Oxygen Service Company

Eleven years ago, St. Paul, Minnesota-based Oxygen Service Company was a thriving $11 million dollar company with 35 employees. Its owners, Bill Huber and Bill Lund, had been managing and growing the business since its founding in 1959. They had emerged from an ownership group to build the company on tenets of employee values, honesty, integrity and excellent customer service. Their strong leadership and stout adherence to values allowed Oxygen Service Company to become one of the most successful welding companies in the upper Midwest.

COMPANY SNAPSHOT President: David Weigel Founded: 1959 Year Joined GAWDA: 1964 Headquarters: St. Paul, Minnesota Other Branches: Sauk Rapids, Minnesota Employees: 73 2003 Sales: $22,000,000 Web site: www.oxyserv.com

However, Huber and Lund were ready to sell their company. The company's employees formed an Employee Stock Ownership Plan (ESOP) trust and purchased 100 percent of the company stock. One of the conditions of the ESOP transition covenant was that Huber and Lund had control over who their successors would be. David Weigel, who had been with the company since 1985 and had served as general manager since 1987, was selected to be the next president. Since that time, the company has become even more successful, with over $20 million in sales in 2003. Weigel has followed in the footsteps of Huber and Lund, sticking to the fundamental values that the company always stood for. “We haven't changed the formula all that much,” Weigel explains, “because the formula that had already been established was successful. We keep ethics and customer service as our center point of values.”

Expansion Into Broader Markets
This stable belief system provides the necessary foundation that has allowed Oxygen Service Company to grow and prosper. One of the company's boldest moves came in 2000, when it acquired Earl's Welding Supply, a small supply house in St. Cloud, Minnesota. The acquisition served a two-pronged strategy. First, it allowed the company to broaden its geographic footprint from solely the Twin Cities market to all of central Minnesota. Second, it gave the company a chance to provide more services to its now wider customer base. Weigel says, “It gave us an opportunity to bring what we had, which was automation technology and primary vendor lines, into a small organization that was suffering from a lack of that. These great employees now have the tools they need to go out and penetrate a larger market.”

President David Weigel

The branch location was quickly indoctrinated into the larger organization. Its name changed to Oxygen Service Company, and the 20 employees are included in the ESOP. (Interestingly, Earl's Welding Supply was itself an ESOP, but is now included in the ESOP of Oxygen Service Company.) This branch recently relocated into a new 20,000 square-foot building in Sauk Rapids, just outside St. Cloud.

Focus on Customer Service
At both Oxygen Service Company locations, customers ranging from large steel fabricators to medical laboratories to oil refineries can expect to receive quality products and services. One advantage of such a variant customer base is that it allows the company to stock a large inventory. “We want to cater to those customers who are searching for that unusual filler metal or any unusual items. When they call Oxygen Service Company, the odds are very high that we will have that item in inventory,” Weigel says. “We can then serve that customer immediately rather than waiting for the item to be delivered.”

Weigel takes pride in his knowledgeable staff that exists to serve all types of customers. The company's sales mix is 70 percent hardgoods and 30 percent gas, but that in no way indicates that they take the gas business lightly. In addition to a gas plant manager with a “wealth of knowledge,” the company employs an analytical chemist who ensures there are no quality or purity problems with any gases it produces. The staff's expertise adds up to a quality rejection rate of cylinders that is “so small as to be a minor fraction of one percent,” Weigel states.

A history of success such as this has encouraged Weigel to look at expanding the company's product lines in recent years. “We are expanding more and more into industrial safety and hardware components. One way to expand while the economy was slow was to take more products to the same customers, but our core business remains our expertise in the welding processes,” Weigel says.

Family Oriented Culture
Another key to the company's success is its low turnover rate. Weigel indicates that the majority of people who were on board when the ESOP was instituted are still around, and most of the former Earl's employees have also remained. “People here are very close. Our culture is one of almost a family orientation. The ESOP pulls people together because everybody is invested in the company and accountable for what is in the ESOP account at the end of the year. It really pulls people together cohesively.”

Oxygen Service Company's main store location in St. Paul

That cohesion is amplified by the effort the company makes to help employees get to know each other outside of the office. A committee plans quarterly family outings like picnics, fishing trips and Minnesota Twins baseball games. “We want employees to get together and know each other away from the company. We want it to be fun to work here so it doesn't become a headache going to work,” Weigel says.

The fun atmosphere does not get in the way of the work that needs to be done, however. “It's an enjoyable place to work, but we still have a job to do and our people do a great job.” Employees have incentive to do a great job because of their stakes in the company. “The ESOP serves as a very strong benefit. Employees have stock in the company, which is a nice financial benefit for a secure retirement.”

The benefits package the company offers is a rarity these days. Oxygen Service Company still pays full medical benefits, including a dental plan and an eyewear plan. The company fully funds GAWDA life insurance at the maximum rate to all employees. At age 55, employees receive an early retirement benefit. Also, employees who choose to seek outside training, such as software courses, are fully reimbursed for that expense. All this on top of competitive salaries and stock in the company makes for an attractive compensation plan.

Tina Schneider greets visitors to Oxygen Service Company's branch store in Sauk Rapids.

With all the company does to ensure its employees remain satisfied, it is no wonder that the firm is so successful. As Weigel notes, “We don't have a human resources department per se. We put our efforts into hiring professionals and retaining that person once he or she is on board.” The benefits and culture go a long way, and the expertise is provided through departmental on-the-job training. The company will also send employees to sales, service and fill plant seminars put on by manufacturers to keep abreast of technology changes.

Using Technology
Technology is an area where Oxygen Service Company really tries to stay current with the latest innovations. One example of its commitment to technology is the implementation of cylinder bar coding in 1997. It has now advanced to the point that 100 percent of cylinders are bar coded, and it greatly enhances efficiency in cylinder tracking. The process is really quite simple. Every cylinder that comes in from a vendor gets a bar code put on it. Then, when it is delivered to a customer, the delivery driver scans the cylinder with his on-board laptop, which downloads the information. When the driver returns to the main office, he transfers the information from his laptop to the mainframe, which then automatically updates the records as to the status of the cylinder. Oxygen Service Company then knows which cylinders have been filled, which ones remain empty, which have been delivered and which have been returned. “It really helps our customers control lost cylinders,” Weigel says. “If there is a theft at a construction site, and somebody attempts to return a stolen cylinder, we can catch that.”

Machine repair can be done either at a customer site or at the service facility in either branch location.

Bar coding also makes it easier for customers to return their empty cylinders. Customers can combine all their cylinder returns into one general receiving area rather than having to keep them separated. Then, as the cylinders get collected from the receiving area, they are scanned and the customer automatically is credited for the return.

Cylinder identification is only one of many technological implementations made by Oxygen Service Company. The company also is making use of Internet technology and the efficiencies it provides. One example is its utilization of Internet telephony to communicate between branches. Voice Over Internet Protocol (VOIP) phones were installed last year, knocking long distance charges down to “almost a complete minimum.” The two locations can reach each other simply by pressing a three-digit extension, even though they are 70 miles apart and in different area codes.

The company is also using the Internet to explore online retailing. The company's Web site, www.oxyserv.com, has an operational e-commerce platform, although it isn't yet a major profit center. Weigel explains, “We carry some business over the Web site, and I think in the future there will be more of that. What will likely happen is existing customers will utilize that as a means for an efficient way to place orders and monitor their deliveries and the status of their inventories. For now, though, it is primarily informational.”

Route trucks allow Oxygen Service Company to service its customers efficiently and quickly.

Oxygen Service Company also uses the Internet to do paperless billing. “We outsource all of our billing and mailing processes. We don't do any of that here anymore. We do imaging of all our delivery tickets and paper processes over the Internet and store them with an outside storage company.”

Welding Automation
Another area of technological expertise on which Oxygen Service Company prides itself is its welding automation. The company's welding automation department sells cutting machines and more sophisticated items, like welding robots. Three technicians have the capability to service welding robots, including one who specializes in programming and repairing welding robots. That individual carries a laptop in his service truck with complete parts information and the ability to do demos at a customer site. Oxygen Service Company's reputation for welding automation often means it gets service calls on equipment it did not sell. “Even if it's not our sale, we will do the service. That's a big part of who we are,” Weigel says.

He sees welding automation as a market segment with great growth potential. “The industry is having a difficult time finding human welders with the necessary technical skills that the jobs require, so they're investing in robots that can give them a more consistent, higher-level weld. It's just a lack of manpower requiring fabricators to take advantage of the efficiencies of technology to remain viable in the competitive global marketplace.”

An increase in welding automation would mean a greater reliance on parts and service, an eventuality for which Oxygen Service Company is prepared. The company recently installed a carousel system for controlling its small parts inventory. The carousel, a computer-controlled conveyor belt layered with bins, contains about 6,000 SKUs that are maintained within a 400-square-foot area. “The reduction of space, impeccable accuracy and stronger inventory control make it a great system,” Weigel explains. “Our order fillers are not wasting steps walking around the warehouse.”

Future
It is clear from all these technological implementations that Weigel is a resolute believer in the promise of technology. “We want to be just on the leading edge of technology, where proven technologies are out there to take advantage of. All these things have helped us become more efficient and less dependent on manpower and square footage. In order to be more efficient in the future, we have to capitalize on the efficiencies of technology.”

The St. Paul delivery fleet stands ready for deployment.

Increased reliance on welding automation and e-commerce are two of the ways Weigel sees technology driving the industry's future. Another is radio frequency identification technology (RFID). He concedes that the bar coding systems used by the company now will eventually be replaced with RFID technology. “We will eventually go that way, but right now we will stay with the traditional bar code labels. We feel there is still some advancement to be made in RFID until it really is a viable technology.”

In addition to continued technological development, Weigel sees some other continued company expansion in the future. “We're poised in a situation seeking additional acquisitions and scratch starts. It is essential for us to move our geography to account for more of the area. Businesses are moving out of the industrial parts of cities and into more rural areas where labor is more abundant and economically priced, so we need to be able to penetrate those markets.”

Weigel is seeing a trend toward offering a wider breadth of products, particularly those related to safety. Growth in gases is a priority, too. “We must expand our ability to mix and manufacture our own gases. I see that as a major growth area,” Weigel emphasizes.

Judging by its recent successes, Oxygen Service Company is ready for the challenge.