Scotchman Industries: A leader in rural manufacturing
For a business that started out over 50 years ago as a junk yard, Scotchman Industries has come a long way to become an employer of eighty people in the small Western South Dakota town of Philip. With sales in the metal industry now in 38-40 different countries, you might wonder why the company chooses to base its headquarters in such a rural area.
Art Kroetch, founder of Scotchman, started out fixing farm implements in the 1950-60’s. His first invention to make it big was the cattle oiler, built to keep flies off cattle in summer pastures. From there, Art ventured out and bought the patent on a 30-ton hydraulic iron worker in 1966. That purchase propelled the business toward the success it is today.
After Art’s death, his son, Jerry Kroetch, took the reins on Scotchman Industries. Jerry’s wife and two children all work in various roles of the business, too. Jerry says the family has never considered moving the company out of Philip. Philip is home, and Jerry has been a part of the community and the company for thirty-nine years, working in every aspect of the business from his early school-age years.
Products & Specialties
The products that come out of Scotchman are very unique to the metal industry. Workers build thirteen different iron workers that weigh anywhere from 45 – 150 tons, and are sold to anyone from individual farmers and ranchers to large metal working companies. While the iron worker is their main product, Scotchman also makes a circular cold saw that is only made in two other US plants, and a manual measuring system for metal working. There are two other products that are made for Scotchman in Europe, an aluminum cutter and a pipe notcher. They are labeled with Scotchman’s logo, and imported for sale.
With such specialty products being produced, you might think Scotchman would have a hard time finding the right skills in people from Western South Dakota. Jerry says it is just the opposite – the right people ARE in Western South Dakota, and it’s the great workers he is able to employ that make the business successful. He points to worker pride, the ability to use their head and hands, and the excellent work ethic that often comes from those who have been raised on a ranch or in a small rural community. Scotchman boasts of very low turnover, with an average tenure of 12-15 years for employees.
The community of Philip definitely gains economic impact from Scotchman Industries. With a work force of eighty people, they are the largest manufacturer outside of Rapid City and Spearfish in Western South Dakota. The tax revenue generated by their sales and purchases benefits both the community and the state. In 2015 alone, Scotchman spent $1.7 million in new equipment. And while the business did slow down during the 2008 economic downturn, it has rebounded to have its two best years in 2014 and 2015.
The only positions not full-time at Scotchman are two part-time janitorial jobs. Full-time workers begin their day at 5:00 a.m., with the shift ending at 3:30 pm. They work ten-hour days, and then set the machines to keep working throughout the night. Employees specialize at each stage of the highly mechanized processing. From laser cutting with a computerized system, to “baking” the metal parts to give them strength, to painting and packaging with mechanical arms, each employee knows the piece of the product they are responsible for must be done well. Quality control workers visit each station at any time, and keep records of ways they might be more efficient or make the job easier in the future.
Challenges & Opportunities
While a manufacturing business like Scotchman might not be so unique in a large city, it is very rare in a town of 800 people like Philip. There are challenges, such as finding managers with engineering degrees that want to live in a rural area, and having to truck in raw materials from Minneapolis, MN. There are a wide range of supporting services like shipping and packaging that are all located away from South Dakota due to the lack of availability here. Some of those supporting services may be opportunities for the right investor.
Opportunities in Philip and other rural locations do seem to be drawing young families back. Jerry has seen alumni of Philip making the decision to “come home.” “We have recruited several alumni to Scotchman. People who have grown up here are choosing to move back as long as they can make a good living, and have quality family time. Scotchman works hard to give employees a decent wage, plus benefits, flex-time and company stock,” says Kroetch.
Community members like Mary Burnett, manager of First National Insurance Agency in Philip, reinforce Scotchman’s commitment to Philip. “When the town’s bowling alley had to close due to retiring owners, the couple who wanted to purchase the business couldn’t come up with the money. Jerry Kroetch stepped up to the challenge, and Scotchman bought the bowling alley and financed it back to the young couple,” says Burnett. “Scotchman holds the note because keeping the bowling alley open was important to the Kroetch’s and to the community.”
Another entity that benefits from Scotchman is the local high school. The company donated greatly to the new Fine Arts Center, and often gifts machines to the shop classes. Jerry says his payback for the shop class gifts is familiarizing local students with the job opportunities available right in their hometown.
Scotchman’s approach to staying rural and using local workers has benefited both the Philip community and the business itself. Kroetch says it all boils down to the workers. Continually trying to create a family-friendly environment and putting together a fair wage package for them is a short-term goal. Watching Philip prosper and seeing young people move back are the long-term benefits.