearby Pepper Pike, Ohio—what the company hopes is the first step in a series of expansions. The new office configuration improves collaboration and cross-functional interaction among Majestic’s employees, Innis says.

At any given time, Majestic has in excess of 250 million pounds of metal on its floor. Innis admits that stocking so much inventory carries some risk, especially in these uncertain times, “but we have our inventory management system dialed in to a science.” Keeping so much material on hand means customers don’t need to, he adds. “Our vast inventories provide all of our customers (service centers included) the ability to operate in a just-in-time fashion, which is the reality of today’s marketplace.”

Being ISO 9001-2008 certified, Majestic not only guarantees that customers get exactly what they have ordered, but it also acts on its customers’ behalf to settle any quality claims with mill suppliers. “That way they don’t have to pull resources out of their day-to-day operations to fight those battles,” Innis says.
Majestic is currently positioning itself for the upturn, finalizing plans to open a second U.S. service center facility sometime next year. The site is in “a strategic location” outside of the Midwest, Innis says, which could eventually lead to international expansion.

“I think we have entered an era now where we will be continuously linked to what’s happening in other parts of the globe. We can’t just look at operating in our own sandbox anymore; we have to position ourselves to be competitive, not only in Cleveland and the U.S., but also throughout the world.”

From its current location, Majestic has serviced customers throughout North America, as well as Central and South America. “To get a bigger slice of the opportunity pie, we need to continue to grow and to position ourselves accordingly,” he adds.

The coated steel market is clearly improving, albeit slowly, says Spoores, who expects 2010 to be a pretty good year for Majestic. “Automotive is starting to pick up, and so has the use of welded pipe for energy applications. Housing bottomed out last year. The only end-use market that hasn’t really bottomed out yet is nonresidential construction, and hopefully that will happen later this year.” Majestic also should get a boost from sales to other service centers as they restock depleted inventories, he adds.

Year-to-date, Majestic is averaging about a 20 percent increase in inventory turns, which means that its business is growing “even before we put more Majestic flags in the ground,” Innis says.

“We are very bullish about the future,” he adds. “The challenges the industry has faced have provided us with an opportunity to more firmly entrench ourselves in the market. We now see ourselves emerging on the other end in a much better position.”
  
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Friday, December 19, 2014