A Conversation with Ohmstede’s Bill Reid and Doug Harrington

This is a story about good timing.

Ohmstede, which started more than 100 years ago by August Ohmstede as a small auto repair and welding shop in Beaumont, Texas, grew to become a trusted name in American manufacturing thanks to neighboring Spindletop’s oil rush and the need for quality metal fabrication. By the 1940’s, Ohmstede was building and repairing shell and tube heat exchangers for the thriving oil refining industry.

Similarly, business partners William (Bill) Reid and Doug Harrington were working together in management consulting when they began an engagement at Ohmstede. As they explored the company’s business model they saw a lot of untapped potential. So much so, they decided to buy the company and manage its makeover.

In 2002, the pair worked with a private equity group and took ownership. In 2007, they sold Ohmstede to Emcor Group and opted to remain on as its executives. Bill is Chief Executive Officer and Doug is Chief Operating Officer and President of Ohmstede Industrial Services.

The following is an excerpt from an article in the May 2010 issue of BIC Magazine, where Doug and Bill discuss what drew them to Ohmstede and the industrial manufacturing and services industries.

What was the aha moment that made you say “I want to get involved with this?”

Doug: To me, it was seeing the competitive landscape, which is still full of small “mom and pop” shops performing singular services. Customers had no choice but to use several different suppliers. This was wasting time and money not to mention the frustration it caused. We saw the potential to mesh industrial field services with the high-quality heat exchanger manufacturing and repair that Ohmstede was already known for. In short, we set out to change a service model that had existed for nearly 100 years.

Bill: I, too, saw great opportunity by integrating the shop and field services. Heat exchangers are mission-critical components – when they fail, they can create multi-million dollar losses due to reduced or lost production. Ohmstede has acres of space in its six shop locations, allowing us to simultaneously spread large projects among several shops. Replacement or new tube bundles can be assembled, hydrotested, and prepared for shipment at the same time. We can also arrange to have the crew ready to re-insert upon arrival. For the customer, this means making faster deliveries with less overtime and with one supplier interface. It’s the very definition of ‘faster, cheaper, simpler.’

What has been the boldest move the two of you have made in the process of transforming Ohmstede?

Doug: The acquisition of United Industrial Services in 2003 jumpstarted our ability to offer integrated field services with our shops. At the time, this company was a leader in bundle extraction services and the acquisition formed the basis of Ohmstede’s Industrial Services (OIS) division. We instantly became able to offer a single point of responsibility for heat exchanger repair, maintenance and manufacturing. This was a game-changing move for Ohmstede.

Bill: On the shop side of the business, I’d say it was our expansion to California with the purchase of Redman Equipment & Manufacturing in 2008. This acquisition has taken Ohmstede from being a Gulf Coast regional player into new, big markets on the West Coast and beyond.

What’s the biggest news from Ohmstede right now?

Doug: For Industrial Services, it’s our Embedded Specialty Maintenance Program. With this program we have an opportunity to make the entire ongoing maintenance process simpler for our customers and make large, lengthy turnarounds a thing of the past.

The best way to describe Embedded Specialty Maintenance is to think about how you maintain a car. You take it to your mechanic at regular intervals to check and change fluids and inspect critical parts to make sure they are functioning properly and are finely tuned.

That same concept applies to Embedded Specialty Maintenance. We perform tune-up work in refineries on a set schedule, keeping the equipment clean and in good repair. If necessary, we coordinate the repairs that can’t be done in the field – things like retubing, machining and specialized welding -- with our shops and organize all the activities so they are seamless to the customer.

Our customers tell us that they are seeing a reduction in energy costs as a result of this program and, in some instances, they are seeing increases in unit efficiency and extension of equipment life. Last year our Embedded Specialty Maintenance program logged more than 600,000 hours at several refineries around the country. We’re quite proud of it and plan to expand it.

Bill: I’m proud of the millions we’ve invested in technology. Our Sulphur, La., shop has robotic welding equipment used for overlay and clad restoration. We use specialized electroslag weld strip technology that gives our craftsmen the ability to work with higher alloys, like 1.25-inch and 2.25-inch chrome, stainless and high-nickel alloys.

Our Beaumont shop’s specialized machining and drilling center is equipped with state-of-the-art machine tools that allow us to machine12 tubesheets up to 13.5-inches thick simultaneously. We can now produce all the components for replacement or new tube bundles in hours not days.

This is also a relationship business and we have built terrific working partnerships with our customers. Our engineers routinely consult with some of the world’s leading refiners to design highly specialized components that address process challenges. Together we have come up with innovative, proprietary designs that improve the efficiency of new or existing equipment. In some cases we have exclusive license arrangements that allow us to share these developments with other customers.

The challenging economy both in the U.S. and globally is taking its toll on the refining and petrochemical industries. How is Ohmstede adjusting?

Doug: Like everyone, we’ve been hampered by overall economic conditions. and we’ve postponed some planned projects until we can determine what the recovery will look like. We believe that the fundamentals of the industrial services industry are strong, and once trucking and consumer gasoline consumption pick back up, a rebound for us will follow.

Bill: Our customers are cutting back, too, and have to do more with tighter budgets. Therefore they expect us to come up with creative solutions to help them meet maintenance challenges.

For example, one of our customers was near the end of a large refinery turnaround and discovered they needed to replace five additional heat exchanger bundles within 10 days in order to stay on schedule. Our competitors told them that it would take 8 to 10 weeks to manufacture the five 50-inch diameter bundles that each contained 1,300 tubes. They called us and we went to work simultaneously using the resources of our Redman shop in Torrance, Calif. and our Beaumont shop to build five new bundles in only six days. We delivered them two days ahead of schedule including transportation time. Timing is everything in this business.