The Lone Star State’s Encore Wire Corp. uses red metal scrap feedstock to supply
the nation with commercial-grade wiring.
Remaining competitive in U.S. manufacturing has proven to be a challenge for companies large and small, even in economic upswings. In McKinney, Texas, Encore Wire Corp. has not only met the challenge but has surged like the voltage running through the residential and commercial grade wiring that it produces.
The company has spent its brief 20-year history increasing its market share and expanding its operations vertically to plug into a modern manufacturing success story.
UPSTART STARTUP. Encore Wire was founded in 1989 by Vince Rego and Don Spurgin, each of whom had held executive positions at Capital Wire and Cable in Plano, Texas, and with its predecessor wire companies.
The duo stared Encore because, as the name implies, it was another turn on the wire and cable stage for the industry veterans.
Starting with residential wire shipments in 1990, the company graduated to commercial wiring in 1992.
Since that time, "We have just gone on and on," says Frank Bilban, vice president and chief financial officer of Encore. "We’ve expanded here on our one campus time and again over the years. I’ve been here 10 years now, and it seems like there has never been a time when we haven’t been excavating somewhere on the property and building something."
In 1998, the company took a major step by building its own rod mill. In 1999, the key new project was a plastics compounding operation. "Unlike our competitors, we make our own cable and have cut out the middlemen to save costs," says Bilban.
In addition to being able to control its costs, the company’s series of vertical expansions has also allowed Encore to control its own destiny when it comes to order fill rates.
Encore takes pride in its order fill rate, prominently tracking it on the home page of its Web site at www.encorewire.com. (As of mid-September, the company’s order fill rate stood at 99.95 percent.)
Spurgin retired in 1996 while Rego remained in a leadership post until a 2006 stroke caused him to step into a chairman emeritus role with Encore.
Encore has been publicly traded since 1992, and as Bilban notes has been making steady investments at its McKinney plant site that have yielded growth and returns. Among the major investments have been:
• A major addition in 1994 to produce THHN (thermo-plastic high-heat nylon-coated) cable;
• A larger distribution center in 1997;
• The addition of the rod mill and of a railroad spur in 1998;
• The plastics production facility in 1999;
• A 192,000-square-foot plant expansion in 2001;
• More distribution center space in 2004; and
• The most recent plant expansion in 2006 to produce armored cable (wiring pre-packaged inside corrugated metal conduit).
A NIMBLE GIANT. Encore has practiced a strategy that combines aggressive growth with an insistence on concentrating its operations exclusively in McKinney.
According to both Bilban and Gary Spence, vice president of operations at Encore, keeping operations centralized has not hindered the company’s growth, and has probably provided benefits.
"The one point of production is, we think, a huge benefit and a reason for our success," says Bilban. "We’ve been able to integrate operations and take advantage of the one location."
Bilban says that north Texas (McKinney is less than 50 miles from Dallas) has proven to be an ideal shipping point for both outbound product and incoming copper cathode and scrap.
"McKinney has been a very good shipping point," he remarks. "You can go all across the South, such as Atlanta to the east or Los Angeles to the west, or up to the Midwest in a number of different ways," according to Bilban.
Spence remarks that the shift of America’s population center and industrial hubs from other regions of the U.S. to the South has also played out well for Encore. "You’ve seen a steady departure from the Northeast of wire and cable manufacturers," he notes.
On the inbound product side, the company can buy copper raw material from Phelps Dodge and Kennecott operations in the Southwestern United States, or import copper cathode material from overseas through "a couple of nice ports," says Spence.
"We also purchase scrap domestically," says Spence. The company will buy No. 1 copper chops and bare bright copper wire for its rod mills, but it also operates a wire chopping line that allows it to accept coated wire and cable from dealers throughout the U.S.
The wire chopping line features equipment made by two fellow Texas companies, says Spence: a chopping line from Triple/S Dynamics of Dallas and granulating equipment from Granutech Saturn Systems of Grand Prairie, Texas.
"The wire chopping system has a processing capacity of around 4,000 pounds per hour," says Spence. He notes that in addition to purchasing wire, the company also processes any prompt scrap it may produce.
Clean copper wire scrap is needed as feedstock for the company’s wire rod mill. "We’re consuming around 1.5 million pounds per month of bare wire and about the same of copper chops," says Spence of the rod mill’s appetite.
The company’s sprawling, vertically integrated complex may have taken on gigantic proportions, but Encore’s managers say that responding quickly and efficiently to customers remains the critical mission.
"I think a key point is to keep it simple," says Bilban. "We stay very focused on blocking and tackling every single day, keeping our eye on the order fill rate and on controlling our costs."
BEYOND THE BASICS. While blocking and tackling, to use Bilban’s football terminology, keeps the ball moving forward, Encore Wire also remains open to scoring with a deep pass.
One of Encore’s successful long passes has been focusing on its product
line of color-coded wires, with different colors being applied to hot wires, feeder cables and nonmetallic cables.
IN THE MARKET
Encore Wire Corp., McKinney., Texas, is a growing company with one sprawling manufacturing plant that ships out truckload upon truckload of copper wire and cable.
To produce that wire and cable, however, the company relies on a stream of raw materials that includes a healthy amount of red metal scrap.
In particular, Encore seeks out wire and cable No. 1 copper chops or the bare bright copper wire that has been extracted from wire and cable.
"We buy scrap from a number of yards around the region where it’s economical," says Gary Spence, the company’s vice president of operations.
Spence says Encore seeks long-term relationships with scrap sellers and offers a number of reasons that can make dealing with Encore attractive. "Our chemistry requirements are steady. We make rod strictly for our own consumption, so we know our own chemistry, and it stays pretty constant," he remarks.
"We’ll be steady buyers and we’ll be available as buyers," Spence continues. "We’re looking for long-term relationships that can last month after month; we like the longer-term partnerships and relationships."
"A maintenance person working on the wires years down the road after the installation appreciates this," says Bilban. "And for safety reasons it’s important too—you don’t want a fatality because someone misunderstands the wiring scheme."
Since being introduced in 1999, the color-coded wiring has helped Encore gain new customers and increase market share.
The company’s production capabilities and sizable warehousing and distribution space allow it to offer the different colors while maintaining its impressive order fill rate. "We always have master reels of the different colors in stock, and when we start to get low, with our efficient factory setup we can change over to the color needed quickly," says Bilban.
Another incentive toward innovation for the company was as a response to attention in California and elsewhere to the presence of lead in PVC wire coatings.
Legislators in California were considering a ban on the presence of lead in any household product. Although lead is used as a stabilizer in PVC wire coatings, "we were able to formulate a lead-free plastic compound," Bilban says of Encore.
Bilban notes that some other wire makers formed a group to hire attorneys to fight the California law, but Encore—with its own coating production capabilities—chose the path of finding a new, safer way. "We decided to take the opposite approach," he remarks.
Encore has apparently found a good balance between sticking to basics while also making room for innovation, as it has grown to hold as much as 25 percent of the nation’s copper wire market, according to a report from business information company Hoover’s Inc.
PLUGGED IN. After 17 years of growth and meeting expectations, the leaders of Encore Wire do not seem ready to rest.
Bilban remarks that even with its good track record, Encore is not in a position to live off of past efforts. "In our business, with the margins the way they are, you have to be very good at what you do to stay in business, much less grow."
Bilban and Spence have watched Rego, Spurgin and long-time Encore executive Daniel Jones (the company’s current CEO) run Encore Wire as a fast-growing company within a fast-growing city.
"Encore has grown from 15 people originally to more than 800 today," Bilban remarks. "It’s been named one of the fastest-growing manufacturing businesses in the U.S. for a number of years now."
Spence remarks that the growth fits in naturally in McKinney, a city that in his time there (about 10 years) has grown from 30,000 people to more than 100,000.
The construction market has been a source of concern in some regions, and the residential market in particular has hit a rough patch.
But Bilban also sees construction cranes and sites in Texas and wherever he travels in the United States, and he sees trends that should keep builders busy. "A lot of baby boomers have kids in college, so universities are doing a lot of new building," he comments. "Our parents are moving into retirement communities, so that’s another growth segment. There will continue to be a lot of infrastructure spending and a lot of renovation projects as America’s cities are having to renovate and refurbish. A lot of old buildings are being converted from one use to another, and those buildings get gutted and rewired," Bilban notes.
And even the residential market is not all despair. "When home owners remodel, the average voltage load per square foot is being raised to exceed where it was 40 years ago," says Bilban, noting that old wiring systems were not designed to handle microwaves, multiple televisions, computers and air conditioning.
Building markets can be fickle, but Bilban is not down on the future of copper wiring. "There are going to be ups and downs and recessions, but in the long run America is a huge market and there is going to be a lot of demand for our product."
The author is editor in chief of Recycling Today and can be contacted at firstname.lastname@example.org.