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Stamping Its Future – Crain’s Cleveland Business

May 23rd, 2006

With move to larger space and new equipment, metalworking firm Talan Products Inc. sets out to grow via acquisitions

 

By David Prizinsky
May 8, 2006

David Prizinsky

A change of address to Cleveland’s Collinwood neighborhood for Talan Products Inc. has created room for sales growth for the company that focuses on metalworking, an industry that is consolidating.

The 20-year-old company is projecting sales of at least $25 million this year, up 32% from $19 million in 2005, said CEO Steve Peplin. Talan spent $1 million on new equipment and building renovations in connection with the move, which enables the company to reduce operating costs through a more efficient layout of equipment, he said.

Before the move, Talan operated out of 58,000 square feet of cramped space in several buildings on the city’s West Side. Talan now leases 145,000 square feet of space in the huge Richard Melvin Building, which formerly housed TRW Inc.’s engine valve production operations.

Talan moved at the end of last year, and Mr. Peplin said Talan plans to acquire the space it now leases. “We intend to own it,” he said.

Plant layout and design are important to productivity, but Mr. Peplin said the key to Talan’s profitability and growth also has been its constant measurement of all shop floor functions and processes against key internal and industry standards. “What gets measured gets improved,” Mr. Peplin said.

Talan, which has 55 permanent and 20 temporary workers, began in 1986 by producing stamping dies. The company since has expanded to include metal stamping, aluminum extruding and tube forming. Mr. Peplin said the company operates 25 stamping presses. Talan’s sales per employee are twice the stamping industry average.

A Plan for Growth

Although employment will increase to 80 permanent workers over the next year or two, Mr. Peplin said sales must grow faster than expected employment growth if labor costs are to be kept under control. Mr. Peplin said the company will pursue long-term sales growth by heightening the awareness of Talan as a company that will form innovative relationships with manufacturers that can reduce overall costs.

“We want to be seen as a provider of solutions,” he said. “We want that to be our brand and our brand is really our people.”

He said the quality of the company’s work force is a source of pride. This year, the employees are slated to receive a substantial bonus that will be based on the gross profit margin for the year. The company did not pay a bonus last year.

Up until now, Talan has grown on its own without acquiring any other companies. But now that the company is settled into its new space and its systems are ingrained, it will seek acquisitions, Mr. Peplin said.

He said companies that might be acquired now could be more easily integrated into the Talan organization and culture thanks to long-standing efforts to establish an efficient production and quality control systems. He said opportunities for acquisitions are relatively numerous because a stamping industry consolidation that is under way. He did not offer a timetable.

Talan has been cited by many industry groups for its sales growth and its openness to new ways of conducting business. John P. Colm, president and executive director of the Westside Industrial Retention and Expansion Network, or Wirenet, a Cleveland manufacturing support group, said the company can serve as a role model for other industrial companies seeking to grow.

“Talan is our poster child for business unusual,” said Mr. Colm, who is familiar with the company because of its work with Wirenet. “Talan is moving ahead on a number of fronts and innovation is the theme.”

A Close Relationship

Mr. Colm said Talan, contrary to the conventional wisdom, has proved that a modernization strategy can work in traditional industries such as metalworking.

He said the company began exploring lean manufacturing practices in the 1990s before they were popular. And Talan is never satisfied with a business-as-usual approach and always is looking for ways to increase efficiency and to work with customers.

Mr. Peplin, one of the company’s two founders, said Talan’s willingness to work closely with customers is another key to its growth. The customers tend to be large since Talan has geared its operations to long-run stampings. Building construction components comprise the largest market. Other major markets are automotive, fasteners and appliances.

Just how closely the company is willing to work with customers is illustrated by Talan’s operation of an inventory management service for customers plus a materials management service.

The inventory management service results in a steady flow of the right quantity of products needed in a customer’s plant.

This enables the Collinwood company to maximize its production efficiencies and minimize equipment setups and other time-consuming changes.

Materials management provides advice regarding the pricing trends of steel and aluminum and gives customers a chance to accelerate or defer purchasing decisions depending on the direction of metal prices up or down.

“Customers rely on us for pricing trends. We spend a lot of time and money on materials information,” Mr. Peplin said, adding that steel and aluminum represent at least 60% of Talan’s costs and are a highly significant part of customers’ costs.

A dramatic example of working with a customer came in 2004 when Talan acquired five presses from an Ohio manufacturer that used them to make parts. Talan began operating the presses and supplying their prior owner with parts. Mr. Peplin said the deal made sense to both companies because Talan is a stamping specialist and can perform the work more efficiently.

From Crain’s Cleveland Business – May, 8 2006

Photo credit: Jannie Bentivegna


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