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Custom Conundrum

Custom Conundrum

End users and suppliers are equally culpable if a custom project goes wrong, says Doug Stitt, president and CEO, The Caldwell Group Inc., who also explores customisation more widely.

In my previous article for this magazine, I outlined the importance of manufacturers constantly expanding their product lines. This time, I want to drill down deeper into customisation, which can be an underrated concept in some industries.

When we looked last time at the essence of standard versus custom products, we agreed that it can be a case of turning a super tanker to evolve a business to become more custom-capable. We also saw that companies that successfully present themselves as true solutions providers or one-stop-shops very often have a 50/50 split between standard and custom business. In other words, we said, it’s rarely a case of pulling an engineered solution out of a hat. Let’s revisit that later, in conclusion.

However, we stopped short of going into detail about what it takes practically to be able to offer customised lifting, or other, solutions—so there is scope to revisit the subject. First, it’s important to emphasise that innovation isn’t typically one big “ah ha” moment. It is often a number of smaller things accumulated over time that can be part of enhancement and evolution.

You have to be able to make good margins in order to provide custom solutions. In simple terms, a standard product is designed once and after the initial set up is done, that product is made, typically in large quantities, for a very long time. With custom solutions, a business has to acknowledge that a lot of unique costs go into each project. There is always significant communication to understand the application, involving onsite visits with the customer; lengthy design time; plus proposal drawings (presale) and approval drawings (preproduction). Additionally, there are unique requirements on manufacturing and testing. In fact, standard and custom is chalk and cheese.

All the while, a target is for companies to build custom equipment but still operate in an organised fashion. Caldwell, for example, builds many standard and custom products each week, but is able to maintain an orderly schedule. Part of that is due to the experience and knowledge of the workforce, as well as the systems that are in place to help us manage our business.

Importantly, a company doesn’t have to be big to build customs; there are a number of smaller, boutique businesses that have built themselves on niche markets or special products. Bigger companies typically have more resources in engineering and machining, which is helpful, but a small firm can still be successful, even via outsourcing.

A differentiator is a company’s ability to manufacture a breadth of below-the-hook equipment. A boutique shop might only build certain types of custom lifters, shipping 10 or 15 orders per week; others, like us, will deliver hundreds. A big company might have 100 orders in the air at any given time, all being fulfilled by the same people and manufactured using the same equipment, regardless of the type of order.

My guidance starts with a cautionary tale.

A Case in Point

There was a situation a while ago where a distributor found themselves in quicksand when attempting to deliver a custom solution to an end user in the nuclear sector. The company hired someone with a modicum of engineering knowledge, intent on entering the custom marketplace. As you’ll expect given the subject of this article, it turned out to be a fool’s errand.

Yes, the company was better equipped than before to customise, but nowhere near ready to do so. For starters, they didn’t have the application, engineering or welding expertise. These were important oversights, as it turned out.

Regardless, they charged gung-ho into a custom lifter project for a bell housing application. It was a comedy of errors: the design was poor; the raw materials were not sized correctly; engineering standards were not adhered to; the welding was woeful; and so on.

The fact that the project was in the nuclear sector magnified these shortcomings even more. When the end user asked the supplier for appropriate details and calculations related to the product’s design, they were unable to demonstrate that they met even the base level criteria of the industry or the site. When asked for the applicable welding procedure specifications (WPS) they couldn’t provide them either.

Herein lies an important lesson, for end users and suppliers alike. Companies who want to build custom products should start slow and small and know their limitations. Likewise, end users must take some responsibility. It should be standard procedure to ask for references related to other custom projects and challenge the supplier to prove that they can deliver against all criteria before the project even enters the design phase. In this case, the problems would have been avoided because the supplier would have been disregarded at the first stage.

Unfortunately, experience tells me that these lessons are not being learnt. In some applications, a custom lifter, for example, may work but do so without meeting today’s design, welding and fabrication criteria (see below). In the worst-case scenarios, the lifter will fail or, if fortune favours all involved, the defects will be realised before it is too late or in advance of the equipment ever being put to work beneath the hook, or elsewhere.

In the case study above, that’s exactly what happened—luckily. The design and construction were deemed insufficient and the lifter was considered economically irreparable. The rigging shop eventually approached us, admitting that they were in trouble. We were able to connect with the nuclear facility and leveraged our superior expertise in this sector to design a solution in line with the American Society of Mechanical Engineers (ASME) and the stringent requirements of the sector. Of course, with the original lifter destined for scrap (the newly hired engineer wasn’t far behind), the time and money wasted was astronomical.

Eyes Bigger Than the Belly

It’s true that the average size of a custom order is typically higher than the average standard order, principally due to all the additional work that goes into it. It’s easy for companies to look at those opportunities and see dollar signs, but of course there is so much more than that to consider. It’s naive to think of it as a big-ticket order because, as our peers discovered, it can be a one-way ride into a black hole if the company can’t deliver.

We’ve looked at what might happen if a product has to be redesigned or scrapped, but it’s not just a financial risk to play. Consider how a botched custom job impacts a reputation and relationship with a customer. A business might provide a custom solution that was unsafe and when an accident destroys plant and equipment, or someone is injured or killed, it can lead to a company ceasing to trade. This is particularly true if a supplier operates in the same sector and / or relies on a great percentage of revenue from only a handful of customers. One bad project can cost them everything it took years—generations, even—to build.

Given the value of a portfolio of successful custom projects, there are times when businesses should be willing to look at applications as less of a cash cow because they want to have that type of custom job as a case study for future leverage. It might be that next time around, many of the complexities of the project are replicated, yet it can be delivered to a greater margin. And the team will already have the knowledge and experience from the previous project to lean on. Turning down a project because it doesn’t look as profitable as another can be short-sighted.

Don’t forget that starting out down a customisation pathway can lead to a dead end. There are instances where the customer doesn’t purchase the concept. What happens then if a supplier has put all their eggs in one basket? If your hit rate is 10%, you will have to cover these costs over 10 proposals but may only get one. Cutting corners (and costs) by skipping visits or detail in drawings, for example, might limit the chances of winning an order, so it’s really a case of going all in. It takes a certain type of business to be able to do that.

A successful custom provider is constantly looking for experience. It’s true that you can learn something new every day and in the custom market that’s priceless. Knowing first-hand what a company’s capabilities are is valuable but, equally, understanding what a business can turn to for things like special machining enables it to quickly assess the merits of a project. In the custom sector the boundaries are not always as well defined as they are in the standard market, but the best companies compensate by developing something of a sixth sense.

Constant learning and innovating, even though each piece may be small, offers us an accumulated knowledge base that we can transfer to our customs. Customs aren’t considered a “new product” because they are usually just one-offs, but in terms of creation and innovation, customs are new products all of the time.

Customising to Today’s Standards

In the past, companies might have built a lifting machine without a lot of technical engineering experience or expertise, and then proof tested it to see if could survive that test. In today’s ASME standards, however, a lifter must be designed to lift the load.

This means a company doesn’t just weld something together and see if it survives a test; they must be able to apply engineering standards to ensure it satisfies the design criteria established by ASME: the essential resource for mechanical engineers and other technical professionals throughout the world for solutions that benefit humankind.

Additionally, as alluded to above, specific weld standards must be met. Again, using ASME’s guidelines, under B30.20, a company’s welders must be certified to build below-the-hook equipment. Further, a company must have standard weld procedures in place that meet AWS (American Welding Society) D1.1.

One can no longer say, “I have a garage and a welder—I can build a lifter.” Just as importantly, end users are putting themselves in harm’s way from a safety and legal perspective by using fabricators that do not have means to build a safe lifter under today’s standards.

For reference, in the U.S., ASME B.30.20 BTH-1 drives the design and construction of below-the-hook lifters. Beyond working to understand and apply the standard, Caldwell works to utilise our experience to help develop the standard.

It should never be overlooked that this is a highly specialised marketplace and not everyone can meet the criteria of a custom project. As discussed, the solution involves a number of different departments working together including customer service, sales engineers, applications specialists, engineering and everyone in between. It has to be an orchestrated effort to deliver the safest, most efficient customised lifting product.

Coronavirus Action Plan

At the time of writing, COVID-19 has only really just hit our regional community here in Illinois and we have moved from our initial preparation to phase two, which involved moving people who can work remotely, offsite. Being a large manufacturing company that programme has limitations, but we’ll move as many people away from the workplace as we can.

Fortunately, we have the systems and tools in place to be able to shift people remotely quite quickly, and it pays to have the flexibility built into a business before it is needed as a measure. We have also significantly limited the amount of people coming into our business. If and when the virus starts to infect people within the company, we have a phase three, which will further limit access. At this point, we are taking everyone’s temperature at the beginning of each shift, cleaning frequently used equipment surfaces and constantly disinfecting common areas.

The challenge for CEOs is to protect their workforce and their families and wrestle with the financial reality that if there is an extended shutdown of business, it will shape what companies look like when we come through this. The difficulty is that nobody really knows how deep this rabbit hole goes. We’ve modelled out a set of conditions for what we see as different levels of the situation.  When we get to each milestone, we know we need to implement certain things. All businesses should have such a plan. It’s not a time for pontification. We hope we don’t get too far down that line, but we have to be prepared. Reality is, every company has that point where it might be forced to temporarily close.

COVID-19 is proof that you can’t be prepared for every scenario. That changes the rules of engagement somewhat because a CEO typically bases every move on sound assumptions about what’s around the corner; they are proactive, in other words. This is an entirely reactive situation and we’re being judged on our ability to adjust and be flexible. Coronavirus aside, even when companies know what’s coming, many struggle to change, improve and evolve, so this unprecedented situation will catch one or two off-guard. There will be casualties in addition to loss of human life.

Fortunately, we entered this tunnel on the up-curve and we’re certainly looking for the light at the end of it so we can continue capitalising on those positive trends.

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