Riding The Wave Of Freedom. Military Orders Mean Big Business for Vendors and Their Subs Who Are Willing To Go After The Work Thursday, July 10, 2008 - Article #901 Written By Joe Cogliano II
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To do its job, the U.S. military machine constantly needs goods and that keeps places like Accu-Counter Technologies Inc. busy. The northern Kentucky company, which sells shot counters for weapons, ships most of its products to clients like the U.S. Special Operations Command.
The command is attaching counters to one style of rifle and plans to put the gadget on all their weapons soon, according to Rich Weathers, president of Accu-Counter. "And the Army is lining up behind them," he said. Only on the market for about 18 months, Weathers expects the counter to revolutionize the weapons industry by shifting maintenance to something done on a usage basis rather than a task tracked by calendar. And that's good news for Accu-Counter and its contract manufacturer in Southern Kentucky. "We believe the shot counter will be as common as an odometer in a car, it's just a matter of time," he said.
Military work only represents a small portion of total revenue for American manufacturers - about 2.5 percent in 2007, according to the U.S. Census Bureau - but defense-related shipments still pump a whopping $110 billion-plus a year into the industry and companies like Accu-Counter and it's subcontractors. In a survey published in Manufacturing & Technology's e-journal the last week of February and first week of March, nearly 50 percent of readers reported doing at least some work for the military, either directly or as a subcontractor for a military vendor.
Companies like Columbus, Ohio-based Air Technologies have always managed to bring at least some defense-related work through the doors, but the company got a big lift in 2007 when it landed several large projects for mega-defense contractor BAE Systems. Air Technologies - which designs, installs and services air compressor systems as well as writes and manufactures software for managing compressor systems - has about 120 employees in a dozen locations across five states in the Midwest. It touts a long-standing relationship with Wright Patterson Air Force Base near Dayton, Ohio and BAE in Cincinnati while BAE in Pittsburgh was a new client last year. "It was gigantic," said Kurt Lang, chief operating officer of Air Technologies. "'07 was profound because those orders we won made it by far one of the biggest years we've had in dealing with vendors that support the military directly."
For Eric Hill, president of Cincinnati Laser Cutting in Ohio, getting a foot in the military industry door several years ago was a result of location, reputation and the fact that so much work was going on during the ramp-up to the war, suppliers needed more vendors. Orders from military suppliers account for about a quarter of Hill's business. "There are several defense contractors here in the Cincinnati-Northern Kentucky area and our proximity to those people got us inroads," he said "You'll get a shot at something and if you do a good job you get a shot at something else." Cincinnati Laser Cutting, which opened in the late 1990s and laser cuts pieces and parts for a wide range of industries, employs about 65 in Cincinnati and 30 at its Tennessee facility. Most of its defense-related orders involve cutting parts for armored vehicles, but the company also gets requests for athletic equipment used by soldiers who spend a lot of their time tethered to military bases.
While the work is good for Cincinnati Laser Cutting's business, it doesn't come free from problems. Some of the jobs are sporadic, which causes scheduling problems, so the company judges each order individually to see if they can take all, some or none. "If you can't plan on something and someone sends you this huge opportunity - and they want it today and you've got other stuff going - you can't just turn on a dime and do this work," Hill said. "There are projects that just happen ... the Pentagon (decides it) just has to have this to protect the troops and then all of a sudden there's this flurry of activity and some of that flurry of activity comes down to our level."
Steve Staub sees the same problem from time to time. Over the last few years, the president of Staub Laser Cutting in Dayton, Ohio has turned away several jobs from military vendors that would have upset his order balance. "I don't want to get that heavy into any one market segment," Staub said. The company cut pieces for a dozen or so military vendors last year, accounting for about 20 percent of its revenue.
With most of the military-related orders that come through the shop, Staub has no idea what the pieces are used for, but he's sure they've churned out parts of Humvees, tanks and missiles. The company got its start in the industry simply by reputation - Staub said military vendors called him - and he expects to stay busy with the work since achieving ISO certification. "We can make a lot of stuff that other people can't, a lot of unique parts with our machine that other companies can't."
Air Technologies' Lang, who served in Navy during the 1980s and saw action in several campaigns including Beirut and Grenada, offers this advice to on what military vendors seek from suppliers. "They have to have the best of the best," he said. "We have to listen to their needs, deeply, and provide the best solutions we can possibly design."
While a bustling defense industry is a shot in the arm for some, companies also face the possibility orders could tumble based on the outcome of the presidential race. Our recent e-journal survey provided a glimpse of how manufacturers view the upcoming election with more than half of business owners and managers reported they were "very concerned" about a downturn in military work.
As president of the local tooling and manufacturing association, Staub knows plenty of members are talking about the issue. "It's definitely a topic of concern because of the amount of stuff made in our region for the military." As a best case scenario under a new president who rapid withdrawals from the Iraq war, he said two schools of thought are circulating: either the military leaves much of its hardware overseas and requires new goods or it brings everything back and much of it needs to be refurbished. Personally, Staub has some concerned about the impact of the election on defense-related orders, but he's sure the work won't totally go away.
Cincinnati Laser Cutting's Hill also wonders how the Presidential election might affect military orders, but he's not losing any sleep over the issue. "If Congress and the President agree to pull out from the world and shrink back, there's obviously a lot less need to have armored vehicles and things to protect the troops," he said. "If a Democrat wins and they do what they say, then it's going to affect military spending, there's just no doubt. I can't control it so I try not to worry about it."
More than 50 companies were contacted to be a part of this article but many declined to participate; most cited security issues or fear that competitors would go after their business.
Joe Cogliano II is the author-joecog2@sbcglobal.net.