HOLLAND — After manufacturing a specialized line of food processing equipment for 30 years, Lakewood Fab Tech LLC wants to embrace new opportunities by refocusing its business on designing custom machines for the industrial market.
The Holland-based fabrication shop aims to “cast a wide net” for customers in a variety of industries in West Michigan, including those in the automotive, office furniture and other industrial sectors, said President Mike Miedema.
By changing Lakewood’s focus and serving an array of customers, Miedema hopes to give his company a better chance at weathering business cycles, yet keep the operation flexible.
“We’ve been focusing very much on trying to fulfill that market for engineered solutions,” Miedema said of the company’s expanded focus. “It is a broad market and can range all the way from companies trying to improve their internal operations as well as being an end product. Our interest connects the opportunity we see in the marketplace combined with our experience and manufacturing resources.”
Lakewood is working to build new sales channels into the industrial machine market, which has presented a challenge for the company so far, Miedema said. In the meantime, Lakewood plans to continue offering general fabrication and other manufacturing to support the business as it develops the new sales channels.
Already, the company has secured a contract with an undisclosed manufacturer of styrofoam components to design machines that eliminate handling inefficiencies by consolidating several existing pieces of equipment into one product, Miedema said.
Lakewood fully committed to pursuing custom machine design last year. The company sold off its primary product line to a major competitor, Lawrence-based A&B Packing Equipment Inc. The company had targeted growers of small fruits and vegetables with the line of specialty processing equipment.
“The field support for that industry was very intense in terms of sales and service and (A&B) had a broader established network,” Miedema said. “Therefore, from a competitive side, it was increasingly difficult for us to step up to the plate and match that, which I wasn’t convinced there was room for in that industry.”
Miedema declined to disclose the terms of the deal.
A year before Lakewood sold the product line, Miedema began eyeing industrial machine design as a logical next step for the company to take.
“It wasn’t a brand new market for us, just frankly one we didn’t pursue as a target on its own,” Miedema said. “That’s what really what led us there. Here’s a market that we’re touching but not pursuing.”
Founded in 1964, Lakewood had designed custom equipment in the past, mostly for industrial applications, Miedema said. However, the company moved away from that market years ago as it focused on the food processing industry.
AN APPETITE FOR DESIGN
It’s likely that Lakewood will have opportunities to grow — at least in the short term — as manufacturers continue to outsource product development and engineering work to other firms, as MiBiz previously reported.
Product design and engineering firms across West Michigan remain bullish on the market for their services in the short term, given the amount of money companies are dedicating to design and research and development.
Moreover, while manufacturers in China and Japan have flooded the market with standard industrial equipment, “specialty equipment is selling very well here,” said Brian Long, director of supply chain management research at the Grand Valley State University Seidman College of Business.
However, Long isn’t sure how long a positive market in West Michigan will last given that most of the region’s primary industries are at the top of the business cycle.
For example, light vehicle sales are projected to cool after 2018 when the industry reaches a peak of 18.2 million units, according to market research firm IHS Automotive Group LLC. Likewise, production in the office furniture industry is expected to grow by only 1 percent to $10.3 billion in 2016, according to the latest forecast issued by the Business and Institutional Furniture Manufacturers Association. The organization predicts the industry will grow 4.8 percent to $10.8 billion next year.
“We’ve never managed to make it more than nine years without a recession and we are seven years into the recovery right now,” Long said. “Every recession has some problem that goes along with it and a bubble breaks. All too often, you can’t see the bubble while you’re in it.”
Still, Lakewood believes it will have success tapping into the industrial equipment market. While the company doesn’t have a growth target for this year as it works to establish a foothold in the custom machine market, Miedema has targeted a 15-percent annual growth rate for the business in the near future. The company generated annual sales between $6 million and $7 million last year and employs 40 workers at its Holland facility, Miedema said.
Despite the potential for designing custom machines and developing new products, Lakewood remains focused on building its sales and marketing arm so it can establish new relationships in a different industry than it’s been accustomed to, Miedema said.
“We definitely have the manufacturing capabilities and are utilizing those right now,” he said. “Really, what’s holding us back is re-establishing that new sales pipeline into the engineered solutions world. We have good capabilities and new technology, so really it’s just finding the right places to apply that.”