So, in 2007 and 2008, while the management was blue skying ideas for the kind of sizable capital investment this would take, another company began to build a plant in North Jackson, Ohio, similar to what Universal wanted.
A few years later in 2011, Universal bought the half-finished plant in order to make it its own.
Oates says they’ve been on pace since to get the facility finished, hire employees and go through the stringent approval process with industry-certifying agencies and individual customers.
Universal’s three other plants also needed additional approvals because many of the products would start at North Jackson before heading to another facility.
“When you look at the new plant, we’re diversifying not so much by end-use market as we are with product. In other words, the new plant gives us the opportunity to make much more sophisticated products,” he says.
Just as the company started to transition the new plant into a selling, operating entity, however, a destocking cycle hit.
Responding to business cycles
Sometimes business challenges are simply the nature of the industry. So, the key is how you prepare and react.
About two-thirds of Universal’s products go to the aerospace industry. This means inventory up and down cycles — like the destocking in 2013 — are inevitable because there isn’t visibility along a supply chain where companies like Boeing and Airbus have a backlog of seven or eight years.
“Managing through those inventory cycles is one of the challenges all mills like ours face,” Oates says.
A 3 to 5 percent reduction in buying at the back of the supply chain can have a major affect four or five steps up.
“So most folks in our business, in the specialty metals business, in 2013 vs. 2012 saw reductions in their volume of anywhere from 25 to 40 percent, which is a big thing to adjust for,” he says.
The company had to reduce costs, being careful of what it was doing with cash while ratcheting down the activity levels.
“You’re looking under every rock for how you can do more with less,” Oates says. “It’s basic blocking and tackling.”
Along with working the inventory down, Universal had to take a hard look at how it was staffed.
“That was probably the toughest thing for us because we were building the organization out to support the new products at the same time that we were seeing fairly sizable decreases in sales,” he says.
As a specialty metal manufacturer, Universal is small for the industry, which means it can use that as a competitive advantage to react quickly to changes.
Oates says he also keeps a careful eye on his customers because things can change in a month.
“We’re on the front-end of the supply chain,” he says. “So you need to stay real close to your customers, but you also need to understand what your customers’ customer and your customers’ customers’ customer is doing, so you can get a sense for what’s going on throughout the supply chain, and where there may be pockets of inventory building up.”
You don’t want to get blindsided, he says. But even with today’s sophisticated technology and computers, the forecasting capabilities of the industry are suspect.
