How Zekelman Grew to a $3B Domestic Manufacturer

How Zekelman Grew to a $3B Domestic Manufacturer

When Barry Zekelman’s father passed away he was 19 years old and six months into college. His dad left behind a business employing 5 people manufacturing steel tubing. It wasn’t much of a head start with beat up machinery, negative $5 million of retained earnings, and losing $60,000 every month. The business was on the brink of bankruptcy. Everyone told Barry to shut it down and stay in school, but he admits, “quite frankly, school was boring,” realizing that for him he had already outgrown it. This was his shot.

Barry had to piece together how to run a manufacturing business, like a pilot learning how to fly as the plane takes a nosedive. “I learned how to read an income statement and put one together real quick. I learned that making money doesn’t mean having money. You can make a lot of income – but cash is king,” he says.

He had no sooner moved into his dad’s office when two employees came in asking for a raise. Problem was, he couldn’t afford it – and he honestly didn’t know how they were making a living off what they were paid. He told them to do that he needed more production. The cash wasn’t there. The employees pleaded, ‘well – if you gave us a $2 an hour raise, this machine would never stop.”

Barry remembers thinking: what comes first, the chicken or the egg? “If this machine never stopped, I’d be able to give you a $2 an hour raise,” he said. “If I give you a raise and nothing changes, are you going to give me the money back?” The guys looked at each other and said it doesn’t work that way. Barry told them they had to do this together to be successful.

Their challenge was to become like a NASCAR pit crew. They needed to change the machine over from size to size much faster without eight hours of downtime.  “I said, look, if I can empower you to figure out how to do it and make change, and then pay you for doing that, incentivize you for doing that, the machine will run better, it will be maintained better, it will change over quicker, it will probably run faster, and you’ll get paid more,” he said. It was a gain sharing program that built efficiencies into the company and provided constant reinforcement. Down time dropped dramatically. When a machine stopped, it was all hands on-deck to get it back up and running. 

Rapid growth followed. Even with added safety and quality measures, sales went from $2 million to $7 million, then $11, then $19 million up to $24 million. Today Zekelman boasts $3 billion in revenue. What Barry is most proud of though, is that each year the team has grown, now employing 2,700 people in North America.

Not a bad climb from a team of five.

Made in America – the Benefits of Domestic Manufacturing

Barry is well known as a champion for manufacturing in the US, launching a campaign in 2018 to encourage the creation of manufacturing jobs in the US. It’s hard to fully put into words the passion he feels for what he does, the people he surrounds himself with, and the impact he can make in communities where his plants employ hundreds and thousands of workers. Whether expanding plants into small towns or more populated areas, he has seen kids graduate from high school, come to work for them and flourish. One of those high schoolers started out running a cutoff saw and is now president of a $1.5 billion division of Zekelman.

“What I want to be remembered for is giving that opportunity. Not how much tube we made, or what building we built, but the opportunities we’ve created for the thousands of teammates and their families that we have,” Barry says.

Providing jobs and opportunity can have a much broader impact. “I believe fundamentally that the root of a lot of our problems today, whether it’s divorce, financial haves and have-nots — and income disparity, crime, drug abuse, lack of education, incarceration, all of those things…that comes from communities losing their purpose,” says Barry. He points to the mass exodus of manufacturing as the trigger point for many deeper problems seen in communities throughout the Western world.

Barry adds: “Everyone said, ‘well, we don’t want to manufacture, we don’t want to make t-shirts here.  We need to be higher educated.’” He believes not everyone is made for higher education or so-called white collar professions. “We do a huge disservice right in our education system at the very beginning of not identifying people and children in the right way and what they’re capable of.”

Barry says instead kids are funneled off to go into higher education where they can learn calculus, be a rocket scientist, lawyer, or doctor, but it’s not always in their DNA and makeup. “They wanted to bend sheet metal. They wanted to be a welder and we basically created a void in society that was incapable of giving those people that opportunity.”

The Cost Dilemma: Offshore Production vs. Made in the USA

Barry sees relentless pressure on CEOs at large corporations to continuously improve stock performance. Make more, and make it cheaper seems to be the ready accommodation to appease Wall Street. The result is cheaper product, but he notes the inevitable cost: “There’s a community that lost the factory. It lost the tax base of that factory. It lost the income tax of that factory. The property values went down, crime went up, incarceration went up, drug abuse went up,” he says.

Even still, there seems to be a focus by many companies on the bottom line and it can often be seen as a victory to cut wages. Barry doesn’t see this as a win. “Do you have any idea of the culture and environment you created? We’re not a corporation. We are a culture. And when you create a culture of takeaway, how do you think they’re running your shop? How do you think they feel about you caring for them?”

As Barry shares that in 34 years he’s never cut anyone’s wages — not by so much as a penny — you can feel his commitment to his own sense of integrity. In his next breath he’s quick to say he’s not an employment agency, that they’ve have to work hard when plants are not up to snuff or make lean improvements. But, he circles back to the secret of his success: motivating and empowering the team to figure out how to be most efficient.

Zekelman Industries has turned out 2 million tons of steel tubing products from 15 plants in the US and Canada, showing no signs of slowing down despite the 2020 pandemic or recession.

Barry walks the same factory floors he walked 20 years ago, still dreaming up new ideas to make things better, safer, faster It’s his form of adrenaline rush. “I hate those signs on the freeway that says speed kills,” he says. “Speed doesn’t kill. I don’t know anyone who’s died going 100 miles an hour or 150 miles an hour. It’s the sudden stop that kills you.  So, go.”