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  • 3/28/2016 forward.msci.org/backtobasic

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    Back to BasicTodd Fogel, owner of Basic Metals Inc., on building lastingrelationships and clear communications

    Tags: Service Center Best Practices Business Strategy Profile

    by Kelly Caldwell Illustration by: Morgan Anderson Posted: 11/3/2014 12:00:00 AM

    Theres more to the first half of Basic Metals Inc.s name than you mightexpect. The Germantown, Wisconsin-based aluminum service center derivesits appellation from a clever acronym cooked up by owner Todd Fogelsfather. When my dad came up with the name Basic, it actually was meant tostand for brass, aluminum, stainless, iron and copper, Fogel says. He hadsome dreams of being a full-service distributor and offering all differentmetals. But all these years weve only focused on aluminum. Maybesomeday well expand to other metals.

    But the aluminum business has been good to Fogel. He joined his father in1983 as the third employee at Basic Metals, which had been incorporated in1980. In 1985, he and his father became owners. In 1999, Fogel purchased itfrom his father to become Basic Metals sole owner. Since then, thecompany has expanded to 27 employees, and from 6,000 square feet of

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    Its still about knocking on doorsandmeeting people face to face.

    space to 80,000, with warehouses in Phoenix and Memphis.

    Yet for Fogel, a reassuring constancy has been one hallmark of his business.Basic Metals has been largely unaffected by the industrys consolidation.Despite the recession, it hung on to many of its customers. His competitors,Fogel says, are the same familiar faces. Fogel talked with Forward aboutbuilding lasting relationships with customers and employees, and why hefinds the metals industry so rewarding.

    How has Basic Metals evolved since 1983? When I joined, it was my father, a slitter operator and myself. I would say Iwas kind of a jack-of-all-trades. I was the inside salesperson, bookkeeper,fork truck driver, slitter helper, janitor. I would load the trucks and whateverelse needed to be done. My dad was pretty much our salesman.

    Today, were still a small company. But I remember getting excited the firsttime we got a programmable typewriter back in the mid-80s. And I thought,Wow, I dont have to type in all these addresses every time I fill out an ordernow. And obviously today the technology is tremendous. I also rememberthe day thatand this will date me a little bita friend of mine from highschool came in, tried selling me a fax machine, and I said, Well never usethat in this industry. [Laughs] And we dont use faxes anymore, so I guessits gone full circle.

    So the technology has changed, but the relationships havent. A lot of mycustomers Ive been dealing with my entire career. And I developed a lot ofrelationships with different customers, personal and professional. And Iguess thats why weve been successful and why were still in business todayand doing pretty well.

    Has the competitive landscape changed a lot? Not really. Its the same faces. Its different names, with the mergers andacquisitions, but we see the same players all the time. The ownership of thecompanies has changed, but for the most part, its kind of a fraternalorganization, this whole industry.

    But do you feel pressure in light of all the mergers and acquisitions? The thing about a company like Reliance is that when they do buy mycompetitorsand they bought a couple of companies nearby, and a lot ofmy competitionthey leave them alone. So really, we dont see any morepressure. Here in the Midwest at least, like I said, its just different

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    ownership. Probably one of the only new competitors weve had in the lastfive years is Main Steel, an Elk Grove, Illinois-based steel service center thatdeals in stainless, aluminum and carbon steel, when it went from just doingtoll processing to becoming a distributor and selling metal. We dont run intothem too often in aluminum.

    What about technological changes? Theres more electronic interchange in processing orders, getting paid, andreceiving orders and releases from customers. But the programs we use forthat are specific to each customer in most caseswe use whatever platformthey need. Ive always considered Basic Metals sort of a job shop. Whetherwere processing aluminum, selling aluminum or processing steel forsomebody, we dont want to have any one particular way of doing anything.Ive always said we rely on our customers to tell us what they want, and wetry to respond to their needs.

    Your website boasts quality and timeliness. What factors go intoensuring both? Its our ability to communicate as a smaller company. Internally, we have agreat system worked out. We have a production meeting every morning,and that includes everybodyour plant manager, our production controller,our sales team, myself, my CFO. Its easy for us to get together in a group ofsix or eight people, and we go through all the orders we have and gothrough our trucking schedule to make sure were getting everything out ontime. Our business is small enough and flexible enough that we can makechanges on the fly. It gets a little frustrating sometimes for my plantmanager and the guys out in my shop, because things will change, eventhroughout the day. But I guess thats my sales pitch to new customers: Wehave the flexibility to make almost instantaneous changes.

    Its the same with the quality issue. We dont have any pre-existing qualitystandards here. We rely on getting that information from our customers andmaking sure that when we take an order from a new customer, we get allthe specs and ask a lot of questions. And then we try to just live up toexpectations.

    Ive always lived by the motto: Tell people what we can do, and make surewe do what we tell them we can do. And I think thats why weve beensuccessful in business. We know we cant do everything for everybody, butwhat we do do, I think were good at.

    What do you see as the future of the company? Do you see growth?

    Right now we have a lot of opportunity for growth. Our customer base isextremely broad. We sell to industries such as housewares, construction,appliance, electrical, stamping houses and fabricators. Our growth strategyhas always been to reinvest our profits into equipment and inventory. After2008, we decided to hold off on any capital expenditures. But were probably

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    getting ready now to look atexpanding. Our circle andsheet business is currentlygrowing the fastest, and nowwere looking at newequipment to improve bothour capacity and quality ofboth, as well as our slit coil.Were very much a nicheplayerwe know our corebusiness is flat-rolled

    aluminum. But in the future, we might have opportunities to get into maybeheavier gauge aluminum, maybe extrusions.

    What role do you think your son will play? Will he eventually take over? He just started with us in April of this year. I told him when he graduatedfrom college that he was welcome to come aboard when he was ready, butnot until he did something else for two years. So when he got out of schooltwo years ago, he found another job and worked selling insurance. Ishouldnt say sell insurancehe always yells at me when I say that. [Laughs]He was a financial adviser.

    A lot of people Ive talked to in old, family-run businesses all recommendmaking your children go out and make a name for themselves. So I wantedto make sure he could bring something to the company as well, somethingthat gives it new energy.

    But right now, I havent put a lot of thought into my exit strategy. I did a littlehomework this morning to prepare for this interview, and found out that theaverage age of employees in my office right now is 43. [Nationally, theaverage age of a high-skilled manufacturing worker is 56.] And that includesmy son, our youngest employee, whos 23. Im our second-oldest employeeat 54. Other than my CFO, Im the old man around here. I also found that theaverage tenure in my office is 16 years. If I take my son out of the equation,the average is 19 years.

    Why do you think that people stick aroundso long? Id like to think its because of me, but[laughs] I dont know. I think we havesome great compensation plans here. Weve had a very lucrative profit-sharing program in place since day one. Since 1985, we have alwayscontributed 15% of each employees income into a profit-sharing plan. I liketo think they stay because theyre happy and enjoy working here.

    I would think that after so many years, people become more like familythan anything else. Yeah. Ive been to almost every one of their weddings. Ive been aroundwhen most of their kids were born. Theres a cohesive culture, I guess.Interestingly, Ive found were more successful bringing in people who donthave industry e