Cure for the (Un) Common Chaos
The calendar says it’s Q2 of ’22, but who knows what the halftime show of a post-pandemic,
supply-chain-healing playing field could dish out.
To give a metalcasting supplier perspective, Alex Lawton, CEO, The Lawton Standard Co., dialed in for a conversation with Casting Source to offer some reflection on buyer headaches and ways to insulate your manufacturing company from further disruption.
CS: How would you characterize market conditions for the metalcasting industry as we enter into Q2 ’22?
Lawton: The metalcasting industry is probably in about as wild a place as I’ve seen it, and we’ve had some serious inflections in the last 20-plus years since I’ve been involved.
First, look at how far the industry cratered just back in 2020, followed by the hard V-shaped recovery; now you introduce a war factor, plus all these supply chain issues and scarcity of labor due to demographics, the pandemic, et al. There’s just true chaos going on across the industry.
CS: What would you say is the biggest headache for manufacturers that buy castings?
Lawton: It comes down to certainty of supply. Obviously, with COVID changes and the struggle for labor, supply chains have proven to be more fragile than anyone would have thought, and they’re being tested again by all of the oddities mentioned earlier, none of which equals surety of supply for the casting buying marketplace ...
And it must be frustrating for casting buyers, who have maybe responded to reshoring campaigns urging them to buy more domestically only to realize there’s been a degradation of supply in the U.S. Foundries are being stretched. If I’m a buyer, I’m looking at whether I’m going to have what I need in my own plant to take care of my customers––I’m most worried about that.
It’s a real problem, because you have a lot of foundries still ramping up and operating at something less than their last peak. It’s hard to go from slow to busy––systems in the foundry don’t flip on and off like a light switch; material shortages and workforce shortages have also exacerbated the situation. We’re all trying to manage through this.
CS: What should buyers be thinking about as they assess their supply chains?
Lawton: There’s more to what’s happening today than just a cycle—I think there’s a more secular nature to it this time. If I’m a buyer who’s thinking, “Okay, another month, another quarter, and [my supplier] will be there, you might want to double down on assessing how secure—or conversely—how fragile is your supply chain? Is it going to be there for you in quality and quantity over the coming years and not just the next couple months? Are these locations secure? There’s financial pain scattered around this industry, like many others, that they should analyze. And there are demographic considerations, like who’s going to be there to lead it?
One of our customers uses the word resiliency––you’ve got to figure out how your supplier is baking resiliency into what they can do for you. And if they are not, how are you going to ensure that mix of agility, strength, and consistency in your casting supply chain?
Watch out for the head fakes, where for a number of months or a couple of quarters it might feel like, from the buyer’s side, the good old days are back. We could have a recession driven by what the Fed is doing, or inflation, or war—all kinds of reasons. And that might make deliveries, quality, or even pricing briefly look better ... but it’s unlikely to last beyond the slowdown. Foundries that are struggling to get their capacity up are going to have to keep recalibrating and keep making choices about who gets served and who doesn’t, because they can’t take care of all of them. That’s a complex scorecard, and it’s going to vary based on a company’s own strategies and preferences.
CS: You’ve pointed out the current realities that make decision-making tough for both manufacturers that buy castings and foundries that supply them. Do you look at these conditions as a problem to be managed or an opportunity to be nurtured?
Lawton: Right or wrong, the strategy we launched into a few years ago was one around opportunity.
Our overriding thesis was that casting buyers and users would prefer to buy more castings closer to home for their domestic plants.
And our take on that opportunity was we need to figure out how to do more, be bigger, and be better than we were before in the types of castings we can offer by material, by size, and by complexity. We believe when you find really good relationships, they’d like more from you, and you’d like to do more for them.
If they like us and they think we’ve got a hint of sophistication or progressivism, they can see why we’re going to be here in a number of years. Then they can hitch their wagons to us and help us develop a company that’s going to better serve them over time—because they like our mindset. They like the way we solve technical problems. They like the way we address customer service culturally.
CS: You obviously have backed up your thesis with a lot of action and are addressing customer challenges through a methodical acquisition strategy. How is your strategic “thesis” been affecting Lawton Standard’s own production capacity?
Lawton: We’ve now brought six casting-centric foundry companies together—though one of them was consolidated into another one during the pandemic. Most recently, we acquired QESC in Houston, Texas, on the steel and stainless side; so we have three gray and ductile iron foundries and two steel and stainless steel foundries. We’ve learned (A) how to have those two materials play together inside one company and (B) how to interchange and move the work where and when it’s valuable to the customer.
We want to get customers to think of us as Lawton Standard, and we’ll take care of them from whichever side or individual site of our business can meet their particular priority list—be it speed, quality, or price. At the present, our theoretical plant and equipment capacity is probably six or seven times what CA Lawton’s was five years ago. However, our practical capacity is only about four times. So we’re focused on how to narrow that gap between what we can achieve in theory and what we can produce in reality.
CS: It’s been reported that the skilled labor shortage is Problem No. 1 among U.S. manufacturers. What more can be done than what everyone’s already doing?
Lawton: It’s my own soap box, but I think we all have a business obligation to try and become more productive. If everybody in and outside of the foundry were to attack productivity in a mindful way, we would generate labor capacity back into the system.
So, there’s a millwork company over here, a fabricator over there, a machine shop, and they all want to do things the way they’ve always done them. But from a society perspective, we all need to try and get more productive. You can do that via lean manufacturing and other OpEx or CI ways where you just get better in your business processes. Also, you can deploy technology more and better utilization of computers, mechanization, automation, robotics, R&D, and so on. And there’s better training we can do, too.
These days, we’re working these folks too hard—we need to balance this out. We need some more people. If we would all work on productivity, there will be more labor available to the system, which is better for everyone.
CS: Give us a bright spot to end on.
Lawton: When we stare at all these dark spaces once in a while, we as a team have to remind ourselves, you know what, the world just doesn’t end very often. And markets don’t come to an end very often either, right? And supply chains figure themselves out. Look, there are a lot of people in the U.S. and around the world working to improve this situation. We like to think we’re a little piece of that at Lawton Standard. We’re trying to make our corner of this industry a little bigger and a little better, which should be good for the marketplace. There’s plenty of room for optimism; frustratingly, all the improvements just won’t be right there tomorrow.
If you’ve got the wherewithal as a casting buyer and user to read this magazine and this article, and go to the right events, and find a handful of suppliers that can help you formulate your supply chain strategy, then you’re doing all the right things. We are part of an industry that wants to be a resource for customers, a thought partner that will help you even if we’re not the source of the castings you require. We want to build you folks up and help you get in a much better spot because your growth is good for us all. CS