My father used to say the luckiest ones were always those who worked the hardest, says Steve Harmon, President and CEO and co-owner with his brother Doug, Vice-President and CFO, of Twin City Die Castings. “I think we work hard but in today’s business environment, you’ve also got to work smart.”
The smart way to work for this Minneapolis, Minn.-based company is to continually reengineer manufacturing processes to produce higher throughputs, maintain high quality at price-competitive levels, and to continually reinvest in equipment so they are ready for new opportunities as they arise.
The Die is Cast
First, a little history on this privately held family business. Twin City Die Castings Company was founded in 1919 by Charles G. Adams at the same location the central plant and corporate headquarters now occupy. The first die casting machine designed and built by Adams required two operators and was originally used for setting lead type; its current use is as a historical display at the Minneapolis plant entrance. Adams remained active in the company and the industry (he founded the American Die Casting Institute, now known as NADCA in 1929), until his death in 1971. Jim Harmon bought the business and transferred ownership to his sons in 1989.
Since then, the brothers have grown the business from $2 million to about $50 million annually, and have expanded manufacturing facilities with aluminum and zinc die casting operations in Watertown, S.D., and a magnesium and aluminum casting facility in Monticello, Minn.
While aluminum and zinc die casting alloys comprise a majority of sales, the newer magnesium alloys have high-end applications in which lightness and durability are premium, such as shielding for medical equipment, electronic components, laptops, automobiles, and even chainsaw housings. “It’s a small market,” Steve Harmon says, “but a growing one, particularly in an industry such as automotive that’s looking to reduce the weight of big parts.”
Dealing with Tough Business Conditions
Meeting such newer and specialized customer needs is one key to the Twin Cities success strategy, although recent economic conditions have defined success in terms of simple survival. “The last four years have been the worst for us since we’ve been in business,” Harmon notes. “It has been tough, but, still, we’ve managed to keep our heads above water by constantly reengineering and retooling to improve our manufacturing efficiency and, at the same time, reducing our (remove word “labor”) costs.” The two concepts go hand in hand. Virtually all die-casting equipment today is automated, so the need for operators is reduced. The result is that Twin City has shrunk from over 400 employees to less than 300. While no employer likes to eliminate jobs, Harmon does see the evolution of the manufacturing process as an opportunity. “While it’s true there is little future in the repetitive, assembly-line type jobs that are going off shore, it does create more skilled positions for people to learn computerized operations such as how to program and maintain a robotic arm, for example,” he points out.
Harmon says that a main objective is to increase sales per employee. “Twenty-five years ago, it might have been $25,000 to $50,000 per employee. Today, it’s about $160,000, and with fewer total employees.” One significant factor in achieving this is improved manufacturing capacity and production. “Instead of using four cavity molds, for example, we use 16,” he points out. “Instead of making one or two parts in a run, now we make 10 or 12. We’re always looking to push the technology envelope to do things better and more cost-efficiently.”
It’s also not the time to put off plant reinvestment. “A lot of die casters got in trouble because they didn’t stay current with new equipment and then weren’t able to satisfy customer needs when they arose,” Harmon notes. The bad luck of some companies is Twin City’s fortune, however. “Our industry has shrunk dramatically from about 1,000 companies to 300. This provides us with an opportunity to purchase equipment at auction. And, obviously, as the competition has dwindled with companies closing down, we’ve been able to pick up some of their business.”
Another area in which Harmon insists on drawing the line is pricing. “Some die casters put themselves out of business because they cut their prices too low. You can’t sell a pound of metal for the cost of a half pound,” he insists. “By cutting our production costs as much as we can, we can offer competitively priced products. But we can’t give it away. By differentiating our products to service a variety of industries and applications with reasonable pricing, we’ve been able to retain business.”
Opposing the “Wal-Mart Strategy”
The future remains uncertain, however. “It’s funny, when the SARS crisis hit, a lot of companies started re-thinking their Asian strategy. The lower labor costs didn’t seem worth their people going over there and putting their people at risk so a lot of Fortune 500 companies started to look again at domestic manufacturers like us,” Harmon observes. “We definitely saw a pick-up in sales activity during this time but now that the SARS threat has seemingly receded, we’ve seen the lull come back. ”
Harmon disdains this widespread and perhaps too-easy acceptance of what he terms the “Wal-Mart strategy.” He adds, “Everything is based on providing volume and the lowest costs. Ultimately, that has to change, because it doesn’t leave any room for innovation. Focusing entirely on trimming costs loses the big picture of making changes that make better products, not just cheaper ones. I think that’s the better scenario, and what we’re trying to do at Twin Cities. Not surprisingly, some of our bigger customers are European, or U.S. subsidiaries of European companies. BMW, Phillips, DaimlerChrysler, for example, all put the emphasis on what counts: engineering excellence and product quality. That approach is the only way we can ultimately succeed in this industry.”