Brazeway Thinks Big

Dec. 21, 2004
Refrigeration-equipment company makes commitments to innovation, customers, and workers that belie its size.

Its competitors are billion-dollar multinational companies. But from its base in rural Adrian, Mich., privately owned, $87 million Brazeway Inc. continues to prove that a small company can be a technological and market leader. In quiet fashion Brazeway, with 10 consecutive years of record sales, has become the world's largest producer of no-frost evaporator coils for home refrigerators, as well as a major global supplier of aluminum refrigeration-grade, small-diameter, thin-wall tubing. In Brazeway's lobby, etched prominently on a tall piece of glass, is a list of 14 quality awards it has received from customers. Brazeway doesn't let its relatively small size stop it from thinking big. In the last three years, the company has invested over $17 million in new technology and equipment and expects to invest another $8 million this year. A portion of those dollars is earmarked for construction of the largest aluminum heat-transfer extrusion press in North America, scheduled for installation in 2002. The company also has adopted big-company human-resources, quality, advanced-manufacturing, and value-chain practices, including locating manufacturing facilities near its largest customers. Fifteen months ago, Brazeway opened a new refrigeration plant in DeWitt, Iowa, within an hour of two of its largest customers, Maytag Corp. and the Amana appliance business of Goodman Manufacturing Co. LP. (Maytag is in the process of buying the Amana business.) In 1997 Brazeway built a refrigeration plant in Monterrey, Mexico, one mile from its largest Latin American customer, a Whirlpool plant. "By being physically close to our customers, we improve communication, speed, quality, and service. That brings us closer to the needs and realities of our customers," says Brazeway President Stephanie Hickman, whose father, Stephen, is the company's CEO. Not afraid to make major investments in R&D, Brazeway in 2000 completed a new World Extrusion Center in Adrian that includes state-of-the-art lab, testing, and design equipment. The facility complements the Refrigeration Technical Center it opened in 1982. "We reinvest all the money we make in profits back into research and development and capital investments," says Stephen Hickman, who bought the family business in 1982 from his two brothers. Brazeway strives for continuous improvement by sharing best practices among its manufacturing plants, operating a team-directed work force, and spending 4% of its gross wages on training every year. The company began to implement Six Sigma principles 18 months ago. "What makes us successful is our focus on innovation, our technology, and our dedication to obsolete everything we do," says Stephanie Hickman. "What sets us apart from our larger competitors is our relentless pursuit of improvement so that we can give customers what they are looking for to improve their performance." That customer-centered effort has produced thinner tubes and evaporator walls, and resulted in the development -- with one of its global partners -- of modular coils that revolutionalized commercial refrigeration. Brazeway's fabrication processes reduced the number of tubing joints (and potential leaks), and its micro-multiport tubes have become the standard for automotive air conditioning. Brazeway even designed and built its own extrusion equipment so it could make thinner-walled evaporators. "There is a clear commitment and a conviction that innovation is the way that we are going to be successful and survive," says David Gasson, director of extrusion engineering and technology. "Steve [Hickman] walks the talk, is committed to innovation, and supports us in what we do" through investments that are disproportionate to the company's size. Yet that commitment to innovation and investment almost disappeared, despite a history of invention that dates back to 1946 when Charlie Hickman (Steve's father) and Al Goldsmith founded Brazeway. The two developed the first extrusion press for aluminum heat-transfer tubing that replaced costlier drawn-aluminum tubes, and 10 years later they developed the copper/aluminum connector tube that pioneered the now-widespread use of aluminum in refrigeration. "We came out of a strategic planning session the year I bought Brazeway and realized that if we were going to become the leading producer of frost-free evaporators, we had to know a lot more . . . because we were simply producing to customer specifications," says Steve Hickman. Unfortunately, he says, Brazeway at that time "was not innovative and was filled with a fear of failure," because employees were used to the cofounders making all the decisions. To jump-start the company's innovation mind-set, Hickman opened the Refrigeration Technical Center and encouraged people to try new ways of doing things, even if they didn't work. It was a gradual process, but Brazeway employees finally accepted his repeated assertion to be innovators and that it was O.K. to fail. "I'd been championing for nearly four years the development of a new leading-edge extrusion technology that another employee had proposed," says Steve Hickman. "But several people . . . felt that it was not worthwhile . . . and set out to prove to me that our existing technology had greater capabilities and could provide more value to our customers at less cost. "They did," admits Hickman. "Their success in defeating me made our people realize that they could battle for their ideas, even if it meant going up against the boss. "The natural tendency is to think that we have so much involved in a product or technology that it is a waste to obsolete it," Hickman observes. "But in reality it is a greater waste not to obsolete your products or your technologies. We have to build the better mousetrap. If we don't, someone else will . . . ." He constantly reminds employees that Brazeway is "not going to be steamrolled by larger companies and their deeper pocketbooks. That type of thinking is self-defeating," says Hickman. "The larger corporations have more dollars. But you still have to have the right people, the right culture, the right environment, or the dollars won't make any difference." Climate For Success What breeds the spirit within Brazeway to do things better and faster, and to add more value for the customer? Brazeway managers give credit to the environment that Steve Hickman has created, the freedom he gives them to make decisions, and Hickman's competitive desire to be the best. "What makes [us] good at innovation is simply good business practices," says Gasson. "We have clear leadership, [managers] treat people right, and they believe that people are the basis of their success." In addition, "Whether it is marbles, shooting free throws, golf, or pool, Steve is always very competitive and wants to win," adds Emory Schmidt, group vice president, extruded products. "That permeates the organization. We don't want to lose." At the same time, says Schmidt, it's an environment without politics where "everyone can grow and have complete autonomy. I have the [authority] to spend a lot more dollars than managers . . . in companies that are five to six times the size of Brazeway. There is more authority to initiate projects here than at larger companies where I've worked. Even if it takes board approval we can put together a board meeting in 30 minutes." John Benzing, group vice president, refrigeration products, agrees. "There is no bureaucratic structure here. People don't have to run back to me to get approval. You don't see management's fingerprints all over their work. Steve allows us to run a business on his money. The money is there. The celebration of success is there. People have failed and there have been no lynchings." Brazeway also shares its financial success with all of its 500 employees through a bonus plan based on the company's profitability and individual or departmental objectives that are tied to the company's annual return on net assets (RONA). "I don't think you can go to any employee and not have them know what RONA is," says Benzing. "Everyone feels like an owner and is treated like an owner so they work each day to ensure they are doing what they can to get our RONA higher." At the company's weekly operations-review meeting, recognition is always on the agenda. "We ask whether there are any opportunities for individual recognition," says Steve Hickman, "and we send out a letter of appreciation from the management team." Each department also passes around an award -- in refrigeration, it is a little green rubber man -- "of no value but great pride," says Hickman. In addition, each group president can make individual awards. "I have the ability to give people four tickets to Walt Disney World and just run it through travel and entertainment," says Schmidt. "We are always looking for positive things we can recognize people for." Improving responsiveness to customers' needs is part of the Brazeway mind-set. In the early 1990s the company created separate business units for refrigeration and extrusion so that design teams could react more quickly and focus more sharply on customers' needs. "Engineering, production, and marketing are all in the same hallway," says Gasson. "Within 10 seconds, you can have that group together." What's more, as a privately held company, "We can manage the business for our customers, not for Wall Street," adds Stephanie Hickman. "When we initially opened our plant in Mexico, we were going down there mainly to supply one customer. That is the kind of thing that scares the bejabbers out of Wall Street. But it was the right decision for our customer and the right long-term decision that we needed to make." Similarly, Brazeway's decision in March to purchase a new extrusion press might not have passed Wall Street's scrutiny, she says, "because that investment won't bring a return for a long, long time." But, she argues, it was needed to remain "the innovation and technical leader in the future. Extrusions are getting smaller and smaller, which makes them more technically difficult to produce. We will need equipment more capable of producing next-generation designs and designs that are not here yet. We have to be first to market to succeed." Through self-directed workforce teams, best-practice teams, and Six Sigma, Brazeway also works constantly to reduce costs. "The voice of the customer continues to tell us that [any] price is too high, that the quality has to be better, and that you need to drive costs out," says Benzing. Still in its early stages, Six Sigma has helped Brazeway reduce variances by more than 50% in some of its manufacturing processes, increase throughput by 40%, and reduce cycle time in some transaction processes on the administrative side from eight days to under three. "Six Sigma is the next logical step in our pursuit of continuous improvement," says chief quality officer Michael Adams. "We must continually improve." To extend its global reach, Brazeway has developed licensing partnerships with J&A Erbslh Aluminium in Germany and Capral Aluminium in Australia. It also licenses products to Kenmore Refrigeration Equipment (UK) Ltd. "We didn't want to run ourselves too thin," says Stephanie Hickman. "So we brought on international partners that allow us to bring more resources to the global market. "As we move into new areas," she adds, "we have to ask ourselves: 'Why do they want it from Brazeway and what enhancements can we bring to bear?' We should be very proud of what we have accomplished -- yet never satisfied that we have reached our potential."

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