Alliance Steel takes the unconventional step of relocating its entire operation across state lines.
Service centers have been known to relocate operations, often because they’ve outgrown the old facility or because the former building was simply not configured to meet modern needs.
In most cases, those moves involve constructing a new – or occupying an existing – facility somewhere nearby, to maintain some sense of normality through the headaches of a move. Such a short hop reduces the costs, allows companies to maintain the employee and customer base and cuts down on the difficulties in maintaining order books while shifting from one location to the other.
Alliance Steel didn’t opt for this plan.
The Midwest flat-rolled service center company recently completed an unconventional move, relocating from its original location in Bedford Park, Ill., to a site in Gary, Ind., a 34-mile trek across state lines and over some of the country’s busiest interstate highways.
The move culminated a years-long process for Alliance Steel, which first announced its plans in 2017.
Andy Gross, president of the company, says three main factors drove the push to such an unconventional relocation. The first was a combination of the traditional reasons – outgrowing the old space.
The original facility in Bedford Park had just over 150,000 square feet, which was no longer large enough to handle the ongoing expansion in business activity the company had experienced through the years.
Moreover, that space was spread out over three separate buildings. “Consolidating into one facility was a must,” Gross says.
The new facility nearly doubled the original space, in a configuration much more amenable to running a steel processing operation, particularly once the Alliance team had modified it to meet the company’s needs.
Secondly, Gross wanted to move closer to his suppliers. His facility in Gary sits between two major integrated mills, while also getting closer to the minimills.
Finally, the State of Indiana provided a number of incentives in the way of grants and tax credits to help the company afford the facility build out and significant moving expenses.
This wasn’t a case of simply wanting to get out of high-tax Illinois, though that helped. Indiana was the only place he looked to relocate his business.
“Geographically, it improves our position drastically. We’re right in the hub of all the highways and right next to all the mills.” Gross isn’t exaggerating about the highways either. The entrance to his facility is actually connected to Interstate 65, just a few hundred feet before the highway ends at U.S. 12 in Gary.
Gross estimates the move will improve internal efficiencies by 3 to 5 percent, whether that’s freight or customer location or storage abilities. Alliance went from being able to store 20,000 tons under roof to 40,000 tons, with space for an extra 50,000 tons outside. On the logistics side, the company went from a freight factor of 75 cents on inbound material to 40 cents.
“All of those factors together help us look into the future. It’s almost like this is our starting line.”
Not surprisingly, a move of this magnitude took ample time. Alliance needed to find the right location to operate a steel processing facility, then even longer to get such a facility up to snuff.
“We knew once we locked in on the facility, it would take many months for the entire process to take place. We had to completely reconstruct all the crane ways and add 11 new overhead cranes with a fully automated retrieval system. We also had to install over $2 million of new foundations and approximately $2 million of installation and electrical costs,” he details. “Yes, we fully expected this to take a long time.”
In some ways, the wait worked out well. In the time between the announcement and the move, Alliance received additional incentives from the state and the city of Gary. “It paid off to be patient.”
Of course, the company wasn’t merely transporting the existing business one state over. Alliance used the opportunity to expand its capabilities, most notably with the addition of a new 84-inch-wide Red Bud ½-inch slitter. The new line can handle coils up to 90,000 pounds.
The push for the new line was driven by customers’ increasing demands to process heavier steel, which Alliance had to send out to toll processors. Now, Alliance will not only be able to do that work in-house, but expects adding some tolling business of its own.
“We think there’s a great opportunity in heavy gauge slitting that hasn’t been tapped. The RV industry for instance, has a lot of heavy gauge material they need narrow slitting done on, and we can do that.
There’s definitely a big void in the market for a good processor with state of the art equipment in the Midwest.”
Before the move, tolling represented between 20 to 30 percent of Alliance’s business. That number may grow, but it will move up in conjunction with additional sales volumes, the company anticipates. “Our customer base increases for that, and it will increase on a toll basis. And with our proximity to Mittal and U.S. Steel, we expect that if we pass the litmus test with those guys, we’ll be able to take advantage of some mill processing for them.”
Additionally, Alliance put $1 million into upgrades of its multi-blank line, adding features and efficiencies and added a 24-inch, ¼-inch by 0.024 inch looping slitter to replace an old 18-inch pull-thru slitter. Alliance also expanded its laser-cutting capabilities with the addition of a new Bystronic machine.
With the new and upgraded lines, Alliance can toll process in slitting from 0.009-0.500 inches from 0.875-inch wide up to 84 inches wide. It can also stretch level 0.400-inch material up to 400 inches long and 74 inches wide.
To orchestrate such a complex move, Alliance assigned various tasks to people in the organization. Gross was responsible for plant and operations. He also used a project management company to oversee the office renovation, a move that has resulted in a remarkable transformation of the space into a truly attractive location for offices and meetings.
“We had help from different parts of the Alliance staff to help facilitate the move and coordination of the IT, phones, logistics and several other time-consuming tasks,” he says.
Despite moving across state lines, the company was able to maintain most of its existing staff. Eighty-five percent of plant employees and 95 percent of administration staff joined the company in Indiana. “This was probably the easiest part of the move,” Gross acknowledges.
More difficult was maintaining service to its customers as it depleted inventory in Bedford Park and restocked in Gary. The company had to utilize some outside processors when the lines were being installed. “We had to very carefully orchestrate all processing and deliveries,” he says.
Though the move was planned with as much foresight as possible, there was no way the company could account for every contingency. For instance, the water table at the new facility was much higher than expected, requiring Alliance to utilize massive dewater services. Other underground obstacles were found in the building, which was built in 1912 and housed some operations for Republic Steel.
“When you are refurbishing a building that was originally started in 1912, you encounter all types of unexpected surprises from electrical to underground storage tanks,” he says.
More recently, the facility was operated by ATCO Gary Metal Technologies, which manufactured products such as fittings and elbows for the HVAC industry. The building itself had not been vacant long when Alliance took over.
It wasn’t a coincidence, Gross says. “I had an inside track. I knew it was going to be empty. That’s why I was right there for it,” he said. Again, the delay worked in his favor. Gross spent several years looking for the right building in Northwest Indiana, and finding virtually nothing.
So what advice would Gross give to the service center operator considering such a monumental move? “Be prepared to make many decisions on the fly and count closely on having smart people involved that can help get you to the goal line,” he says.
He continues. “Be patient. The more accuracy you start with, the cleaner the project will turn out. Also make sure you interview several vendors for each segment of the project. And most importantly, have a Plan B because nothing ever really goes as planned.”
Perhaps the most important advice he can impart is not to do it in the throes of a pandemic. Alliance had initially expected to complete the move in February, then had it pushed back into March. When the coronavirus shut down so much of American life in early-spring, it delayed completion of the move until June.
Numerous problems cropped up immediately, as concerns arose with various vendors and their ability to continue working. Most meaningfully was the delay on the installation of the Red Bud line.
Shortly before the project was expected to be completed, Alliance received a call from the contractors working the job. They were not going to be able to complete it. The company, Lee Contracting, was based in Michigan, and lawyers for the company told Alliance that it would not violate its state’s lockdown orders to cross state lines and finish the project.
Gross sought out another contractor to complete the line, but couldn’t find one. When the Michigan order was lifted at the start of May, Lee returned to Gary to complete the project.
“I could not have picked a worse time to move our company. But we’re soldiering through and we’re gathering steam,” Gross said. “We still don’t think things will come back to normal until the first quarter of 2021, but as a service center, I feel better.”