TS: I’m from your area and have known of your company my entire career. But for those people new to the industry or maybe from another geographic area, give me a quick company background.
Charlie: 1947, my grandfather, Charles L. Kerr, and a few other associates, revived a dormant machine shop and named the new company C. L. Kerr Industries, Inc. This company ran turret lathes and produced small lots of larger diameter fasteners turned from bar stock.
A second business, Lakeside Machine Products Company, organized in 1943, ran single spindle Brown & Sharpe Automatic Screw Machines producing smaller parts in larger lots sizes. Because Lakeside Machine Products and C. L. Kerr Industries had different types of manufacturing equipment, they regularly purchased and resold each other’s products. This eventually led to the consolidation of the two companies into Kerr Lakeside Industries, Inc. as of July 1, 1948. Seventy-Two years later we are a fourth generation family business.
In 1970 we purchased our first cold header, a National 1000-5 (1-1/8” max thread diameter). Over the next five to seven years we added two National Boltmakers, an 8L4 (1/2” max. thread diameter) and a 1012 Boltmaker (3/4” max thread diameter). In the early 1990’s we added 2 National FX24L headers (5/16” max. thread diameter).
We started out as a screw machine shop, and today while we still run that type of equipment, cold heading standard Hex Socket Screws and related make to print specials is what our reputation is based on.
TS: Your company is a family business and has been for a long time. You worked for a long time with your father and now you have your son working alongside of you. Care to jump in and share some thoughts or experiences on the family dynamic?
Charlie: First let me state I never worked with my father, I worked for him. Big difference. My dad really liked running the business and he was responsible for building the company into what it is today. But as he aged he refused to step back, slow down, or delegate. This created a very stressful situation for me. The pace of doing business was getting faster and my dad just could not keep up. He became a bottle neck for everything he demanded to be involved with. This did not threaten the viability of the company, but it did make for difficult moments especially when customers were kept waiting for answers on routine inquiries. While this was going on at the office, members of the family who had nothing to with Kerr Lakeside Inc. other than being related to us, thought that Dick’s ability to go in every day was great. Had I done anything to push my dad aside, I would have been excommunicated from the family. Being able to walk in the door every day is not the same making a productive contribution to the operation. I am not the first person to deal with a less than easy management succession and I won’t be the last.
When Alex joined the company several years ago I made a commitment to him he would not have to stand in my shadow. I never make commitments I’m not 100% sure I will keep and we’ve made this management transition successfully. Our next big milestone will be Kerr Lakeside’s 75th Anniversary Celebration scheduled for May or June, 2023. Save the date!
TS: I am sure you have the opportunity to give advice to your son Alex on a weekly, if not daily basis. What advice do you have for the younger people who might have 5 years or less in our industry?
Charlie: I rarely offer Alex unsolicited advice. My dad was always giving me advice, actually instructions he expected me to follow. That was his way of making sure I knew he was calling the shots. I am still active in the business, but I have relinquished control of day-to-day functions to Alex.
Before joining the business, Alex worked as a commercial airline pilot and before joining the airlines he was a flight instructor with the Odegard School of Aerospace Sciences at the University of North Dakota. His skills as a pilot and instructor transfer very nicely to our operation. He has the ability to solve problems and at the same time is comfortable allowing others to solve problems. As far as advice for people who have entered our industry in the last 5 years; be patient and don’t expect instant gratification. There are a lot of fastener industry people currently in senior management positions who got started packing boxes, driving delivery trucks, or running machines. The path into management today is different for several reasons but the newer members of our industry need to realize many of the successful leaders in this industry got to where they are by learning the business from the ground up.
TS: You are still involved with several industry based organizations and have a long history with the North Coast Fastener Association. What are your thoughts on industry organizations and the role they have played for you and your business?
Charlie: The short version of the answer is this; had Kerr Lakeside Inc. never belonged to any industry associations we would be out of business and that would have happened a very long time ago. Starting in the 1970’s when I joined the company on a full time basis we have been confronted with a very long list of challenges that failure to conquer would be disastrous. An obvious one is the Fastener Quality Act (introduced as HR 3000 in July, 1989) and related things such as third party testing lab accreditation and ISO Certification. Absent active participation in IFI, ASTM, ANSI/ASME, and NCFA Kerr Lakeside Inc. would not have been able to deal with this issue. When it comes to things the government does to regulate your business, if you are not at the table, you are on the menu. All industry associations have some governmental affairs involvement. This is a very valuable benefit of membership.
Before the FQA, fastener manufacturers had to integrate statistical quality control techniques (SPC) in the plant at the point of production. SPC wasn’t new, but back in the days before affordable multifunction pocket calculators, slide rules were the prevalent tool for doing math. Under those conditions, SPC was very cumbersome and the most economic quality control practice was in-process inspection and post production final inspection using sampling plans like MIL-I-105 that provided for acceptable quality levels (AQL). In other words it was OK to ship out of spec parts as long as there weren’t too many of them. Try that today.
In the early 1980’s, Statistical Process Control, a prevention driven system versus in-process and post production inspection which is detection driven, became the law of the land for heading and screw machine shops. I flunked out of statistics 101 in college, so we had a very serious problem to deal with. Our company’s membership in the Precision Machined Products Association (then known as National Screw Machine Products Association) gave our company access to SPC training that saved us from extinction.
I took a long time to make an important point; membership and actively participating in trade or professional associations is a mission critical activity. I want to go back to a previous question about advice for some of the less senior members of our industry. “You earn your paycheck while you are at work. You earn raises and consideration for promotion as a result of what you do when you are not at work.” Taking classes at a local community college to stay current on generic skills like creating sophisticated spreadsheets would be one example of doing something outside of work to enhance your value to the people you are employed by. Industry specific skills can easily and affordably be augmented through participation in programs offered by the various industry associations. These groups are very valuable resources, take advantage of them.
TS: For a lot of companies, continued growth and increased sales is a benchmark or a measuring stick of success. For others, profitability is the goal rather than just growth for growth’s sake. How has Kerr Lakeside navigated that urge to grow with determining what is best for the company and the workers?
Charlie: First, I am a very debt averse person. There is no getting around borrowing money to add new machines and make other improvements to keep the operation efficient and competitive but I’m not one of those people who is comfortable going deep into debt hoping for the best. Our growth has been gradual compared to some other businesses but it has been sustained. Growing too fast might look good in the moment, but many of the fastest growing companies 20 years ago are not around today.
Another business philosophy of mine is to avoid deviating from core competencies. We are a precision machining and cold heading shop. We are good at both processes and do a fair amount of secondary machining on near-net-shaped cold headed blanks. The two processes are different but we have been successful at “merging” them under one roof.
TS: What are your biggest opportunities as a domestic manufacturer?
Charlie: I might be wrong, but I think three years from now North American manufacturers will look back at Covid-19 say it was the best thing that happened for business since China started capturing our work 30 years ago. Inexpensive components to purchase became very costly when the supply of them was interrupted starting in March, 2020. We are already seeing a surge in RFQs for parts currently being sourced in China. There are a number of ways to tell the part is being made in China, but the raw material specification is usually the most obvious. The Chinese use many steel grades that are not produced in North America unless you want to order 800,000 pounds.
TS: What are your biggest challenges as a domestic manufacturer of fasteners?
Charlie: Getting new blood interested in pursuing a career in our industry. This problem is not unique to fastener manufacturers. Every business that brings raw material into the building and sends that material through some process to convert it into a finished product has this problem. The size of the talent pool is the single biggest constraint to taking full advantage of the opportunities created by re-shoring parts that went to China and other low labor cost countries.
TS: How does a long-standing manufacturing company integrate new technology into its operation?
Charlie: The answer to this question depends on the nature of the technology. If we are talking about advances in production technology, the supplier of the technology, usually a machine tool builder, will facilitate the integration with training and other support services. Since the early 1980’s when CNC lathes and machining centers became less costly and easier to use followed by CNC enhancements to heading equipment, the machine tool builders recognized that the smaller shops collectively would be destinations for far more machines than the mega OEMs like an automotive plant. Smaller plants do not have the resources of the bigger ones, so the machine tool builders supplied support to go with the hardware. Pretty simple and straight forward.
Technology integration for office automation and management information systems is not as simple. I can’t speak for how other companies in our industry addressed this but our approach has been primitive. We are in the process of migrating from two software systems (ERP is one system, Distribution is the other) into one. The software vendor gave us a list of several of their customers in our industry. We called everybody on the list and we able to visit a few in the area. We received positive reviews of the program and vender’s support so we went with them. This is pretty much the same method we used back in the mid 1980’s when we settled on the distribution software. It was being used by several customers and competitors and everybody liked it so we went with it. Pretty much the same story ten years later when we put the ERP system in.
TS: How hard would it be to start a fastener manufacturing facility from scratch today?
Charlie: Assuming you wanted to start a cold heading shop with the idea of producing and stocking a full line of common standard sizes, absent an unlimited supply of cash, next to impossible.
You need production machinery, tooling, raw material inventory, finished goods inventory, QC equipment, support machines for tool room & maintenance, packaging equipment and materials, material handling items like cranes, lift trucks, and tote bins. Then you need a spacious building with a good roof and very thick concrete floors to house everything. You will also need customers to buy what you produce and you need the expertise to produce what you offer. The barrier to entry in this industry is high. If somebody is serious about getting into fastener manufacturing, acquiring an existing shop or two would be far less painful.
TS: Where is this industry heading? Private equity and consolidation are more prevalent than ever and probably is not going to go backwards. What does the future look like?
Charlie: Hard to say. I get this Magazine called Smart Business. The most recent issue dedicated a lot of space to M&A under the Headline “Thaw In Ice Cold M&A Market?” The focus was pretty generic (not industry specific) but there are groups with money looking to buy businesses. If reshoring is for real and I think it is, fastener manufacturers along with other metal working companies could be targeted for acquisition. You might see some smaller companies in our industry merge to reduce redundant overhead costs and gain other benefits that come with consolidation. In my opinion a smaller number of larger companies is not a positive circumstance. Competition results in a better outcome for all interested parties. Consolidation reduces competition for customers, and employees. The more choices a customer has, the quality of the product and service will be better. Fewer choices result in mediocrity or worse.
A few parting thoughts regarding M&A. If a party with serious interest in buying your business approaches you, keep in mind, what makes your company valuable to them is not what you have done with the business but what they expect to do with your business if they buy it. With reshoring in mind, if the interested party thinks they can double the sales of the company in three years, they will be willing to pay a premium over a party that would be satisfied maintaining the status quo. There are many methodologies used to estimate a company’s value. The seller may use a different method than the buyer and if the different methods yield a wide gap in valuations, a deal will likely not happen. Bottom line, a business is only worth what somebody is willing to pay for it. If you are thinking about putting your business on the market, the more prospective buyers the better. I’m not suggesting you arrange a bidding war between multiple parties, but if you are only involved with one suitor, you will likely leave money on the table.
TS: Tell us a couple things about Charlie Kerr that we don’t know from other interviews you have done.
Charlie: The reason there is a penny shortage is because around 500 lbs. of them are in my bedroom closet. I collect Wheat Pennies and the rest are in a five-gallon water bottle. If you see me picking pennies up off the sidewalk it’s because I’m looking for Wheat Pennies. I have several that over 100 years old.
I consider analog clocks (clocks with hands) powered by weights or springs employing a pendulum are the most fascinating machines ever built. Anybody who has ever been to my house or office will notice a have clocks everywhere. Punctuality is important to me but that’s not why I collect clocks. Once I find a nice grandfather clock, I’ll consider the collection complete.
Note from TS:
I have a regular column in Fastener Technology International (FTI) magazine, called 10 Minutes with the Traveling Salesman, which can be read online at www.fastenertech.com. Subscriptions to FTI, print and digital editions, are free-of-charge for fastener manufacturers, distributors and users as well as suppliers to the industry.”