Pentz Design represents a new breed of manufacturer that relies on outmoded technology and discarded equipment to create a state-of-the-art product

Pentz Design is a foundry that can give us a window on some of the changes in the world of business. Using an ancient process, it takes advantage of the marketplace's demand for more specilaized tasks, shorter production runs, and better service. It's a company that probably could not have survived 15 years ago, yet today it's thriving. -- E.O.W.

Down by the water in Seattle where the fishing boats come in sits a functional, low-slung building, home to Alaska Diesel Electric Inc., maker of engines for fishing boats and yachts. At the heart of the building the engines sit, assembled and primed in shiny school-bus yellow, rising like sculpture from the shop floor.

Alaska Diesel relies on a constellation of foundries to cast its engine parts, and the relationship is at times uneasy. Casting hot metal is as much art as science, offering ample room for error and misunderstanding. If a customer decides to go elsewhere, he must often pay for the tooling of a new mold. He must watch painfully as the new foundry struggles to master the inevitable quirks that arise in casting an unfamiliar part. "When you move your pattern to a new foundry, you start the learning curve all over again," says Dick Gee, vice-president and technical director of Alaska Diesel. "Manufacturers hate that. The tendency is to stay where you are."

Nonetheless, two years ago Gee decided he wanted a divorce from the foundry casting the valve covers for his engines. The quality wasn't there. Gee gave the job to a fellow named Larry Pentz, who ran a small foundry across Lake Washington and up in the foothills of the Cascade Range. Pentz, who casts precision aluminum parts in sand molds, had been quietly courting Gee for a year. Gee liked Pentz. He found him bright and straightforward. He was willing to give him a try.

Then the valve covers came back from Pentz, the engine's name crisply raised in block letters across the top. Gee marveled at the effort and all that has followed since from Pentz's shop. "The quality of his work is outstanding," says Gee. "It's art grade, really. It's better than it needs to be. He takes great pains not only with how the part works, but how it looks."

Pentz Design now casts more than half of Alaska Diesel's aluminum parts in a relationship Gee calls "symbiotic." It routinely gets so involved in the development of Alaska Diesel parts it might as well be a subsidiary. In one case Pentz suggested design changes that made the part easier to cast and less prone to failure. In doing so, it saved Gee 35% on tooling costs.

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Larry Pentz, 39, attended the Cleveland Institute of Art, where he studied sculpture and industrial design. For the past 18 years he has been pouring all manner of metals into molds of all shapes and sizes. Pentz is an artisan. Yet, last year, Pentz Design Pattern & Foundry Inc., in Duvall, Wash., did $1.7 million in sales. Its five-year growth rate of 1,266% placed it 215th on the list of INC. 500 companies. Pentz now employs 38 people, and has 60 customers, the bulk of them in high-technology industries such as electronics, medical equipment, and aerospace. His production runs tend to be limited -- as small as one piece -- his service is not. Most foundries cast a part and let the customer take care of the rest. In addition to offering extensive design input, Pentz Design casts, machines, finishes, tests, and inspects virtually all the parts it casts. It is a one-stop shop.

Pentz Design, a company that looks and feels like it belongs in a cottage, has turned into a mainstream success. Mass-production techniques now yield to more specialized tasks, shorter production runs, better service. Flexible specialization, as this trend is called, is characterized by a more collaborative relationship between supplier and customer. Information is shared. The customer does not squeeze his supplier on price, for what he seeks is quality work. The supplier, meanwhile, exploits his own skills. He revives dated techniques and materials, imbuing them again with value.

Two MIT professors, economist Michael Piore and political scientist Charles Sabel, have expounded the concept of flexible specialization in their book The Second Industrial Divide. (See Face-to-Face: "The Second Industrial Revolution," September 1985.) They believe that the industrial economies have saturated the market for mass-produced goods. Most Americans, for instance, have cars, TVs, and stereos -- products that continue to be cranked out of low-cost factories in developing nations.

Manufacturers in developed nations have scrambled to compensate. One means has been through artisanship -- which flourished a century ago, before the first industrial divide, when mass-production techniques took hold. "Manufacturers have been forced to switch to strategies based on product differentiation and innovation," says Sabel. "As product cycles have shortened and the pace of technological development has picked up, even the largest firms have found they have to collaborate with expert suppliers to design and manufacture crucial sub-assemblies and components." The rush to differentiation and collaboration is happening in virtually every industry, "from autos to apparel," says Sabel.

Sabel and Piore foresee no letup in this trend. Markets, they believe, will grow increasingly fragmented, demand more specific -- the need to outsource work to expert suppliers will become ever-more urgent.

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Larry Pentz is a laconic sort, given to quiet utterings and occasional flashes of a bone-dry sense of humor. Move him down amid the hum and heat of the shop floor, though, and the man comes alive. Here Pentz can't keep his hands off things: neatly poured parts, machine tools bought at auction and rebuilt.

Pentz Design at its most elemental can be found over against a far wall in the foundry. That is where mounds of sand, dark in color, chalky in texture, rise from the floor. "This is our lifeblood," says Pentz. "For us sand is a living, breathing thing."

Pentz talks eagerly about the stuff -- its moisture content, degree of aeration, and percentage of clay. The clay is a mix of western and southern bentonite -- one to resist heat, the other to prevent lumps. Clay binds the sand together, but after substantial use it breaks down. Dead clay, says Pentz, is a marker for fines in the sand -- sand disintegrating into dust. "Fines can really screw us up." Fines lead to porous molds, weak castings. Every two weeks the foundry runs 40 different tests on the sand to ensure it is within specification.

The sand comes off the foundry floor and goes into a machine called a muller, a boxy sheet-metal contraption reminiscent in shape of a combine. "Mullers are strange things," says Pentz fondly, as though he were describing a quirky old car he could never junk. Around this one there wafts a faintly yeasty odor. "You know when you knead dough you're not exactly mixing it. Well, that's what the muller is doing with the sand. When it comes out, it's like dough. It's no longer dry and it's no longer sticky. It's nice and fluffy, all the lumps are gone. It's beautiful." This muller, unlike other models, kneads the sand in two stages. That's why Pentz knew he had to have it. New, it costs $50,000. Pentz tracked this one down one at an auction in Winnipeg. He paid $10,000, plus $1,500 to have it trucked to the foundry.

The sand comes out of the muller and, kneaded just so, rises overhead in buckets to be carried by conveyor across the ceiling to a line of hoppers. Out of the hoppers it falls into wooden forms to be packed by workers around the molds inside. When sand overflows the forms, they go into the molding machines, which come down hard with a furious pneumatic hissing, compacting the sand tight around the mold. Pentz has six molding machines, some of which retail new for up to $37,000. He didn't pay more than $4,500 for any one machine. One he got for $120.

In the past 20 years many American foundries, beset by foreign competition and starved for capital, have died. That has left many idle machines waiting for people like Larry Pentz to come along and make them whole again. The artisan in the second industrial divide, believe Sabel and Piore, possesses great restorative power. He resurrects what the mass economy has long since thrown away. He revives, as Chuck Sabel puts it, "devalued assets."

Today's artisan resurrects more than old machines. He also revives old materials and dated techniques. Pentz Design works in aluminum, a metal that plastic threatened to displace 20 years ago. But lately aluminum has been rediscovered. In an era of high-cost energy, aluminum has often become a lightweight replacement for iron. In an era of high technology, electronic machinery requires adequate shielding from high-frequency noise. Plastic isn't a very good sound insulator. Aluminum is.

Pentz bought one of his furnaces for two-thirds off the going price. The other he built from scratch to his own specifications. The furnaces are electric resistance, not gas. Many foundries make the mistake of using gas, says Pentz. Gas furnaces produce hydrogen, which creates bubbles in the aluminum. Pentz devised his own degassing system, which injects nitrogen into the aluminum to bond with the hydrogen and render it inert. He also developed his own hydrogen-detection system.

Pentz is finicky about keeping the right mix of alloys in the aluminum. Many foundries, he claims, "just melt the aluminum." He adds extra steps to the process, modifying the metal with strontium and titanium boron. He avoids recycled aluminum, knowing it is contaminated with iron.

Pentz's metallurgical education has been an informal one, conducted largely at the shop around the open hearth. He reads trade and academic journals, much of which he passes on as mandatory reading for his foundrymen. "I train them and they train one another." Classes are held one night every other week; ideas are exchanged. "I'm finding now that I learn as much from employees as they do from me," says Pentz. His approach, he says, adds up to "a lot of trial and error."

One customer came to Pentz with a truck scale that kept breaking at 17,000 pounds of pressure. Pentz did research, noting a type of alloy that would make it stronger. The scale he cast broke at 80,000 pounds. "The customer was hoping for a 10% improvement," says Pentz matter-of-factly. "We gave them almost 500%."

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The Chinese invented sand casting 2,500 years ago. Twentieth-century Americans consider the process a dying art. Though their respective applications often do not overlap, sand casting in the past 30 years has been partially superseded by die-cast and injection molding. By those methods molten material is not poured but rather is injected at high pressure into a mold.

The disadvantages of sand casting are clear. Quality varies and the cost per part is high. It demands both dedication and skill.

Conversely, if mastered, sand casting offers compelling advantages: economy, flexibility, and speed. A sand-cast mold costs 5% to 10% what a die-cast or injection mold costs. (A complex injection mold can cost as much as $200,000.) It makes limited runs affordable. Customers can afford to test various configurations of a part because a sand-cast mold can be easily and inexpensively altered while the other molds cannot. To make a change in a die-cast or injection mold usually requires starting over. That is very expensive. Finally, with sand casting a part can move from conception to market in one month. With the other methods it takes six months.

In the artisan's economy, quality assumes more textured meaning than just doing a good job. "Quality really means coming up with creative solutions, not just fewer defective parts," says Michael Piore. "Quality comes from allowing a supplier to stretch his imagination. To do that, a supplier needs to work with a lot of different people. If he is a captive supplier, he's not likely to have as much insight."

A number of Pentz's customers are bunched in the same industries. They manufacture everything from swimming-pool ladders to aircraft parts at tolerances finer than a human hair. Pentz has design input on virtually all the parts it casts. "Sometimes a new customer will tell us they want us to make a box," says Pentz general manager Stewart DeOme. "That's not the way we do business. My first question to them is, What's the function? We like to look at the whole picture. The better we understand what they want us to build, the better job we can do for them."

Pentz's high-tech customers need to get their products out on the market fast, because the life cycles of their products have been continually shortened in recent years, says DeOme. Pentz can respond, changing drawings and patterns in a day, if necessary, thanks to a recently installed CAD/CAM system, getting a product to market within a month after its final conception. It can also respond at any level of demand. Says Pentz: "I was asked by one customer, 'At what volume does it become uneconomic for you to cast a part?' I told him, 'Less than one.' " Pentz has one customer for whom he made a mold, and then cast all of two parts.

One of Pentz Design's challenges is to convince customers that sand casting is not as dated and low tech as many perceive. Bill Hunt, chairman of Huntron Inc., of Mill Creek, Wash., made that leap of faith. Huntron makes machines that test solid-state circuitry; precision is vital. He heard about Pentz and thought he'd give sand casting a shot. "I was dubious. I didn't believe he could do it." Then the first casting came back. It met the specifications. "The castings since then have been incredible," says Hunt. "The foundries I know of around here haven't come close to what he's doing."

By now, Pentz has grown used to getting calls from desperate and disgruntled companies looking for higher quality. "They usually spend the first 10 minutes telling me their horror stories."

A medical electronics company came to Pentz with a flawed casting. Pentz quoted it $24 for each piece. "I asked them, 'Am I in the ballpark?' They said, 'Yeah, you're close.' " When he got the mold, Pentz noticed it lacked several features that the cast part had. Where was that? Oh, said the customer, we had that machined in afterward -- for $85 apiece. Pentz was amused. His bid was for a casting that included those features. No machining was needed. He was proposing to save the customer $85 per part.

Pentz's largest customer is Intermec Corp., a maker of bar-code equipment in Everett, Wash. Intermec came to Pentz with a part machined from a piece of aluminum at a cost of about $75. Recalls Intermec's Darryl Carver, an industrial designer: "I suggested, 'Why don't we try sand casting?' Everybody said, 'No one can do what we want." Pentz gave them a sand-cast part at $30. Impressed, Intermec started turning over more intricate pieces to Pentz -- to be made by the supposedly cruder method of sand casting. After Intermec, renowned for its exacting standards, signed on with Pentz Design, the company's sales jumped by 500% in one year.

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Pentz Design may turn out flawless castings, and Larry Pentz may have a knack for fixing any machine he can get his hands on, but now there has come this inevitable problem of growth. Much of the value an artisan brings to his company is invested in himself. Its limits are defined by his skill and energy. What happens when sales rise 500% in one year? What happens when the energy is tapped out, when skill is stretched thin?

It is late on a February day, and Larry Pentz is sitting at his desk, the winter darkness outside having long since gathered. Pentz draws a breath and says, "I've hardly been able to keep it together. I've bitten off a lot, and it's come back to bite me. I've created a monster."

Pentz goes over to his drafting table nearby and retrieves a large piece of paper on which he has neatly charted financial data. In December 1989 accounts receivable jumped to $278,000, and that same month Pentz maxed out its line of credit at $150,000.

What options does Pentz have to ensure the company a future -- when every choice now seems to carry obvious risk?

One choice is to keep the company growing. Pentz sees that as almost inevitable. In fact, he welcomes the prospect because he sees it as a way out of the cash-flow bind. His customers, though, are leery. "He has to be careful about taking on more of a workload," says Alaska Diesel's Dick Gee. "Those of us who were in early with him want to be sure he maintains the quality and the delivery time."

One way to solve the growth issue is to make a second and logical choice -- hire more skilled and dedicated people. But how available are those people? Pentz's latest hire, CAD operator Lance Wheeler, closed down his shop because he couldn't find enough qualified workers. Michael Ochoa, founder and president of Precision Technology Inc., in nearby Woodinville, a machine shop that does finishing work on some of Pentz's parts, adds: "What Larry does is almost a lost art. People of the quality Larry needs are people who have their own businesses. And if they don't, they should."

Even if Pentz does find the right people, others wonder if he can make another necessary choice -- delegate. "I'm not sure that's possible, given his personality," says Intermec's Carver. Carver says Pentz is obsessive about his work; stepping back is not in his nature. "It may take some external force to get him to step back. Larry might even have to work himself into a health problem before he changes his ways."

Now and again, Pentz considers the ultimate choice -- selling the business and devoting himself to sculpture. His customers dread that prospect. "That's the kind of thing that makes you wake up in the night in a cold sweat," says Dick Gee. On the other hand, no one is losing sleep just yet. Larry Pentz, they believe, senses what they see. Pentz has created value by being there. He is not the type to walk away and watch that value diminish.

"I know that if I had stock in his company and suddenly Larry wasn't there, it would be worth much less," says Carver. "I think his knowledge is transferable, but the energy, dedication, and sense of customer contact he brings to the business is not." Pentz Design, for better or worse, has become simply an expression of Pentz himself. It is a one-of-a-kind creation -- not mass produced. An artisan company. The uniqueness that limits Pentz Design's future may also ensure it.