Farrar Corp. Executes Its Plan for Future Success.

After several years of diversifying simply as a survival mechanism, this ductile iron foundry has begun an expansion plan to solidify its niche and future success.

Discovering one's niche can be a lengthy and frustrating roller coaster of successes and failures for a manufacturing company. Along the way, several roadblocks and seemingly insurmountable obstacles surface to make the journey a challenging one. Once a company determines what it does best, though, the end results can be extremely profitable for several years to come.

When Farrar Corp., a small repair shop and agricultural manufacturer in Norwich, Kansas, embarked upon its own foundry business in 1967 by pouring ductile iron castings for its product line of sickle drives rather than continuing to order them, its owners believed they had found a unique foundation upon which to build a new future for the company. However, over the next 30-plus years, the foundry and machine shop, which originally served only the agricultural industry, would encounter several obstacles, forcing it to alter the direction it had mapped out for itself. With the guidance of President Joe Farrar, the foundry has been able to recognize and react to market fluctuations, create a stable, balanced service to a variety of industries, and construct a reliable vision for a profitable future.

This article examines how Farrar's ability to diversify helped it survive in the foundry industry and allowed it to finally discover its niche. It also will look at how a recently developed 10-year business plan, which includes the opening of a state-of-the-art machine shop, has mapped out a method to carry out this specialty.

Branching Out

When Farrar entered the ductile iron casting business in the late 1960s, customers that had known it only as a fabrication and machining company began to send casting jobs their way. "We needed a material with the strength of steel but that was more economical to produce," said Farrar of the firm's decision to pour ductile iron. "We were fabricating parts for our sickle drive, and there was a lot of chopping, welding, drilling, tapping and machining. We saw it as a way to save money and to make the product look better." Availability was their number one reason, though, for switching to in-house casting as Farrar could take full control of the part's production, thereby saving order and transportation costs.

The startup foundry was working out of an 8000-sq-ft converted metal grain storage building, where it was pouring 8-9 tons/day with a gas-fired furnace but barely keeping up with its workload. "We had a 6-month backlog, and we weren't taking on any new customers or any new jobs from our existing customers," said Farrar. "Demand was way up and we needed to expand."

In 1976, the foundry moved into a 49,000-sq-ft building across the street. There, Farrar ran six squeezer lines (combining to produce 600 molds/day) and installed coreless induction furnaces. The foundry has since replaced its squeezer lines with automatic molding machines and increased its pouring output to 50 tons/day. Six months after operations began, the agricultural industry, which accounted for 90% of the foundry's business, experienced a price crash. For a foundry that went from $500/month in fixed costs in its old facility to $1500/month in the new one, this predicament could not have come at a worse time.

With the foundry pouring only 2-3 days/week, Farrar, who at that time had 5 years of experience at his father's company, became its salesman and set out to diversify its markets. Within the next 6 years, Farrar was supplying four major industries, including oil field, valve bodies, hydraulic cylinders and agriculture. In 1982, though, oil prices fell out along with agriculture, and these customers crashed, leaving Farrar in a bad situation yet again. "We went from $4.5 million annual sales levels to $2 million in 60 days," said Farrar. "We also had the only layoff in company history, going from 125 to 65 employees. This started 6 years of tough times."

In this time, Farrar learned a lot about surviving and discovered that the company needed to diversify far more than it had previously. "We needed to never again get into the position where all of our eggs would be in one basket," he said. Today, out of its 100 customers there is no one industry that makes up more than 24% of Farrar's business, and its largest customer makes up only 17%. Currently, with 1600 active jobs, its main market is lawn care equipment, followed by construction equipment and prestressed concrete bridge construction. The agriculture industry, which used to be the foundry's anchor, now accounts for only 8-9% of its total business.

'Grow or Die'

For a decade, Farrar thrived in its newfound diversity, and, according to Farrar, established a definite niche for itself. "We are the only company I know of that pours ductile iron castings from 1-65 lb, has its own in-house pattern shop, foundry and machine shop, get its parts heat-treated and assembles them," said Farrar, who has seen his company's total sales steadily increase from $3.3 million in 1986 to more than $12 million in 2000.

A result of the foundry's broad capabilities has been a significant boom in business--so much business, in fact, that in the last 5 years, Farrar has had to turn down much of it because of a lack of capacity. "In 1998-99, I turned down as much work as we already had," said Farrar. "We had opportunities to quote jobs that would have doubled our business."

With this in mind, Farrar devised a 10-year plan, in which the company would expand with the construction of a new foundry, machine shop and heat-treating facility. "It's either grow or die," said Farrar. "In order for stockholders to get a decent return on their investment in the company, it had to grow."

A noticeable trend in Farrar's business had been the increasing amount of castings machined at its facility. For years, the foundry had machined in-house 35% of the castings it poured. During the 2 years of property negotiations for its expansion, that amount jumped to 55%, accounting for 75% of its sales. "At the end of that period, we realized we were farming out a lot of that machine work to other machine shops just to meet our deliveries," said Farrar. "We were out 3-4 months in our machine shop, and we lacked the machining capacity to meet our needs." The lack of capacity of the foundry coupled with that of its machine facility also voided the possibility of Farrar ever handling higher-volume jobs that required machining.

These figures propelled Farrar into a second machine shop to open up capacity at its Norwich facilities. Farrar was encouraged on a few occasions to purchase an existing facility to address his company's needs, but he felt that buying another facility would not be the solution to Farrar's capacity dilemma. "If we bought another facility, it already would have customers," said Farrar. "So where would the capacity be? And if they didn't have much work, there's probably a good reason for it."

Farrar knew that he could not achieve his desired growth in Norwich due to a lack of infrastructure and available labor (nearby Wichita is home to several well-paying aircraft companies). To determine the location of the future site, Farrar created a list of criteria that he thought would describe the perfect location. These criteria included:

* the site must be big enough for a foundry, machine shop and heat-treating facility because the ability to provide all of those services is what differentiates his company from other job shops;

* all utilities must be available;

* the location must not be west of Norwich because the vast majority of its customers, raw materials and supplies are east of there;

* the city must be on or connected to the interstate highway system by a four-lane highway;

* the city must be more than 1 hr away from its present location and from Wichita so that it would not be competing against itself or the aircraft industry in Wichita for labor;

* the city must have an airport capable of handling corporate jets;

* the city must have a 4-year college, tech school or university that offers classes pertaining to the metalcasting industry. "I felt this was important for future potential networking, business synergy and available technical expertise" said Farrar. "It also raises the caliber of personnel entering the local job market and improves the quality of life in the community;"

* the quality of life and the school systems must be attractive in order to keep employees;

* there must be a good, available labor pool;

* the city government, chamber of commerce and community leaders must have a positive attitude. "It is important to feel welcomed by the community," said Farrar. "I don't want to build a foundry in a community where there was public sentiment against it;"

* the city must offer good incentives.

After completing this list, Farrar identified nine cities in Kansas, Missouri and Oklahoma that came close to matching his criteria. Upon narrowing the list down to three, he visited the cities and asked for proposals on why his company should locate to their city. Manhattan, a Kansas town 175 miles northeast of Norwich, had the best incentive package and most closely matched the required criteria. One attribute stuck out for Farrar. "A few years ago, the city passed a 5-year 1/2-cent-sales tax for economic development," he said. "During that period of time, it has raised $10 million in a town of 45,000 and has created close to 1000 jobs at 17 different companies within the city."

A New Start

The site selected for the expansion resides in an industrial park and offers 33 acres on which to build. Construction of the 37,000-sq-ft machine shop (Fig. 1), which was designed for future expansion, began in October 1999, and operation began in April with six employees. According to Farrar, when the shop is in full operation, it will require 35-40 workers.

As opposed to its Norwich machine shop, this facility houses state-of-the-art, highly automated CNC equipment to handle higher-volume jobs and larger-sized castings. It also takes on work from other foundries looking to outsource machining work.

One of the shop's most relied upon machines is its horizontal machining center with a 13-station pallet system, which allows it to process 13 different jobs at once and better handle highly repetitive runs. This machine, which is served by an automatic guided vehicle, has a 120-station automatic tool changer and is capable of operating unattended in a "lights out" environment. "Machines here are set up to eliminate the setup downtime," said Farrar. "At Norwich, we would lose 2 hr every time a job was set up. Here, we will leave the job setup on one of the pallets and not lose future production time due to setup." The machine shop, which plans to continually add to its capabilities in the future, also features a vertical machining center, lathe and automatic CMM inspection equipment.

In reaction to the Manhattan machine shop's newfound capabilities, Farrar plans to double the capacity of its foundry and take on more high-volume work than in the past. "We're going to increase the foundry's melting, sand system and coremaking capacity to match the molding capacity that we have now," said Farrar. "We can afford to do that without hiring many more people."

As the foundry doubles in capacity, that increasing production will come to Manhattan to be machined. While the growth of the Norwich foundry will determine the amount of castings machined in Manhattan, some of the initial jobs have come from castings poured elsewhere. Currently, four of the nine jobs at the facility are cast elsewhere, while less than 5% of the castings poured at Norwich are shipped to Manhattan.

The construction of another Manhattan ductile iron foundry (next door to the machine shop) that will handle higher-volume jobs and larger castings is to begin in 5-7 years as well as a heat-treating facility. With the implementation of these facilities, Farrar's 10-year plan is to doubles sales within the next 5 years and double them again in the following 5 years to $50 million by 2011.

Farrar Corp.

Norwich, Kansas

Year Founded: 1933 (company); 1967 (foundry).

Casting Data: Ductile iron and austempered ductile iron.

Mold Capabilities: Nobake and green sand (horizontally parted).

Core Capabilities: Shell and coldbox.

Melting Capabilities: Coreless induction.

Value-Added Capabilities: Heat treating, machining and subassembly.

Size: 49,000 sq ft (foundry); 20,000 sq ft (machining facility); 37,000 sq ft (Manhattan, KS machining facility).

Key Markets: Lawn care equipment, construction equipment, pre-stressed concrete bridge construction, agriculture, material handling equipment, heavy trucks and exercise equipment.

2000 Shipments: 4000 tons.

2000 Sales: $12 million (casting and machining).

Employees: 145.

Corporate Officials: Joe Farrar, president; Don Reimer, operations manager, Norwich facility David McLachlan, operations manager, Manhattan facility; Les Gould, sales manager.

Casting Conversion: A Cut-and-Dried Tool

In the early 90s, a number of Farrar's customers were facing issues with some of their parts such as a lack of strength or durability and the need to consolidate parts and reduce costs. Having recently attended a Cast Metals Institute course on austempered ductile iron (ADI), Farrar was armed with the knowledge of the material's process and properties and, as he always was on the lookout for solutions to customer dilemmas, was ready to add ADI to his foundry's arsenal.

According to Farrar, ADI offers a combination of lower costs, design flexibility, good machinability, high strength-to-weight ratio, good toughness and wear resistance, and fatigue strength. It features these properties because it possesses the advantages of ductile iron plus the mechanical properties brought about by a special heat-treating process. "ADI doubles the strength of a part while maintaining the elongation," said Farrar. Though the austempering process adds to the customer's casting cost, sometimes by doing it, you can reduce the amount of material to offset the added price, he said.

In 1991, Farrar began casting a side link pusher dog for a chain-line conveyor, which was manufactured as a steel forging. The customer was faced with having to buy new dies for the forgings because they were worn out, said Farrar. With the cost of the die running $20,000-30,000 and pattern equipment at Farrar being less than $5000, the customer chose to convert the part to ADI. The casting cost them half as much as the forging, and, with ADI, the properties were improved and the foundry was able to cast in oil passages that the forging would not allow. The component's life also was extended by five times, according to the customer.

"ADI gives us another tool," said Farrar. "It broadens the range of applications that ductile iron can be used in. We've been able to go to a customer and say 'If you've got a problem, maybe ADI can provide the extra life or cost savings you need,"

Today, 100 of Farrar's jobs are cast in ADI, accounting for 10% (400 tons) of its total production. According to Farrar, ADI usage should continue to increase by 8-10% per year or at 2-3 times the rate of standard ductile iron.

Over the past decade, Farrar has tried to make conversion a routine task of its engineering process. "We try to train our sales reps to recognize opportunities to convert parts to castings," said Farrar. This attitude, coupled with an earnest commitment to providing solutions to customer problems, has resulted in 25% of the foundry's currently quoted jobs ending up as conversions to castings. Below are just a few of Farrar's conversions to ductile iron and ADI components.