Vice President of Advanced Technologies Rodger Shepherd says the company’s Arizona facility is on track to grow revenues as much as 18 percent this year — despite supply chain and workforce challenges.
Prior to joining family-owned Cleveland Electric Laboratories in 1994, Shepherd owned a similar, though smaller, business in southern Ohio. After buying Cleveland products for several years to resell to his customer base, the company’s leadership approached him about joining forces. He started as a salesman, and in 2000, he was asked to become the company’s national sales manager.
“I moved my family to the Cleveland area in 2000,” Shepherd says. “[The company] continued to have a lot of growth and broadened our customer base. Then we experienced a company in Tempe that was making very specific instrumentation that we did not make. Our customers were asking us for it, so I started buying those products from the Tempe company and reselling them. We had a nice little thing going there, but then 9/11 hit and it really affected their company. Long story short, they closed the business.”
Shepherd went to Cleveland Electric Laboratories owner Jack Lieske and suggested opening a location in Arizona. He recalls, “I don’t think I was in his office five minutes before he said, ‘You go right ahead. Try not to spend too much money.'” They quickly hired six people from the Tempe company that had shuttered. “We didn’t want to see that talent base just crumble and go their separate ways,” Shepherd says.
Cleveland Electric Laboratories opened its Advanced Technologies Group (ATG) facility in Tempe in 2004. “We started up in a very meager little building,” Shepherd says. “And it was just at that time when Honeywell had a downturn in business, and they were letting engineers go that were in our field. So, we started hiring [their] engineers. Within a year, we had outgrown our first little facility and then moved to the building we’re in now.”
Today, Cleveland Electric Laboratories headquarters and a 33,000-square-foot manufacturing facility are located in Twinsburg, Ohio, while Shepherd’s team operates out of a 24,000-square-foot facility in Tempe.
While originally launched as “an incubator for all kinds of other ideas on how to do things,” the Arizona ATG now manufactures many of the company’s high-temp specialty thermocouples and industrial thermocouples along with all of the turbine engine test instrumentation and fiber optics. It also does 90 percent of the engineering work for Cleveland Electric Laboratories’ clients and all of the company’s precision machining jobs.
“Back in 2008, we had done some business with a local father and son machine shop, and we ended up buying them,” Shepherd says. “And then as recently as 2017, we were approached by another machine shop vendor of ours. The gentleman came to me and said, ‘I really liked the way you guys run this business. And unfortunately, I’ve just found out I’m quite ill. I don’t want to spend my last days in a machine shop.’ So, we worked out a deal with him and are now in two buildings here at our 52nd Street campus with a full-blown CNC machine shop.”
Demand for Cleveland Electric Laboratories’ precision machining services is growing. Shepherd says it currently accounts for about 15 to 20 percent of the ATG’s sales. Fiber optics account for about 10 percent, while industrial thermocouples and turbine engine test instrumentation make up the rest.
Shepherd says that when the Arizona facility opened, they were using TIG welding and spot welding when fabricating metal devices. However, over the last decade, they’ve invested in newer technologies including laser welders.
“They’re much more efficient and effective,” he explains. “We started off with a small one that was very useful. Then we decided there were more things we could do with a laser, so we bought a much more powerful, larger, CNC-operated laser welder. We also have what’s called a ROMER arm. It’s kind of a robotic inspection device. And in the machine shop, we have all CNC lathes and mills, including a 5-axis CNC mill that’s a little bigger than an office.”
Cleveland Electric Laboratories serves customers within the Department of Defense as well as the aerospace and energy industries. The company’s thermocouples are also often used in the medical, semiconductor, additive manufacturing, and heavy equipment industries.
“Our typical customers are making turbine engines,” Shepherd says. “That’s the biggest part of our customer base. Even the machining work we do is usually for those turbine engine manufacturers like Rolls Royce, Pratt & Whitney, General Electric, Honeywell, and Siemens. And it’s not just aero turbine engines that are hanging on the wings of the planes. A lot of our customers are also making the large turbine engines that are used on the ground for electrical power generation.”
He continues, “We’re usually on the ground floor of their development process. When they build a prototype engine, we build and install a lot of these specialty sensors all over that engine. Then they run it on a test stand. And that’s how they evaluate the efficiency of their design. They are collecting all this data from all these different sensors. A test engine, when it’s fully instrumented for evaluation, could have 4,000 to 5,000 different sensors placed on it. They run the engine, evaluate the data, and then tweak their design, make another prototype, and do it again.”
Challenges: Shepherd says the supply chain has been a big challenge for some time. “We have materials coming from all the base metal suppliers,” he says. “We also use a lot of platinum for our very high-temperature applications where people are trying to take measurements in excess of 3,000 degrees. We’re the largest consumer of platinum thermocouple-grade wire in the country. And we buy/sell/trade on average over 1,000 ounces of precious and noble metals a month. It’s a very big part of our business.”
Filling open jobs is another challenge. “I have everybody working full-time plus some significant overtime,” Shepherd says. “And I’m looking for people and can’t find them. I could hire three or four more people today if I could find them.”
Opportunities: While the company’s growth in Arizona was flat last year, Shepherd says they’re on track for 15 to 18 percent growth this year. “We’re seeing big opportunities in one of our fiber optic products,” he continues. “It is geared around the security industry, and we’re seeing a lot of uptick in people spending money on physical security around campuses, airports, and military installations.”
Needs: People and space. “Our buildings are full,” Shepherd says. “And we really don’t want to invest in moving. We looked into moving a few years ago and just to do upgrades on a new building was going to be seven figures, plus downtime and interruption. So, we’re just trying to manage with what we have right now and add efficiencies where we need to.”