RoMan Keeps Marching Along

April 18, 2005
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GRAND RAPIDS — On the eve of its 25th birthday earlier this month, RoMan Manufacturing had ticked off nearly all the significant trends facing the manufacturing sector in the win column.

The world’s largest manufacturer of resistance welding transformers, frequency converters and DC power supplies, RoMan is the market’s proverbial last man standing. After a series of consolidations that absorbed its core competition, RoMan is the last full-line manufacturer in its category in North America.

Meanwhile, the $20 million Grand Rapids company has capitalized on each of the manufacturing industry’s emerging trends. It has worked to stay close to domestic automakers while wooing new domestics like Honda, Toyota and Mercedes. It has sought competitiveness through efficiency and staked a claim in China.

RoMan has even shifted employment toward the service sector.

“We’re in a very challenging industry,” said RoMan Manufacturing President and CEO Robert Roth. “The resistance welding process is driven by the automobile industry, its single largest user. It’s no secret that the whole metal fabrication sector of the automobile industry is financially in rough shape.

“We’ve tried to position our business so that we’re not in the same boat.”

Over the past five years, RoMan has made some difficult cultural changes.

As North America’s consolidator, the large market share gave RoMan some breathing room, Roth said, but the company had to become vigilant on cost.

Only a few years into its lean journey, RoMan is already seeing benefits. With no loss of capacity or jobs, it will consolidate its three Grand Rapids facilities into two. To be completed on May 15, the consolidation will save the company more than $500,000 a year.

Meanwhile, the company knew that efficiency alone couldn’t assure continued growth or success, Roth said. It needed to innovate and create new markets.

“But there really wasn’t much opportunity to advance the technology,” Roth said. “It hasn’t changed much since the ’60s. Newton and Faraday figured out how magnetics works a long time ago, and God hasn’t done much to change the physics of metal and copper.”

In such a mature, long-life-cycle category, customers often treat suppliers like RoMan as a commodity, competing on price alone.

“Then we noticed a problem,” Roth said. “Many times we’d be called in by a customer saying they’ve got a problem with a transformer. We’d go in and there would be nothing wrong with it. It would be a welding problem.”

Through their own cost-savings measures, many of RoMan’s clients, including Big Three OEMs, had outsourced their industrial process engineering groups. The transformer failures were problems in the welding process, but there were no engineers to troubleshoot them.

“We had the knowledge to help them with the welding issue,” Roth said. “But I wasn’t going to recoup the cost of selling that knowledge to them by selling them another transformer to replace one that works.”

RoMan had not outsourced its engineering group, nor did it intend to. As a result, it now had the world’s most qualified transformer design group. By its very nature, the group was required to be experts on the resistance welding process as a whole.

“Because of the products we manufacture, we learned a tremendous amount about resistance welding,” Roth said. “We had this knowledge as a core competency, but we couldn’t bundle the value of that knowledge inside the product. The customer wasn’t going to pay a premium for that knowledge. So this was an opportunity for us to leverage that.”

In 2000, RoMan Engineering Services Inc. was launched to provide technical support, metallurgical support and process development for all of the metal joining processes, resistance welding along with arch, laser and friction welding.

After only five years, the consulting service now represents 25 percent of the company’s revenue.

“That’s a significant part of the whole that didn’t exist five years ago,” Roth said. “I think this is something that manufacturers should look at, specifically if they have niche products that are very specific to a process or an industry.”

The entry into the service sector has been somewhat of a culture shock to the company that Bob Hofman and Dietrich Roth founded in 1980.

For one, the consultancy was, in effect, a virtual business. There were 23,000 square feet of lab space split between facilities in Madison Heights and Dearborn, but much of the work was done offsite.

When RoMan helped Tower Automotive and Ford Motor Co. launch the Ford 500 in Chicago, its consultants were onsite for nine months.

“We’ve had to change our mindset,” Roth said. “All of our experiences have been in manufacturing, and certain paradigms don’t transfer so well. You don’t need everybody in a concentrated place. The majority of our people are on customer sites all over the nation.”

As such, one consultant is based out of California and another is in Oregon.

“We used to base our judgments on running a manufacturing company. How could I have employees in Oregon? They could never get to work on time,” Roth said. “But it doesn’t matter whether we fly them from Detroit to Dallas or from L.A. to Dallas.”

Other new experiences involved professional recruiting. RoMan filled out its consultant ranks with fresh college graduates as junior engineers. While educated in the industrial welding process, the new recruits knew little about the professional world.

“These poor kids would show up in Detroit with three milk crates and a couple of suitcases,” Roth said. “We bought a house in Birmingham to house up to seven engineers. So many of them showed up in the big city and didn’t know what to do. We needed to help smooth the transition into working life.”

While RoMan is expecting strong growth from that new market, it continues to grow the penetration of its legacy products, as well.

“We’re going to have to broaden our customer base,” Roth said. “We need to get a better penetration into what is being called the new domestics.”

Like its peers, RoMan has traditionally been oriented toward the Big Three, but the addition of North American production capacity by Honda, Toyota, Mercedes and the like has extended that customer base.

RoMan has already supplied the welding transformers for one Mercedes plant and is anticipating doing so for the new plant in Alabama. It also is a finalist for the new Hyundai facility, also in Alabama.

Meanwhile, RoMan has set its eyes on China. Through a joint venture with a Chinese company, RoMan has moved into the Chinese automobile market, which just surpassed Germany to become the third largest in the world.

RoMan has no intention of ever shifting North American capacity overseas. In fact, Roth said that the production of some components has proven more cost effective in Michigan.

“We’re building a product in China for China, with some components actually here that we’re shipping over there,” he said. “It gets missed often, but there are so many difficulties manufacturing a product such a great distance from its market.

“I hear people say, ‘How do you compete with 50 cents an hour?’ If it was as simple as cheap labor, why would Hyundai — who pays something like a buck an hour in its country — be building a plant in the United States of America?”    

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