Service Centers Dipping Toes in Welding Waters
Whether to grab extra margin or to meet the needs of a demanding customer, a growing number of service centers are dabbling in welding and fabrication as another value-added service.
By Dan Markham, Senior Editor
Adding value is the mantra of today’s service center. Increasingly rare is the metals distributor who does not saw, cut, level, blank or slit a piece of metal before sending it on to the customer. Taking a further step into fabrication—at the risk of stepping on some customers’ toes—more service centers now offer welding, as well.
Some have entered the welding world slowly, adding a simple piece of equipment and a single welder to handle the occasional customer request. Others have embraced the process with a major investment in equipment and personnel.
In either case, a growing number of service centers now offer welding as a value-added service. More than 10 percent of Metal Center News subscribers indicate that welding is among their offerings. That figure will only grow as the competitive industry evolves to meet changing demands and conditions.
“Yes, we have seen more interest [in welding equipment] from service center companies,” says Dave Maxham, vice president of cutting system sales for ESAB Cutting and Welding, Florence, S.C. Many of these service centers were reluctant to venture into manufacturing for fear of appearing to compete with customers, but did so because a large customer essentially demanded it. They hire welders and purchase the equipment, but don’t go out of their way to inform other customers. Others simply see the move as an opportunity to grab a little more business, though they are cautious about the accounts they target.
On the other hand, there are metals distributors that have launched entire welding groups. “They’re making a big-dollar commitment and they’re going full-speed ahead. They see it as a value-add for their customers and another revenue stream for them,” Maxham says.
Of course, one company’s value-add is another’s competition, which has long discouraged service centers from delving too deeply into aspects of manufacturing. For many service centers, even those that have added welding, this conflict of interest remains a significant concern. Some sources would only talk about this touchy subject under the promise of anonymity.
One such service center executive says it was the repeated insistence of one customer that led his company into fabrication. “They suggested we add value, and did so for a number of years. You get hit on the head enough times, you realize it hurts, so we started doing it,” he recalls.
Justifying the move is made easier by the dog-eat-dog nature of the metals supply chain, he notes. Concerns about competing with his customers were eased by the fact those customers would routinely price shop every piece of metal and would not hesitate to place their order somewhere else. “We have to worry about ourselves and our employees. Distribution has gotten very difficult. We have to do what we do and not worry about getting beat up by a fabricator.” The move has paid off, he adds. His company now derives more of its revenue from fabricating services than from traditional metals distribution.
Comfortable speaking about his welding operation is Ramon Sanchez, owner of P&S Metal Supply in Las Vegas. His company has evolved from a traditional service center into a value-added service provider offering cut-to-length, leveling, shearing and welding. Today, the company employs 6-10 welders at any one time. Sanchez sees this as a benefit to his existing customers, rather than a challenge to them. “We want to accommodate our customers, create more of a partnership. When they’re busy, we help them out of their bind,” he says.
That attitude is common among service centers that walk the fine line between complement and compete. They envision themselves as gap fillers. “I see the ability to add fabricating as an extension of our primary business to our existing customers,” says John Reuter, president of Metals Inc., Oakwood Village, Ohio, which specializes in the distribution of expanded and perforated metals. “A lot of our customers are welders. We’re here for their support.”
One way to maintain some distance is to avoid direct competition in the types of welding offered. That can be accomplished by installing a larger or more specialized piece of machinery than is common in the region, or simply by only handling material in house.
“We don’t have a field crew, so we’re not in competition with our customers,” says Jimmy Culpepper, manager of the steel service center for Augusta-based Modern Welding of Georgia. “A lot of the contractors around here are in the chemical plants working on tanks, putting patches on them. We don’t want to be in competition with them.”
While some service centers have added welding to their menu of services, it’s just as common to find fabricators that have opted to expand into metals distribution. That was the path followed by PRW Steel, Paso Robles, Calif. “It’s an easier transition for a fabricator to get into steel sales,” says General Manager Rajon Begin. “When it comes to adding welding and fabrication for a service center, it’s going to take the right personnel with the right knowledge of the field.”
PRW Steel, located halfway between Los Angeles and San Francisco, began distributing metal to fill a void in the local marketplace. The addition of a metals warehouse has been a boon to the entire business. “It’s helped our welding. We don’t find ourselves calling around to get material for a build,” Begin says.
Modern Welding, which operates 16 separate facilities in the Southeast, is another fabricator that has moved into metal distribution. In its case, a new manager with experience on the distribution side of the business opened the door to that market. Since that change 15 years ago, the company now offers metal sales at four of its locations.
To Steve Fort, vice president and manager of Modern Welding of Georgia, the transition to metal sales was a necessary move. Whether adopting new technology or expanding products or services, it’s a case of evolve or perish. “You can’t just keep grinding it out by hand like we used to do; you have to be a little proactive in trying to stay current. If you try to do things today like you did 10 years ago, you’re losing,” he says.
A diversity of offerings spreads the risk and can act as a buffer against any economic slowdowns, says Sanchez. “During the recession, we were able to keep all of our employees. It has helped us managed through the downturns.”
Getting into the welding business is more complicated than just buying some new equipment, executives warn. It comes with some very specific challenges, including OSHA compliance and liability issues should a welded part fail.
“It helps to have an engineer on hand for any design needs,” says Reuter.
Pricing out the service, estimating the value provided, can be more difficult than simply selling a commodity such as steel. The entire learning curve for running a successful welding department can be steep, say the experts.
One of the biggest challenges is finding qualified workers. The American Welding Society estimates there will be a shortage of more than 200,000 certified welders by 2025.
“Those in the field are nearing retirement age and there are not enough people to replace them,” says Cindy Weihl, senior PR manager for the Miami-based AWS. A generation of Americans was steered away from trades and into college, and the expected return of manufacturing jobs to North America is creating the anticipated shortage.
Companies such as ESAB are trying to address the shortfall through product development with an increased focus on automation. “We’re trying to make the lower-end entry level equipment simple and user friendly, building all of the intelligence into the process controls,” says Maxham. “Where it used to be an art form, we’re building that into the welding equipment so you can take someone off the street and teach them how to weld without years and years of apprenticeship.”