Two foundries' expansion experiences.

By analyzing production capabilities and markets, Piqua Emery and Precise Castings determined opportunities available to them via plant expansion and the path to follow.

Although knowing what it takes to perform a modernization and expansion is the first step to a successful increase in production and efficiency, actually completing the task on-time and on-budget is another matter entirely. The following case histories outline two foundries' experiences in expanding their facilities and some of the key decisions made during the process. Although each has seen improvements in capacity and efficiency, success required a thorough analysis of current production capabilities and markets as well as future ones. In addition, despite all the planning and preparation a foundry may do, unexpected equipment start-up problems and employee learning curves always have something to say before an expansion is complete.

Piqua Emery Foundry

At the heart of every foundry operation are the molding line and melt deck. Some would say that by mastering these two arts, regardless of the level of technology or equipment, a foundry can produce high-quality castings, and therefore always have the ability to attract customers.

For Piqua Emery Foundry, Inc., Piqua, Ohio, this belief has been held true as it has grown from a 12-employee aluminum shop in 1985 to the 85-employee, 65,000-sq-ft, multifaceted operation today. By focusing on its strengths and maintaining a lean foundation (by only concentrating on melting, molding and pouring), this foundry has been able to expand without exhaustive capital resources. Through its 14 years, this floor, squeezer and nobake molding foundry has added a permanent mold shop with 16 casting machines as well as a low-volume automatic matchplate green sand line to produce castings for the air moving (fans), pump and valve, engines, lighting and machinery industries. But it is the 2-year expansion that began in late 1996 that has moved this foundry into competition with all low- and medium-volume job shops. This $1-million expansion added another used automatic matchplate molding line, two new furnaces, a sand system, PLC controls, complete computerization and 10,000 sq ft of manufacturing space to provide more value to the customer.

"Our latest expansion has allowed us to move closer to our goal of selling casting designs to our customers and potential customers as influenced by foundry practice," said Dick Mikolajewski, vice president of sales and engineering. "We strive to be the ultimate job shop and cast most any size component of any size production run, as long as it fits our equipment."

The uniqueness of this expansion is based in the philosophy of Piqua Emery that its main function is to melt aluminum and pour it into molds. That is its one and only focus. Although the foundry supplies finished components to customers, it subcontracts everything, including: coremaking, grinding, machining, heat treat, assembly, HIPping, and anything else that isn't related to melting, molding or pouring. How does this relate to effective expansion? Subcontracting has offered Piqua Emery another key to maintaining fixed costs and determining the bottom line.

"When you add tasks and equipment to your foundry, you also must add support in the office, workers' compensation benefits and insurance premiums, as well as all the maintenance and electricity costs that go into production," said Mikolajewski. "If we don't keep these costs down, we aren't competitive with the other job shops and we go out of business. This is the reason we subcontract and the reason we are able to expand."

Piqua Emery only added one employee with its recent expansion and that was to manage the new computer system. As part of its goal to service customers, the computer system and software serves as a holding station for casting designs. The computer system is equipped with CAD software, so the foundry is able to shift designs and blueprints from its customers to its rapid prototyping firm, pattern shop, coremaker, machine shop, and through the rest of the operation.

For small job shops, Piqua Emery serves as an interesting example of what can be done with limited resources. Prior to this recent expansion, the foundry's sales were at $7 million with a production of 1.6 million lb of castings ranging from ounces to 500 lb. This year, with the recent expansion, the foundry is projecting $10 million in sales for 1999 with shipments of 2.1 million lb. The foundry predicts the expansion will pay for itself within 5 years.

"Instead of adding new workers to increase production, we put our money in more automated used and new equipment," said Mikolajewski. "We knew with the low unemployment in our area that good people were going to be hard to find."

So the foundry went the other route and secured a loan to purchase the used and new equipment it needed to compete.

"A lot of foundries are scared of debt from purchasing equipment, technology or construction, but if foundries wait to make changes and expand only when the cash is available, most will never be able to do it," said Mikolajewski. "Your ability to borrow is an asset, If you don't borrow, you most likely aren't going to be able to purchase the equipment to compete."

Although Piqua Emery created debt for this expansion, its outsourcing of everything non-melt, mold or pour results in low overhead.

"We know what our payments are going to be every month and we can plan for that to make sure the loan payment is made," said Mikolajewski.

Precise Castings

A foundry looking into expanding capacity is often confronted with the decision of whether to add on manufacturing space to its existing facility or to build a new plant. The foundry must analyze its current and potential customer base, where the capital is going to come from and how much is available for expansion, and which type of expansion makes sense for the foundry's product flow, work force and equipment. For Precise Castings, Inc., a steel investment foundry in Stratford, Ontario, Canada, all these factors were laid on the table, but it, for the most part, didn't make the expansion decision - its customers did.

"In the early to mid-90s, if we were going to be successful as a pump, valve and flow technology industry supplier, we had to expand our capacity and modernize our facilities," said Tom Melanson, president of Precise Castings. "But we also needed to show a commitment to the industry we served and its customers, and this commitment needed to be visual as well as in terms of capacity available."

Precise Castings was formed in 1987 as a 4000-sq-ft investment casting expansion to Magalloy, a sand caster in Stratford. During the first year, its 7 employees produced 50 tons/yr of high-alloy steel castings netting $500,000 in sales. By the spring of 1997, after two expansions to increase production capacity and improve control of the shell room environment, and after being spun out by Magalloy, which had been bought by Wescast Industries, Inc., Brantford, Ontario, the company had grown to 37 employees, 250 tons/yr production and $3 million in sales. The problem was that its customers had decided to make changes.

"Although our customers told us we had a high-quality product, the pump, valve and flow technology industry took a page from the automakers and began consolidating their suppliers to weed out the ones that weren't working to the highest standards and couldn't produce large volumes," said Melanson.

According to Melanson, these customers were looking for throughput delivery and response times to serve them. It was vital to have external as well as internal efficiency.

"To remain a player in the only market we ever have produced for, we had to strengthen our position or fall back and reorganize to supply a different industry," said Melanson. "We recognized that we were good at casting our specific product line and we didn't want to walk away from that."

Precise Castings looked at the opportunity to expand its existing facility as well as the possibility of building a greenfield site. In an initial cost estimation, an addition of 28,000 sq ft to the existing 16,000-sq-ft foundry would cost 40% less than building a brand new 42,000-sq-ft foundry. But there were two problems with an expansion - achieving straight-line product flow and the visual commitment for its customers. Due to the expansions that already had occurred at the plant, straight-line product flow was not possible with an increase in capacity of the size required to meet the market demand. To perform an expansion, all the current equipment would have to be removed and reorganized for straight-line manufacturing. But even with the reorganization, the second objective, which was going to be vital to keeping current business and winning new business, wouldn't have been achieved because it still would have been the old plant.

"A strategic part of our vision was the commitment to the visual aspects of the foundry," said Melanson. "It is a manifestation of our response to our customers' needs. They needed to see us building the commitment, and they needed to see this commitment when they visited our facility."

In August 1997, Precise Castings broke ground on its new facility 200 yards from the existing structure. By August 1998, the $4.25 million, 44,000-sq-ft facility began production. In response, objectives of increased automation and work environment improvements were designed in the new plant in four cells - the pattern shop, shell building, melting and pouring, and grinding - that operate in a once-through process with its products.

In the pattern shop, new wax injection equipment was added to double pattern production. In the shell room, a robotic system was added for shell dipping that allows for both fully automatic shell production as well as manual production (for smaller jobs). The plant is producing 100 shells/day with another 180 possible at peak capacity.

On the melt deck, the plant has four coreless induction furnaces (1000, 500, 300 and 100 lb) to allow the foundry to pour different types of high-alloys in the same day and be flexible for volume demand. For the new plant, the foundry designed and built its own hanging conveyor system to hold the investment casting shells for pouring and a robotic encapsulated mold filling system that allows the operators to remain a safe distance from the molds during pouring. In addition, Precise Castings installed an air management system to control the exhaust fumes and heat conditions to maintain a good environment for the workers. The melt deck produces 1.5 tons/day at a productivity improvement of 40%.

In the last cell, the finishing room, the goal was to minimize distances for the castings to travel as well as backflow of product. The foundry has three shotblast machines in two different places along the manufacturing line to blast castings after knockout and also after heat treat. In addition, the foundry has automatic grinding equipment to process castings quickly and accurately.

According to Melanson, his customers have told him that if he hadn't undertaken expansion, he would be out of the flow technologies industry because his old building didn't represent a commitment. In addition, Melanson believes that by achieving the goals the foundry set out before the new site was built, it has strategically positioned itself to become a major supplier to its customers.

The three goals the foundry set for itself with its new plant were growth in sales, increased productivity and improved workplace environment. In terms of sales, the new plant currently is at $5 million with 380 tons/yr production, but with the production commitments from customers beginning to roll in, this number is rapidly growing and is forecast to reach $10 million with 850 tons/year production by the end of 2001. Precise Castings' benchmark for productivity improvements is an increase in labor efficiency. The goal set for the new plant was an 18% increase in efficiency over the old plant - it is currently at 7.5%. With the robotics and other new systems installed in the new plant, Melanson believes his maximum labor efficiency improvement won't be realized until its sales are closer to $7 million/year. In terms of improving the work environment, the looks of the building, the cleanliness of the air and the work environment, according to Melanson, speak for themselves.