As ag economy remains strong, QC manufacturer Service Steel eyes continued growth
With many Midwest manufacturers humming again, Service Steel’s new district manager expects business volumes at the Quad Cities facility to be as strong as its steel piping products.
Increased customer demand, an improved supply chain as well as a significant capital investment have the East Moline company poised for growth, marking another successful business expansion project in the region during the pandemic.
“We usually get busy in August and slow down by April or May, and that’s when we do our cleaning and repairing,” said Jeff Smith, who joined the company in October 2020. “But that’s not going to happen this year.”
While Smith’s forecast calls for very little downtime in the next six months, Service Steel’s addition of a second multimillion-dollar laser tube cutter is enabling his union shop to meet the growing demand of customers, including the likes of Deere & Co.
“We wanted to be able – if we commit to build a part – to serve the customer. If we only had one laser and it goes down, how were we going to fill our customers’ orders? This is our backup,” he said of the new equipment.
‘Price of steel has doubled’
Smith said the pandemic’s impact on the steel business included production shutdowns or reductions at the major steel mills, which provide the raw product. In addition, the uncertainty last year pushed centers to sell off all they could so they would not be sitting on inventory. “But come June, business was picking up and steel mills weren’t producing, so demand quickly caught up to supply.”
The result is that the lead time for orders is now taking longer.
“The price of steel has doubled from what it was a year ago, much like the lumber industry,” Smith said. “I’m constantly talking to customers to see where I can make adjustments (in scheduling).”
Part of Deere’s supply chain
The strength and resilience of the agricultural machinery market during COVID-19 has been a key to Service Steel’s success, Smith said. In fact, the Quad Cities-based Deere and its suppliers in the region consume a lot of the manufacturer’s capacity.
“We sell direct to Deere and to a lot of subs (subcontractors) who are Deere suppliers,” Smith said. “It’s the 80-20 rule: 20 percent of our customers do 80 percent of the business, and 80 percent of our customers do 20 percent.”
From its plant in the East Moline Industrial Park, Service Steel supplies customers across Illinois, Iowa, Missouri, Wisconsin and Minnesota.
“We do something to every piece of steel that hits our door – from cutting it to cutting shapes out of it,” said Smith, who traded a 30-year career in steel sales to join Service Steel, one of his former customers.
Time for another laser?
While pandemic-related issues and other factors delayed the new laser’s arrival and installation, “We’ve filled it (to capacity) already,” Smith said.
Produced by the Japanese company Mazak, the laser cutter is the newest model of the laser Service Steel first bought five years ago. The large investment was a decision the family-owned parent company of Service Steel (Michigan-based Van Pelt Corporation) had been weighing since 2019 – long before the impacts of COVID-19 ripped through the economy.
“When you’re making that type of investment, you’ve got to concentrate hard. You have to predict what’s going to happen to the ag industry (and with your business). Is it going to go up?
“The next conversation will be, ‘When is the next one?’” Smith said, adding, “Once we’re sure the growth is here to stay.”
Proud of veteran workforce
The laser machine, which is running three shifts a day, is just one technology Service Steel uses. The company’s skilled workers also run saws, drills and CNC machines to cut steel as well as operate large overhead cranes and forklifts to move bulky piles of metal to be cut.
Smith’s biggest challenge is hiring qualified workers and keeping them. “Employment issues are the toughest part of the job,” he said, adding he appreciates the longevity of his workforce, including six employees with more than 30 years apiece.
Noting how physically demanding the skilled jobs are in the plant, he said, “Our core guys – I’d put them against any other people in the business. But trying to find that work ethic (in new hires) is hard.”
His message to the employees: “You’re a valued member of the team, nothing goes out the door without you.”
AT A GLANCE
Known as Service Steel’s Western Region Service Center, the Quad Cities plant employs 60 people at 2930 Morton Drive in the heart of the East Moline Industrial Park. Built in 1976, the facility spans 250,000 square feet after expansions in 1980, 2011 and 2012.
It is one of five Service Steel regional centers owned by the Van Pelt Corporation in Sterling Heights, Michigan. The other service centers, which fabricate carbon steel, alloy and aluminum tube and pipe, are in Detroit, Cincinnati and Buffalo and Farmington, New York.
The manufacturer’s new district manager in East Moline is Jeff Smith, who traded a 30-year career in steel sales to join Service Steel, one of his former customers, in October 2020.
Chamber connections
When COVID-19 struck last year, the Quad Cities Chamber stepped up its outreach to connect area companies like Service Steel to a variety of resources to help protect the health of their operations.
Specifically, Chamber staff referred Service Steel to the Illinois Manufacturing Excellence Center (IMEC) for assistance on implementing new sanitation and decontamination services inside its sprawling warehouse. As a result of that connection, Service Steel has continued to work with IMEC on other services to improve its operations.
This is the type of work the Chamber does on a regular basis. Keeping a pulse on the regional business community’s needs, our team connects businesses to services that help them grow and combat challenges. This is how we learn about successful expansions, such as Service Steel’s addition of a new multimillion-dollar laser, and we do our best to elevate these stories in the Quad Cities and beyond.