Solving Problems through an "Application First" Mindset

Eugene, OR: Examining the screw conveyor manufacturing landscape quickly reveals the large number of OEMs from coast to coast that specialize in building this sort of material handling equipment. Screw conveyors are primarily composed of a shaft, which is often referred to as "pipe," in the center, and some sort of steel plate, referred to as "flights," being wrapped around pipe for the length of the conveyor. Screw conveyors are manufactured in many different configurations, sizes, and diameters. In addition, they are often made from many different types and combinations of material, which can range from stainless to mild steel, depending upon the application.

Experience generally shows that when a large number of providers exist, it does not take too long for the product to become commoditized. When this happens, price quickly becomes the driving factor in whether or not an OEM secures a purchase order, and when a product and/or an industry gets to this point, there are usually not many winners and more times than not, far too many losers...

It is with this in mind that our focus shifted to those companies who are operating within this crowded space and have carved out for themselves, what we would call a "Blue Ocean Strategy" as outlined in their recent book of the same name by W. Chan Kim and Renée Mauborgne. In their book, W. Chan Kim and Renee Mauborgne talk about the "Red Ocean Strategy," which is when price-driven businesses continue to drive down profits by slashing prices to a point where nobody wins and it becomes more and more difficult to compete let alone survive. The book goes on to talk about those companies that are operating within the same industry but are competing at an entirely different level, where price although important, is not the deciding factor, and in doing so create for themselves an entirely different way of growing their business. This strategy is referred to within the book as the "Blue Ocean Strategy." The book goes on to share details about how a business can operate within the same industry as other price-driven operations, but do so by applying their own set of rules and in the end, carve out a growing and successful business outside of the standard competitive landscape. It is with this in mind that Precision Machine and Manufacturing, located in Eugene, Oregon showed up on our radar, and was worth a closer look!

Precision Machine & Manufacturing, www.premach.com, better known as "PMM" is located in Eugene, Oregon, and manufactures a variety of material handling equipment, which includes rotary feeders, airlocks, rotary valves, and screw conveyors. Today, our focus is on the screw conveyor segment of their business, which appears to be a healthy and growing segment. We sat down for a few minutes with Don Lindsey, Chief Executive Officer/President of PMM who was able to quickly outline for us the company's strategy. According to Don, PMM is not interested in pursuing price-driven business. He mentioned that there are plenty of providers who can fight over this business if they so desire. So we asked Mr. Lindsey how PMM determines when a screw conveyor opportunity is a good fit? Without missing a beat, Don said "Those where we are solving a problem that DOES NOT include getting a lower price. When a customer contacts us, our first question is: What problem are you trying to solve? If the customer communicates their happiness with how their current equipment has performed and is just looking to compare prices, we politely thank them for reaching out and explain that we are not going to be a good fit. Customers that communicate to us their interest in solving a problem, regardless of what it is, those are the ones we are most interested in."

Further along in the meeting, we asked Don to outline PMM's approach to working with customers. Don relayed: "It all begins and ends with the application. Unlike most, we don't take a one size fits all approach, and I know this sounds cliche but once we understand the problem(s) we are trying to solve, our approach is to lead with the application first and foremost. During this process, we learn as much as we can about what the customer is trying to accomplish, the material being moved, their challenges and issues, and then we go to work determining if we can help them by solving their problem. A great example is a recent project that we just finished for a large customer. The size of the screw conveyor alone at 280' significantly shrunk the pool of manufacturers who could handle a screw of this size. Combine the 280 feet of length with 48" diameter, 1/2" thick steel plate flights, which are precisely formed at a 30" pitch, and also hard-faced along the OD while being continuously welded on both sides down the full length of the conveyor, and the pool of manufacturers suddenly got really small! Most providers took a look at the size and simply no quoted, but here at PMM, we relish the opportunity to be challenged!"

Don went on to share that PMM may not put the volume of screw conveyors through their manufacturing facility that low-cost providers do, but the quality of work they decide to take on fills an important niche and is really good business for PMM's shareholders. After speaking with Don, touring the facility, and witnessing first-hand the quality of the metalworkers within their building, it is easy to see how PMM has carved out a Blue Ocean Strategy within a very competitive marketplace.

Here is a picture of the finished product in action...