A steel fabrication and construction company has turned a subcontracting headache into a valuable asset via business model innovation. By SARAH BELFIELD.
By Sarah Belfield
Innovation was not only required in the technology employed, but in the business model of what was at the time an industry starved of the required skill sets.
Get business news first
Sign up to SmartCompany’s daily newsletter
Three years ago, future growth at structural-steel fabrication and erection company Alfasi Group was under threat because the company was beginning to exhaust the capacity of the detailing subcontractor industry.
The family business was founded by Avri Alfasi (pictured, centre, with fellow directors Saar Alfasi, left, and Gill D’Vier) when he opened a metal workshop in 1980, employs 250 and turned over more than $80 million in 2006-07. It now produces 8000 to 10,000 tonnes a year of fabricated steel.
But around 2004, the company’s continued growth was threatened by a shortage of subcontractors with detailing skills. Alfasi was not missing out on jobs but it could smell an industry trend and decided to act.
Director Saar Alfasi says: “We were using so much of subcontractors’ capacity that it just became impractical… We could see that the capacity within the entire shop detailing industry was shrinking.”
There was a shortage of skilled steel detailers – who draft steel fabrication drawings and erection plans based on architectural and engineering drawings – and there no trade courses available to replenish numbers, despite it being a very specialised skill.
The company responded by bringing the work inhouse and building up its own steel design and detailing branch.
Managing to find “enough of the right people and not too many of the wrong people” was a key issue, for the entire company as well as for the detailing branch.
As part of building up its detailing capability, the company hired 15 people from the Philippines and is now considering hiring in the UK. Although it usually takes about three months to train an overseas recruit to produce detailing to Alfasi’s standards, all the trainees have turned out to be a good fit, Alfasi says.
Enticing local detailers on board was problematic. They were hesitant at first about joining the company because of the unusual business model.
Saar Alfasi says potential recruits had to be persuaded that the concept wasn’t “just a pie-in-the-sky idea, something that we’ll start and then give up on”. Their fear was that detailing would be a mere adjunct to the company’s fabrication and that they would have to look for another employer when Alfasi’s detailing work ran out.
Crucial to overcoming the problem was having a well-connected manager on staff who had 30 years’ of experience in the drafting industry and who was able to persuade people to join the company. Another attraction has been offering salaries that are in line with the mining industry, which has lured many detailers to it.
The decision has paid off, and the new department has become a profit centre. The group now employs 35 draftsmen, who provide a service for the entire company, including for Alfasi’s projects in Asia and the Middle East.
Alfasi says the move has helped the company win customers and projects for its steel construction business, “because everyone recognises the criticality of shop detailing in the whole steel construction business, and everyone recognises there are just not enough detailers.
“Sure, some fabricators have detailers that work for them. They might have one, or two, or three. But we have 35 and we’ve set it up as an ongoing business, which we want to take national and international. We want that business to be a major player in shop detailing in its own right.”
Alfasi would not elaborate on how much extra growth came from the strategy, except to say “it has been very profitable. It’s been a worthwhile experience.”
The company now wants to pursue the detailing market in the United States over the next 12 to 18 months. Alfasi says the US requires a large amount of offshore detailing services to supplement its local supply. He will make sure the local detailing business can handle the process before he goes ahead. Alongside the US strategy would be a tilt at supplying detailing to the mining industry.
Alfasi hopes the company will have about 70 detailers on its payroll in about three years from now.