Reg Zeller, founder of AFS Corporate Member CaneKast, left Corporate America for the freedom of creating something of his own that would also help satisfy his passion to bring more manufacturing back to the U.S. Driven to bolster U.S. manufacturing while concurrently building his own business, Zeller is focused on helping more companies, large and small, realize the benefits of not only bringing their parts back from Asia but converting them into stronger, more efficient castings. To that end, he developed a straightforward reshoring system to help ease the path for his prospects.
His metalcasting company is currently comprised of Ermak Foundry & Machining in Chaska, Minnesota; Patriot Foundry & Castings in Franklin New Hampshire; and Superior Aluminum Castings near Kansas City in Independence, Missouri. In just four-and-a-half years, he’s doubled the sales of his first foundry, Ermak, and he’s just getting started. His vision is to create a small, local foundry presence within a 300-mile drive of the majority of casting buyers from the Rockies to the East Coast. 

Q How is it that a career corporate “suit” ended up in the foundry business trying to revitalize U.S. manufacturing?

The Corporate America thing had me bouncing all over the globe, and what I realized is (1) I wanted to do my own thing, and (2) there was a real opportunity to run some made-in-the-U.S., local type of shops. I’d already taken three different factories and reshored them from Asia back into production here in the U.S. 
I grew up in a small town in Wisconsin and fundamentally have always believed in U.S.-based manufacturing, even though I’ve had all the pretty suits and the boardrooms. In reality, all of my buddies are plumbers and electricians or drive beer trucks for a living––that’s what I grew up with. Then, with my days of doing M&A work and coming up with corporate strategies, I wanted to put those two things together. 
We’re continuing to buy up small local foundries, putting them together and making sure that it’s still like dealing with a small, very nimble supplier. Our customers won’t get lost in some corporate conglomerate, but at the same time, because we have the scale of all of these facilities, we’re able to invest in technology and automation.  This makes customers competitive, and yet they still get that small-town, local-business feel that they may be accustomed to.

Q You’re obviously passionate about bringing manufacturing back to America, and certainly the reasons are many to do so. But is it one of those things that’s easier said than done?

I can’t tell you how many times I’ve had this conversation with customers. Bringing something back to the U.S. is substantially easier than what it takes to initially get something going overseas. 

We created our own proprietary development process to make this simple. We’ve continued to refine the process so we know all the questions to ask; we have a checklist that we go through and it’s completely transparent to the casting buyers. We just make sure everything is taken care of and we walk them through it. 
All they have to do is answer questions and find the documents that they may or may not have. That’s why we put it all in a pdf—that’s as complex as it gets. If a customer or a casting buyer can read through that list, that’s as difficult as it gets for them. We take care of everything; we ask all the questions, we solve it for them. 

Because of our corporate background, we understand it can be like moving mountains to get things done in a big organization. They just tell us what they need, whether that be first article inspections or metrology, and we adapt our process to not only make a good casting, but to make sure it works with their corporate systems, processes and metrics.

Q What do you think OEMs fear most about reshoring their products?

The most frequent concern I’ve heard is when customers have sourced something and it’s not their own design. They’ve relied heavily on a team overseas to make the product, the tooling, whatever was needed for them to get a product to market. So they feel stuck or unsure what steps to take next.
My easy answer is, domestic foundries can solve that problem except with a lot more communication and a much easier process to ensure that they’re getting a high-quality product that’s manufacturable and that they can have in stock.

It’s also partly a fear of the unknown. But for foundries that have gone through this process a few times, it’s not difficult. It can be a little bit time consuming; it might be four weeks, six weeks, eight weeks, depending on the complexity and how much we need to redesign. But it’s also something we can easily do.

We’re not asking customers to be Monet. This is going to be more of a paint by numbers. They simply have to fill in the blanks.
Their fears are understood, but at the same time, we’ve made it easy to solve them.  And we’ve never had anybody walk away because of the complexity of a process.

Q Cost is always going to be top of mind—it’s why manufacturers sourced parts overseas in the first place. How are they going to fare on the finances if they reshore to North America?

With the products we’ve successfully brought back, typically it was the lower wage rates that motivated them to send parts overseas—you obviously pay a lot lower wages overseas than we do here. Now what you have to do is figure out how to redesign a product for manufacturability.

In one case, there was a part made from approximately 13 different sheet metal assemblies; there were about 30 different fasteners, and it was a lot of manual labor—probably three or four hours of assembly per part. When we took the initial look at that product, to make it would have been about double the price of what they were paying. The other side of that, though, is we took it and said, wait; instead of having all of these individual pieces, we can make you a much higher quality product by making that into one solid casting. 

By figuring out a way to redesign, we got that cost down to within 25% or 30% [of the overseas cost]. It was a premium to do that, but they got a far superior product, and they’re able to have it in stock now and can order on demand. They used to have a four- to six-month lead time and hold a substantial amount of inventory, and then they may or may not have the right amount. 

Last summer when COVID hit and supply chains got disrupted, they were not going to have any product. We were able to turn those parts back around in three or four weeks. But they told us that even with our premium they made more money last year—because of the lower costs of storage, the lower cost of transportation, and actually physically having something on shelf to sell their customers.

Q How do you help customers see there’s more to cost than the unit price of the casting? 

I’m not trying to minimize the importance of price—we certainly all understand you have to be able to still sell the product. But there are both hard and soft costs and you really have to understand what is your true cost of quality, plus what your value is in your market. 

We’ve heard a few horror stories where the first couple of shipments of castings for customers were great, and then, all of a sudden, [the foreign supplier] clearly changed material to a lower quality. What risk does a customer have when they’re selling a product that may not be the specification that their engineering team designs or their customer requires? 

The other big piece is stockouts. How much in profit do you lose every single time that you don’t have a product on the shelf and your customer goes to your competitor? 

Then it comes back to branding and pricing—can you sell your product for a premium because you make it locally? In one of these processes, we asked one of our customers who is a bike part manufacturer, “Have you ever thought about just raising your price 50% and marketing as made in the U.S.?” So he did, and he’s getting that price because none of his competitors were doing it, and ultimately he is making a lot more money because his parts are in stock.

A lot of it is about branding and marketing, and this is a way to differentiate yourself to sell on value, not price.

Q If a casting has been produced overseas and the manufacturer doesn’t own the tooling, that upfront sticker shock can be hard to overcome—how do you address that?

When they move the casting, they might not have a tooling budget, and this might be a $10,000 tool. We’ve said, ‘Alright, let’s come up with a creative way to figure this out.’ For instance, we’ve amortized tooling so what would have been a capital cost became an operating cost. In that case, they paid us an increased part price for the first year until they could get the CapEx budget the following year to pay the rest.

We can be very flexible to make the process work. And at the end of the day, once you own your own tooling, you are now back in control of your own destiny. You can take your job to whatever foundry you want. 

The cost is what it is, but we’re always evolving on getting ever cheaper ways to create tooling. For example, we can create a pattern model, load it into a 3D printer and get a 16” x 20” pattern ready to go in a matter of days at probably 20%–40% of the cost of traditional tooling. 

Bottom line, a customer knows once they get in the beginning of the funnel, we’ll get them out the other side with quality products on time. They can stop worrying about this. Buyers tell me all the time, “My favorite vendor is the one that I never have to talk to.” And I’m like, “Hey, that’s fine with me.”

Q We all like a scary story as long as it doesn’t happen to us ... but, of course, in overseas supply chain matters, anything could happen to anyone. What’s been one of the most serious cases you’ve seen?

We had a customer come to us because he was not getting product from his overseas supplier, plus communication with them had been tough. Then, all of a sudden, he saw a near knockoff of his product on Amazon and Alibaba and a few other direct websites. [The supplier] had all the tooling, and the customer didn’t have a trademark or any IP––he hadn’t signed any agreements. So, they just started knocking this product off, and it was his grandpa’s design! 

In addition to that, he’d get some products but not others and was having this constant fight of communication and consistent supply. He would get these parts late and have big increases in demand, so he had a real hard time managing his workforce. For two weeks, he’d have to get out 60-hours-a-week worth of work, and then he wouldn’t get any products for another month or two, so his workers were just sitting idle.

We brought the product back and helped them redesign it, so we were making two or three castings out of what used to be 30 different parts and assemblies. And by redesigning it, now he can manage his workforce better because he knows he’ll have a consistent flow of material and doesn’t need to add the three or four months to cover his swings. 

And by upgrading and changing his product, he actually then was able to sell at a premium price—against his own tool that got knocked off. 

Q It probably seemed like a good idea at the time, right?

It all started when he had taken over the family business and wanted to grow it, but they either couldn’t get local manufacturing or didn’t know some of this stuff can be made here in the U.S. So, he just Googled and ended up finding a casting broker, and suddenly he was sourcing this stuff from China, initially unbeknownst to him. That decision literally almost ruined his company. 

I imagine someday it will be a “Harvard Business Review” case study of the issues we saw with supply chain disruptions, COVID and JIT inventory; but this is why I moved product back when I was in Corporate America—I had these exact same problems. I also knew that I could go get a premium for my product if it was made in the U.S. We had a lot of success doing it, and that’s what we’re continuing to do here.

Q What can any foundry do to move a customer toward the reshoring mindset?

Tell customers, ‘If you’re thinking about reshoring, it probably means that you already should have been doing it. We understand why you haven’t—but if you’re thinking about it, it’s at least worth a conversation. That costs you nothing.’    

Click here to view the article in the digital edition of the August 2021 Modern Casting.