Bringing out-sourced services in-house can help companies increase sales opportunities, shorten lead times, reduce product costs, and improve quality control. Success stories are detailed in the article along with things to consider when exploring the addition of value-added services to your operations.
The decision to bring traditionally outsourced services in-house can be an expensive and scary proposition—one with the potential to either transform a company or send it into bankruptcy.
Yet that’s exactly what many manufacturing companies do, and often they are pleased with the results. That proved true for the four companies profiled in the following pages.
Machining in Depew
QMC Technologies Inc. is a second–generation, family-owned machine shop in Depew, N.Y. The company took its first step into providing value-added services beyond machining parts 5 years ago, when it purchased a laser engraver and put the company’s manufacturing coordinator, Rachael Serafin, in charge of the new department.
“One of our customers requested that every product be marked with the company logo and a part description,” Serafin said. “We started by subcontracting the work to a laser house, but it was killing our lead time. It got to the point where we were falling short on delivery promises, which in turn affected our competitiveness. Bringing the work inside was absolutely the right decision.”
Because of concerns about corrosion, that same customer required that all stainless steel parts be passivated. QMC management applied the same let’s-keep-it-here logic and invested in a passivation tank, a move that not only reduced product costs and lead times, but attracted other customers as well. Because of its success, QMC has also implemented hydraulic crimping, custom bagging and packaging, and ultrasonic sanitization services, all of which were prompted by customer requirements.
Aside from the convenience and control that comes with keeping these value-added services in-house, it also reduces risk. “Anytime you send something out, there’s a chance it will get damaged during shipment,” Serafin said. “For example, we’ve had boxes of fittings worth several thousand dollars split open while in transit. The shipper scooped the parts off the loading dock, tossed them back in the box and taped it shut. So not only were the threads scratched and dinged, but we ended up with missing parts. It’s not worth the hassle.”
Powder Coating in Pennsylvania
Miller Welding & Machine Co. has a similar story, albeit on a larger scale. A supplier of machined and fabricated parts, weldments and mechanical assemblies to OEMs in the construction, mining and agriculture industries, MWM has 500,000 sq. ft. of manufacturing space across its Sandy Lick, Maplevale and Homer City, Pa., facilities. MWM Sales and Marketing Vice President Eric Miller said much of the company’s success can be attributed to one thing: His father’s decision in the late 1990s to invest in powder coating and painting equipment.
The motivation was simple: The manufacturer’s customers demanded that products arrive at their plants ready for assembly. “For whatever reason, the market shifted,” Miller said. “The big OEMs were no longer interested in buying machined or fabricated parts. They wanted products that were coated and ready to go. We looked at outsourcing, but then you run into timing and quality issues, something that’s a big concern when you offer just-in-time delivery.
“The ironic part is, if they’d asked us to install a bigger machine tool, we never would have questioned it, but at that time we were very uncomfortable with the whole idea of powder-coat and paint. In the end, it came down to one thing—get on board or lose the business to someone else.”
It was a bold move. The projected cost was $11 million, at a time when annual sales were less than $29 million. Worse, the economy dropped sharply after the installation, so MWM didn’t profit from the purchase until 2004. After that, however, the return on investment was extreme.
“By 2008, our sales volume increased to $118 million and our employee count went to 500, more than double that of a few years earlier,” Miller said. “None of that would have happened without the value-added services we’ve been able to offer our customers.”
Tool Grinding in Saginaw
Gary Bruff, vice president of manufacturing at Fullerton Tool Co., Saginaw, Mich., is looking forward to the flexibility and process control that comes with in-house tool coating. The company makes endmills, drills and other solid-carbide tools.
The toolmaker installed a Platit PVD coating system last October, he said. “It was a turnkey installation with a cleaning machine, coating chamber, tooling set and inspection equipment.”
Fullerton has had the volume to justify its own coating chamber for quite some time, Bruff said, but didn’t have the infrastructure to support it. That changed when the company expanded into a new second facility. Together with the coating demand from its sister company, punch and die manufacturer Endurance Carbide, Bridgeport, Mich., Fullerton management felt the time was right for the $1.5 million investment.
“We’ve used several different coating vendors,” he said. “But we’ve always struggled with handling problems. The tools are very sharp and brittle, and, even with good packaging, we’d end up with some chipped edges. Coating in-house has significantly reduced that.”
It’s also given Fullerton greater process control. Expediting specials is easier, lead times are shorter and shipping costs are substantially lower. Best of all, in-house coating capability gives engineers at Fullerton a chance to perform a little black magic.
“We currently have around 20 different coatings, some of which were developed in collaboration with outside vendors,” Bruff said. “The Platit system can run four different cathodes in the same job, so we have the ability to cook up a lot of different recipes. Our FC-20, for example, is one of our newest advanced performance coatings. It’s really kicking butt.”
Rules and Regulations in Rochester
“One of our favorite success stories is about a tool shop that was having problems with their nickel plating,” said Stephen Pontarelli, president of PKG Equipment Inc., Rochester, N.Y. “They decided to do it themselves, which was a pretty big leap for a company with only eight employees. Today, they have over 100 employees, and part finishing has become a lucrative and profitable business for them.”
PKG manufactures, services and distributes industrial plating and process systems, from blackening and anodizing tanks that cost $15,000 to automated cleaning, coating and handling systems costing millions. Pontarelli said most plating processes are fairly straightforward and easily managed by even nontechnical shops, but the decision to invest in the necessary equipment shouldn’t be taken lightly.
“If you can run a machine shop, you can operate a plating tank,” he said, adding that there’s a lot of technical support available from plating supply vendors, and the majority of the maintenance is a matter of basic chemical additions and analyses. That said, having someone with a chemistry background on board is helpful.
“There’s also a lot of ancillary gear that’s needed, such as tooling and lab equipment,” he added. “Because of this, we like to sit down and go over the process in detail with prospective customers, so they understand what to expect up front and can budget accordingly.”
Pontarelli said it’s also important to understand local environmental laws. “It’s a highly regulated industry. There are disposal and compliance issues to deal with, and some companies find it doesn’t make sense for them once they understand all the requirements.”
Pontarelli recently worked with a screw machine shop that wanted to fire its plating shop and bring the job in-house because of quality issues. “My recommendation was to either work with the vendor to improve its processes or find another vendor that could do the job right. The shop simply didn’t have the volume to justify the capital investment,” he said.
“Even so, bringing these value-added services in-house makes sense for a lot of manufacturers. Just make sure to do your homework first,” Pontarelli added.
PKG Equipment helps Monroe Plating in Rochester, New York revive a used line to expand their operations.
Monroe Plating began looking at adding capacity, which meant expanding its operation and adding a finishing line.
John Rowe has never thought of himself as a “new car” kind of guy, preferring instead to kick the tires of a great used car that will get the job done for him just as well as a showroom model.
As general manager of Monroe Plating in Rochester, New York, he took that same approach when he joined the company four years ago when owner Ken McAlpin brought him on board to run the finishing company.
“Ken brought me on to grow this business,” Rowe says. “When I came on, our barrel line work was a shift a day, and after about two-and-a-half years, we grew it to where we were running it 24 hours a day, five days a week.”
So when he couldn’t fit more hours in a day to get additional work, Rowe started looking at adding capacity, which meant expanding Monroe’s operation and adding a new line.
“Our customers had the additional work for us,” he says. “We just couldn’t take it on.”
Monroe Plating specializes in electroless nickel and electroplated zinc in its 39,000-square-foot facility which has served the Rochester, Syracuse, Buffalo and all of upstate New York and Pennsylvania for 50 years.
Roots to 1964
The company traces its roots back to 1964 when Frank McAlpin and Ralph Derleth cofounded McAlpin-Derleth Tool and Die in Rochester. After adding a stamping operation in 1965, the company grew to start Monroe Plating as an in-house finishing operation for zinc and electroless nickel plating.
McAlpin changed the company name in 1981 to McAlpin Industries after Derleth left the company. It is now a diversified precision metalworking company that provides sheet metal products, assemblies and services to the telecommunications, computer, business machine, office equipment, medical, transportation, voting equipment, electronic, warehouse management and automotive sectors.
When McAlpin retired in 1992, his sons Ken and Mike became president and vice president, respectively. The company has been one of Rochester’s most successful privately-owned companies for several decades.
Part of that success comes from knowing when to expand, and when to add services for customers, a challenge Rowe was tasked with solving when he needed to add capacity to Monroe Plating.
“I spent about a year looking at what alternatives we had to add capacity,” Rowe says. “And at the same time, I needed to show to my company management that we actually had work lined up if we spent money on a new line.”
Once Rowe received the go-ahead to start the project late in 2014, he worked with PKG Equipment in Rochester, a manufacturer and service provider of plating and process equipment. PKG has the capabilities to design, fabricate and install the equipment, while also servicing and rebuilding plating lines internationally.
When Rowe met with Stephen Pontarelli, CEO of the family-owned PKG, they discussed both new and used equipment that would serve Monroe’s needs.
“John and I decided used would better fit their budget,” Pontarelli says. “Then it was a matter of finding the right equipment. There is nothing wrong with used equipment, as long as it is the ‘right’ used equipment.”
When Rowe got a lead on a used line that was available at a closed plant, he and Pontarelli went to look at it, though Pontarelli would not give his seal of approval for Monroe to take the line and move it back to their location.
“It was out in Connecticut,” Pontarelli says. “I told him we really needed to go out and evaluate it, and so we did. I told John I just didn’t think it would have made sense, and it just wasn’t the right line. The line was old, in poor condition, and the tanks were beyond their life expectancy.”
Because PKG not only builds new lines, and they spend a great deal of time servicing and rebuilding existing lines, Pontarelli advised Rowe to walk away. That advice came from years of experience, honed from Pontarelli’s father, Sam, who started PKG Equipment in 1969. Back then, Sam started with three employees in a small, 2,300-square-foot space where they fabricated metal tanks and racks for the plating industry.
National Finishing in Buffalo was PKG’s first customer, but Sam grew the business with other customers such as Eastman Kodak, Xerox and Bausch & Lomb.
PKG started fabricating plating equipment using thermoplastics during the 1970s. In the early ’80s, Sam bought plastic welding and forming machines from Europe to expand their plastic fabrication capabilities. PKG was one of the first companies in the U.S. to have that type of technology.
Two fully automatic hoists each have 180-pound maximum load capacity per barrel.
Expansion to More Equipment
Purchasing that equipment enabled PKG to begin offering turnkey plating systems. In the 1980s, PKG started expanding into other industries by custom fabricating several types of corrosion resistant process equipment, as well as making pharmaceutical skids, tanks for the chemical manufacturing industry and dry process equipment for material handling.
The additional services grew PKG and enabled the company to buy a 25,000-square-foot building in 1990 to expand, and a few years later it added another 10,000 square feet as demand for its services grew even more.
Sam’s children—Stephen, Maria and Carla—now own and operate PKG with more than 30 employees. In 2014, PKG invested more than $1 million in additional space and equipment for its now 50,000-square-foot facility.
PKG’s extensive expertise was one reason Rowe called on the company to help, and that expertise proved vital when Rowe heard about a line that was shut down at a facility that was closing in southern New York near Horseheads.
The line was a great candidate to be relocated to Monroe Plating, especially since PKG had rebuilt the line and its systems just a few years earlier.
Modifications from Nickel-Tin
“It was a tremendous prospect for them,” Pontarelli says. “We knew this line very well because we had worked on it, and it helps to know the history of the line if you can.”
The only drawback was that the used line was set up to run nickel-tin coatings, so there needed to be some modifications to it for Monroe to use it, which is what PKG is expertly qualified to do.
“We knew that we were going to have to do a major changeover to enable the line to do what we wanted it to do,” Rowe says. “But you could tell it was well taken care of.”
In addition, Rowe says the new line had “way more bells and whistles” than the current line in the shop in Rochester, which made it even more attractive. The line had two hoists and individual rectification, among other attributes.
“It was going to give us more plating tanks and flexibility that we never had before,” he says. “Our current line had only had one rectifier for three cells, which limited its efficiency. The new line was going to let us run at least six different parts and different thicknesses simultaneously, and it had a lot of other great features.”
Once Monroe purchased the line early in 2015, the company had to make plans to get it moved to PKG’s facility to begin refurbishing it, as well as get its own shop ready for its installation. That included ripping out an existing line that was no longer needed and getting the infrastructure prepared, such as readying the floor for the new system.
PKG designed pumping stations for the Monroe wastewater system. Monroe coated the floor and raised the line so it was off the floor and fully enclosed. It also improved the lighting system to make the work area bright.
At the PKG facility, the team spent about two months rebuilding the line and getting it prepared to go into Monroe’s plant. Pontarelli says about 35 percent of the overall business is rebuilds, so this wasn’t anything new to the company, or something it couldn’t handle.
“It just made more sense for us to bring the line into our shop and do the work, as compared to taking it to the customer’s shop and trying to do all the work there,” Pontarelli says. “Especially when they needed to prep their shop, it was better for us to bring it here and let our people get to work on it.”
PKG personnel recycled many of the existing components on the used line, including moving some stations around to get it ready for the zinc application.
The rebuild included removing the tanks from the base and reconditioning the base parts, which meant sandblasting and coating the steel, and even installing new steel where needed.
The tanks were inspected and repaired if needed, and then put back on the base and configured exactly as it would be at the Monroe shop. That’s when new plumbing was installed, and steam and condensation lines were added.
Then it was time to take apart the line in modules and get them ready to ship and install at Monroe’s plant a few miles away after the shop’s infrastructure was ready to accept it.
PKG personnel installed the new line’s main exhaust and hoist system first, and got it in place and ready for the remaining parts. The 90-foot line was modularized into four separate sections, and was brought over from the PKG facility to Monroe one section at a time, a process that took roughly two days to complete.
“We used the installed hoist structure to install the modules, and that was a tremendous help,” Rowe says.
Another big reason for the quick install was that Monroe sent an electrician to unwire before removal and then to PKG’s facility to rewire the line. This meant, when it arrived at the plating shop, it was very easy to make the connections and install the equipment seamlessly.
“I would highly recommend electrician involvement up front for anyone who plans on doing an installation like this,” Rowe says. “It just went very smoothly, and we reused a majority of the existing wiring.”
The line includes six plating cells with individual 15- volt/1,500 amp tank rectification, plus the two fully automatic hoists each with 180-pound maximum load capacity per barrel.
Rowe says the line has the ability to run 12 barrels concurrently, and it came with an Allen Bradley PLC controller that has touch screen capability, variable speed control on rotational motors, an automatic temperature control module and automatic chemical addition based on amp-hour usage.
Rowe says that when the system is set in automatic mode, the parts to be plated are entered into the controller with a predetermined processing recipe based on the weight of the part and the plated surface areas. The controller uses this information to automatically adjust rectification to the level needed to meet the plating thickness requirement.
Flexibility in Operations
“We run thousands of different parts, so it’s important to have a controller that enables us to really use the line in the sequence we want to use,” Rowe says. “The system has tremendous flexibility.”
The biggest plus for Monroe, Rowe says, is that numerous plating barrel designs are used for flexibility. While standard barrels can hold a maximum of 180 pounds and can run parts as small as 0.125 inch in diameter, the system’s mini-barrels are used for small volume parts. He says split barrels are used for running different parts within the same barrel.
Monroe is currently running clear and yellow chromates on the new zinc line, as well as an organic sealer. Rowe says that, if required, the parts can also be baked for hydrogen embrittlement in a thermocouple controlled oven before going to the final chromate operation.
“There’s a large amount of business in upstate New York, such as in fasteners and in small machined parts,” he says. “Our business requires quick turnaround so we are now prepared to support this demand with our increased capacity.”
Overall, Rowe says buying the line used provided cost-savings, but he cautions other shop owners to perform their due diligence, and to certainly have experts like those at PKG to advise on the line.
“Steve and I looked very closely at this line, and I would suggest to anyone to look at maintenance records and history to see the quality of what you are buying,” he says. “There are still a lot of unknowns, but it’s not that much different from buying a car. You better look at it closely. The unknowns can be costly.”
Pontarelli says that buying used equipment is not a bad idea, but only after having someone thoroughly evaluate the system before writing the check to buy it.
“A lot of customers get really excited when hearing about a plating line shutting down and they think they can get a good deal on it, or the former owners tell them they can have what they want from their line,” Pontarelli says. “Beware, because there’s probably a reason why they want to get rid of the line, or are giving it away.”
PKG Equipment Inc. is increasing its capabilities, physical size and workforce. The Chili firm has invested more than $1 million in more space and equipment to keep pace with growth. The facility added roughly 15,000 square feet to their building and are now at 50,000 square feet. Increased capabilities, a more diversified customer base, and the loss of competitiors during a sluggish economy have helped the company grow.
PKG Equipment Inc., a process equipment manufacturer specializing in surface finishing equipment, has formed a strategic alliance with Roberts Chemical Co., Inc. of Attleboro, Massachusetts, a full service chemical distributor for the Northeastern U.S. PKG Equipment will be representing Roberts Chemical Co., and Roberts Chemical Co. will be a distributor for PKG Equipment covering the east coast from Maine to Virginia. The strengths and specialties of each company will be combined providing their customers with a total surface finishing package complete with high quality chemicals and equipment. This partnership enhances both companies’ positions in the surface finishing industry by meeting a full range of customer needs.
PKG Equipment installed a third thermoplastic sheet butt welding machine in its plastic fabrication department with several advanced technological features. The butt welder has sheet thickness capacities that range from 1/8″ to 2-3/8″ with a working width of 158″. It can also be used to butt weld 90° corners on material over 1/2″ thick.
The operating controls consist of PLC controls allowing for parameter selection by manually setting pressures, welding times and temperature, but there is also a touch screen feature where the operator can input sheet length, sheet thickness and select a standard material from the menu. The machine then automatically calculates and sets all the necessary adjustments with respect to times, temperatures and pressures. The preprogrammed parameters are based on current DVS (German Welding Society) guidelines and include polypropylene, polyethylene, extruded PVC, pressed PVC and PVDF, therefore performing quality controlled welds according to DVS 2208-1. In addition, the PLC interface allows the operator to produce documentation on welding parameters for individual welds.
Another feature is the extension of the memory with parameter sets for customer specific data. Product specific parameter sets, including geometrical data, can be stored and easily retrieved, allowing for considerable minimization of set-up times when changing materials or product types. This is an additional feature to prevent potential operator input errors.
PKG Equipment recently installed a new Miller submerged arc welding system to expand its capabilities in the fabrication of process equipment. This sumerged arc welder uses a continuously fed consumable solid or tubular (flux cored) electrode. The molten weld and the arc zone are protected from atmospheric contamination by being “submerged” under a blanket of granular fusible flux. When molten, the flux becomes conductive and provides a current path between the electrode and the work. This thick layer of flux completely covers the molten metal thus preventing splatter and sparks as well as suppressing the intense ultraviolet radiation and fumes that are a part of the welding process. The sub-arc welder is mounted to an Aronson manipulator that has a 10′ longitudinal travel and a 12′ vertical travel. Advantages of sub-arc welding are reduced weld time, high deposition rate, superior weld penetration and repeatable x-ray quality welds.
PKG Equipment Inc. has just received exclusive authorization to use HY-PRO® flame retardant clad polypropylene to manufacture process equipment. PKG Equipment has been fabricating process equipment from various thermoplastics for over 30 years, but this new capability allows PKG to offer plastic fabrications that require some flame retardant provisions without the expense associated with solid flame retardant sheet.
HY-PRO® was developed by Allegheny Plastics, but Siemens Corp. currently owns the trademark and rights to HY-PRO®. It is co-extruded polypropylene sheet with an impact resistant copolymer polypropylene core and two outer protective layers of .090″ thick flame retardant copolymer polypropylene. HY-PRO® offers the superior weld ability, toughness and strength of the copolymer polypropylene core with flame retardant skins on the outside faces. Butt welds are made by machine hot blade fusion welds or by using full penetration welds with natural copolymer polypropylene welding rod. The only non flame retardant areas in fabricated parts are the exposed edges and weld seams which are a very small percentage of the total surface area.
While this material has flame retardant outer protective layers, it is not represented as having the equivalent burning characteristics as solid flame retardant sheet. It is an economical alternative with superior physical properties. The flame retardant skins protect the copolymer core from ignition from weld splatter, burning droplets, electrical arching, etc. Typical applications for HY-PRO® polypropylene include, but are not limited to fume exhaust hoods, ductwork, tank covers and scrubber bodies.