Idleness can be tolerated, says Chris Rea – in some circumstances, at least. Some of his company’s machine tools stand unused for as much as 60 per cent of the time. They whir into action only when urgent orders come in that require vital parts to be manufactured on demand.
“The money I ‘waste’ on this sort of investment is worth paying to ensure we have satisfied customers,” says Rea, managing director of AESSEAL. The company was started by the 62-year-old former economist in 1981 in Rotherham, the south Yorkshire town where it is still based. (This article appeared in Made Here Now in 2016.)
Rea’s business is the world’s fourth-biggest maker of mechanical seals – key parts of virtually all rotating machines involving fluids, and used in processes ranging from chocolate production to oil refineries. More than 80 per cent of its £143m sales last year were outside the UK.
The company stands out for having added – alongside its fundamental business of making things – a strong service culture aimed at ensuring customers’ requirements are met, even if this sometimes leads to higher costs.
Blending a service approach with manufacturing has wide appeal. It strengthens bonds with customers. It may also create barriers to competitors entering the same sector, while adding possibilities for new sources of revenue.
But the need for a service culture is particularly necessary in the seals business.
Mechanical seals are made from highly engineered pieces of metal, plastic and other materials. They stop fluids leaking out while machines such as pumps work at high speed. Even a tiny amount of leakage can compromise efficiency and lead to accidents.
The range of machines that seals go into – and the differences in the ways customers use their equipment – means that the demands on suppliers are extremely high.
Rea says: “We make 400 types of seal, each of them capable of being produced in up to 100 variations. We have to produce seals to fit an enormous number of possibilities.”
A large part of the company’s business comes from replacement parts. If a pump in a chemical plant needs a new seal, the operator does not want to wait too long for a replacement. Nor will it be happy if the substitute seal doesn’t fit.
While all this strengthens the need for service thinking, making it happen is not easy. Ensuring the right amount of liaison with customers – and installing the hardware that will translate their requirements into real products – requires commitment and money.
Rea sees a lot of value in the company’s team of 350 sales engineers – technically qualified people around the world who have the expertise to understand customers’ problems and work out with them how to create the products they need. Of its 1,700 employees, 350 are in Rotherham, a similar number elsewhere in Britain and 1,000 overseas.
To support the commitment to customer service, Rea’s company has invested in IT systems to ensure that orders can be transmitted quickly to production centres. Ninety per cent of its manufacturing is carried out in the UK, requiring machinery that is up-to-date and able to operate very flexibly.
The approach explains why AESSEAL’s spending on plant and equipment has been high, totalling more than £60m in the past seven years.
Summing up the past 35 years Rea says he has focused on three points that sound simple but are hard to get right: devising new products, achieving excellence in manufacturing and selling globally.
“A lot of businesses can innovate. But can they manufacture the products and can they sell them? I think you’ve got to be equally good at all three. If you aren’t, the customers will soon notice.” Whatever the other challenges, he reckons the business would not have been successful without good employees. “My approach is to take on smart people, spend six months evaluating them and then leave them largely alone. If I take all the decisions, it’s a poor way to encourage people to behave responsibly.”
Within this philosophy, he has the important responsibility of making sure the workforce consider the business a good one. “If [employees] believe in the brand and the technology – if they think there is a bit of magic about the company – they will do a lot.”
Vital hardware that keeps machines humming
Mechanical seals are crucial for many machines with rotating parts, such as pumps. The business of making them is dominated by three large companies: Flowserve of the US; John Crane, part of the UK-based Smiths Group; and EagleBurgmann, a joint venture between Germany’s Freudenberg and EKK of Japan. The UK’s AESSEAL is number four.
Mechanical seals are crucial for many machines with rotating parts, such as pumps. The business of making them is dominated by three large companies: Flowserve of the US; John Crane, part of the UK-based Smiths Group; and EagleBurgmann, a joint venture between Germany’s Freudenberg and EKK of Japan. The UK’s AESSEAL is number four.
- Carl Johann Freudenberg starts the Freudenberg tannery in Germany with its leather providing a base for the company’s move into sealing technology.
- Feodor Burgmann forms Burgmann in Germany, which later becomes EagleBurgmann.
- George Cook invents the mechanical seal in the US and starts the Cook Seal Company to make assemblies of metal and textile-based parts to ensure liquid stays trapped in machines such as pumps.
- Crane Packing Company starts in Chicago as a seals producer and later moves into mechanical seals. The company subsequently becomes John Crane and is acquired by Smiths Group of the UK.
- Nihon Sealol, now called Eagle Industry Company (EKK), is founded in Japan.
- Chris Rea starts AESSEAL in the UK, after learning about mechanical seals while distributing products made by a US supplier
- Flowserve formed in the US through the merger of two leading fluid motion and control companies – BW/IP and Durco.
- Freudenberg and EKK acquire EagleBurgmann – now operated as a joint venture.
- Rea’s company reaches £100m of annual sales for the first time.
- Rotherham United’s new football stadium is named after the company in a sponsorship deal
- AESSEAL opens its Asia HQ in Kuala Lumpur
The accidental route to starting a company
Chris Rea was drawn into manufacturing by accident. Working as a distributor of engineering seals in Northern Ireland during the late 1970s, he found that the US company supplying them had suddenly pulled out, leaving him to find a new source for these products if he wanted to stay in a job.
He decided to try to make the items himself – and he succeeded, after a struggle. “After I got dumped I invested two years of my life moving into manufacturing, mainly driven by a desire to get my own back”.
In the early days he was greatly helped by the decision of Rotherham council in South Yorkshire to let him start up a factory on some land it owned “for virtually nothing”. The local authority’s move was part of an effort to attract new businesses to a region ravaged by the decline of the steel and coal industries.
As well as retaining Rotherham as its headquarters, Rea’s interest in the town is underlined by the sponsorship deal with the local football club which has meant Rotherham United’s stadium carries his company’s name.
The benefits of staying private
While Chris Rea owns just over half of AESSEAL, most of the remaining shares are held by 3i, the investment group. He sees being privately owned – as opposed to seeking a stockmarket listing – as an advantage.
It has greatly reduced the need to sound out shareholders about areas such as investment plans and dividend payments.
This form of ownership gives entrepreneurs the opportunity to “forego short-term profit generation and generate over a long period a large and sustainable business”, Rea says.
Good vibrations from the internet of things
A new area of activity for Chris Rea’s company – and one that fits in well with its service culture – centres on generating income from monitoring customers’ equipment using handheld instruments that measure vibration.
The process relies on machines and sensors transmitting information between each other in a way expected to become increasingly common as part of the so-called internet of things.
Industrial applications of the internet of things will become important both for big and small manufacturers, as well as a large group of companies selling key elements such as software and electronic components required to make the concept work.
Collecting the data thrown generated all these connected objects should make it possible to monitor them more closely, optimise their performance and anticipate problems before they occur. It could also support new business ideas such as charging a subscription for hardware based on the amount it is used.
In the new business, AESSEAL’s plant in Warrington, near Manchester, is making small instruments incorporating digital processing hardware plus sensors for measuring vibration.
Operators equipped with these devices will visit industrial plants to check on vibration – a ubiquitous by-product of rotating machinery. Working out the amount of vibration and how it varies indicates how well the machines are operating –and what sort of maintenance they need – but requires a lot of very precise data and sophisticated processing techniques.
The company aims to start using its monitors – which it calls machine sentry devices – to begin a service to UK customers before extending it to other countries. The project will mean the UK business comes up against strong competitors such as the US’s Emerson and Prüftechnik of Germany that already offer services based on monitoring vibration.
The article appeared in made Here Now in 2016
