Kaydon Bearings

Source: Manufacturing Digital

Date :15/09/2007 16:15:01

Kaydon Bearings has found that serving multiple niche markets requires manufacturing process that can turn on a dime

Written by James Buchanan & Produced Patrick Harlow

When seeking to be the manufacturer of choice for a number of diverse niche markets, being able to rapidly transition from complicated custom work for one customer to high volume throughput manufacturing for another requires an extraordinary degree of flexibility.

For Kaydon Bearings — a division of the Kaydon Corporation — flexibility is what sets the company apart from its competitors, says Jeff Manzagol, division president of Kaydon Bearings. The company can serve a variety of manufacturing needs while also developing new opportunities among diverse markets.

“What Kaydon does well is find the niches in the market that are not served well, and turn those into interesting business opportunities,” says Manzagol.

Kaydon Bearings, based in Muskegon, Mich., is the original company from which Kaydon Corporation grew. Founded in 1941 to produce large, precision gun-mount bearings for the Navy during World War II, Kaydon Corporation has grown to become a publicly traded company with approximately $400 million in sales annually.

“We were effectively just a bearings company until the mid 1980s when the company went public,” says Manzagol. “We were a profitable, but relatively small company; but we had the ambition to grow. So we went public in order to raise the investment capitol to do that.”

Growth was pursued through a combination of investments in infrastructure, acquisitions and expansions to include plants in South Carolina, North Carolina and Mexico. In Mexico, the company has one plant in operation with another expected to come online by the end of the year.

Under its acquisitions strategy the company has gone from the original bearings division to its current nine division structure. The other eight divisions are Industrial Tectonics Inc., Spirolox, Kaydon Custom Filtration Corporation, Tridan International Inc., Purafil Inc., Indiana Precision Inc., Canfield Metals, ACE Controls Inc., and Cooper Split Bearings.

Within this family of companies, Kaydon Bearings designs and manufactures a number of different bearing types for the aviation, aerospace, robotics, machine tools, semiconductor, manufacturing, medical, surveillance, material handling, and wind power generation industries, among others.

According to Manzagol, each of the divisions within the company is essentially an autonomous entity with its own management team.

Being autonomous does not mean that these companies don’t seek out synergistic opportunities whenever possible. For example, Cooper Split Bearings produces bearings for heavy equipment, which are distinct from the bearings produced by Manzagol’s division. However, both companies coordinate their approach into some markets and are looking to exploit other synergies.

Within each division there are operational and functional management positions. Underneath these, the division is broken down into primary market segments, which are led by business managers that continually interact with each other to develop cooperation when processes overlap.

On the factory floor, Manzagol says the factories are organized into business production units that — as of this writing — follow a lean manufacturing model with migration to single piece flow where appropriate. The intent is to design in more flexibility within its manufacturing process in order to achieve quick changeovers, meet shorter lead times, and speed throughput.

Manzagol says this is where much of the company’s flexibility is derived. Kaydon Bearings is able to successfully operate within a number of scenarios, such as profitably producing smaller orders as well as larger volume, or products of varying size or manufacturing complexity.

The company can also provide custom made bearings, which has helped Kaydon Bearings distinguish itself as being able meet unique challenges and customer needs. That has been the result of having strong design and engineering capabilities as well as a strong technical sales approach, says Manzagol.

Further, being able to produce custom bearings for a wide variety of purposes has enabled the company to get its foot in the door of some very important industries. By way of example, Manzagol says that when CT scanners were first developed in the late 1970s and early 1980s, the first ones used Kaydon bearings.

Recently, the company invested $7.5 million to double its presence in the market. According to Manzagol, CT scanner use is growing in the U.S. and other developed countries, and is being introduced in developing regions of the world. This one segment should be able to sustain growth rates of seven to 10 percent per year for the foreseeable future.

Also, with the growth of the alternative energy market — and in particular wind energy — Kaydon Bearings has found a niche designing and producing bearings for wind turbines.

“The first turbines built in the 1980s had Kaydon bearings in them and some of those are still working in southern California,” says Manzagol. “The business is taking off and it will likely be our largest market in 2008 or 2009.”

In 2006, Kaydon began a three phased investment of $75 million to grow its wind turbine capacity and expand sales from North America into Asia; principally China and India.

According to Manzagol, the company is benefiting from favorable currency rates, but the real boost is from its investment to increase its footprint in this budding market.

“Because of our investment and manufacturing processes, we can go anywhere in the world,” he says.

With such an emphasis on flexibility, the company requires machinery that can match its manufacturing goals. To this end, much of its machinery is custom designed and built for Kaydon.

For example, one of the processes to machine the teeth on the exterior and/or interior of a slewing ring bearing is known as gashing. Kaydon sought out custom machine builders that could produce gashing equipment that can produce quality work, are flexible in the size and type of bearings, and handle high throughput.

Because Kaydon’s custom-built machines are fairly large, complicated to build, require relatively long lead times, and the company requires so many of them, Manzagol says Kaydon relies on one primary vendor to handle 70 percent to 80 percent of its business, and another to pick up the remaining 20 percent to 30 percent.

Another area where Kaydon can provide value to its customers is by working with what Manzagol describes as exotic materials. The primary users of these materials, he says, are the defense and aerospace industries, which restrict the company to domestic producers for the majority of material needs.

As to more standard materials, Manzagol says private clients are less demanding than the federal government as to source, but equally as demanding when it comes to quality and price. To this end, he says Kaydon is able to play the international market for materials very well in countries such as China, India and Mexico.

With cost and quality, the company also expects international vendors to meet strict delivery requirements.

Looking to the future, Manzagol says the company will continue to invest in emerging markets such as wind energy and medical scanners, as well as future opportunities as the company identifies them. Already there is enough in the pipeline, he adds, to allow the company to grow by 50 percent over the next few years.

“The challenge is to continually add to what we are already doing and find other opportunities that will allow us to continue that growth,” says Manzagol.

Overall, he says the goal is to sustain growth of at least 10 percent per year.

Further, the company’s investment capabilities are enhanced by its strong financial position.

According to Manzagol, Kaydon has almost as much cash on hand as it does revenue. The company also is fully capable of going to the capitol markets to proceed with any investment strategy.

With such a strong financial position, acquisitions are also on the table. Though he couldn’t discuss specifics, Manzagol says there are acquisition opportunities under consideration.

“We are a niche company in a global market that is between $35 and $40 billion,” he says. “We have been successful at finding smaller, demanding markets, and being well paid by our customers for meeting and oftentimes exceeding their needs.”