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Steel du jour.

Baker City's S&R Industries is growing by smartly diversifying its product line and forming new partnerships.

Walk the shop floor of S&R Industries with company president Randy Johnson, and you'll see why one customer said, "What the heck is a fab shop this size doing in Baker City?"

You'll pass snow blades headed for Alaska on your right. A cooling coil for the John Day Dam on your left, and dead ahead, it's the prototype for a new portable branch and limb trimmer.

"Our biggest difficulty was proving that somebody from Baker City could do it cheaper than Portland," says Johnson, who started the company in a small shop in nearby Elgin in 1984.

The diversification spread over S&R's 25,000 square feet of manufacturing space not far from the city's historic downtown, might fool you into thinking the company takes on whatever work it can get -- a willy-nilly solution to life in a small town where customers aren't exactly roaming by your door each day.

But you'd be wrong. Not without some pain and suffering, Johnson learned that to grow a metal fabrication company requires more than skilled technicians. It takes research and a clear vision of what the company should pursue.

In S&R's early days, Johnson recounts, the company made equipment exclusively for the forest products industry. That exclusivity, and a drive to grow the company big quick, nearly killed it.

"If you sell it cheap enough, you can sell a lot of it. But we were selling it too cheap," says a wiser Johnson of the company's nearly $5 million heydays. Johnson parted company with a manager who promoted the "more and cheaper" philosophy, and got serious about building an enduring, high-profit operation. Now at about $3 million in sales, the company is doing just that.

First, Johnson took stock of what he had. "We knew how to make material handling equipment. We just looked for other industries where our expertise was needed."

Johnson says today that two things set him apart: He's known for his flexibility and his research. It was research that led him to those other industries that might need his expertise in material handling equipment. He also hired an engineer, Phil Scheler. Besides designing, Scheler will spend half his time researching environmental markets and products.

When Johnson turned up the heat under his research activities, he found a growth potential in environmental services including water treatment, mining equipment and in supplying parts to the primary metals industries.

Johnson watched as aluminum dropped to 50 cents, and aluminum companies let maintenance go. Now that the price is up to 72 cents, maintenance is back on the front burner, and S&R is fabricating new heat treatment parts for one, with potential for more.

Baker County and its partner counties chose Environmental Services as part of their industry focus through the state's regional strategies program. Johnson was quick to find a project -- the branch and limb trimmer -- that won him a $35,000 marketing and development grant from the program. Johnson has to match the grant and agree to create at least two jobs. He's already created three.

In 1992, Johnson hit on the best collaboration he's found so far. He was looking for a partner to take up some of his excess manufacturing capacity, and he found it in IMAC Design Group Ltd. in Vancouver, B.C. The $8 million attachment equipment company is providing designs that S&R is manufacturing, for a very interesting price. IMAC's design royalties are buying the company a chunk of S&R Industries -- up to 20%. Johnson expects sales of IMAC's products to turn into a million-dollar business in the next year.

"When the Canadian dollar might have given us an opportunity in the U.S., the I-5 corridor was loaded with attachment manufacturers. Randy's logical market is to head east, and it is an ideal opportunity for us to expand our technology," says IMAC CFO Christophir Mahden. "What we do is thought of by the end users as dumb steel, and we don't sell it far before the cost of transportation overtakes us."

IMAC and S&R met when Randy got a request from a customer for a product he'd never heard of, and he went in search of the creator. The discovery was a good fit for both companies.

"For our part, we like working with him," says Mahden. "We think of ourselves as very agile and share much the same culture in terms of processes as they do. We don't rely on a lot of legal documents for our arrangement."

But that's not the end of the two companies' relationship. Johnson invited Brian Wilson, IMAC's president, to join his new board of advisors. Wilson and the other board members will be helping Johnson develop his first five-year strategic plan.

Johnson acknowledges that it would be easier to pick up S&R and drop it into the middle of Portland, but he's not tempted.

"Not for a minute," he says narrowing his gaze. Even when his shop foreman comes in to say a steel shipment has been stopped at Cascade Locks for being overwidth and will have to head back to Portland, leaving idle hands on the floor below. Even though there's no local training programs for his workers. That's OK, he'll just do it himself.

"We're expanding our in-house training classes. We may even become a regional training center."

If you glance around Johnson's office, though, it's easy to see the appeal. It's the 14 lift tickets from around the West tacked to the wall. It's where he grew up, it's where his wife grew up. It's where he wants his kids to grow up.

And to do it, he's planning carefully, researching his options, and keeping his focus.

"We can't afford to make a misstep or we'll be toast."
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Title Annotation:S&R Industries
Author:Dimond, Kathy
Publication:Oregon Business
Article Type:Company Profile
Date:Dec 1, 1994
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