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WDI-Special Focus

Norco Inc.

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Solving your inventory problems by getting your product from thin air is every inventory control specialist’s dream, but for Norco Inc., it is reality, although distilling oxygen, nitrogen and argon from the atmosphere admittedly is a “chilling” process. “We’re the only multisourced, completely vertically integrated, independently owned gas business in the United States,” asserts Robert Mohr Gerry, executive vice president of industrial products. “We have two air separation units, which produce the majority of our gas products. They carve out the components of the air we breathe: 78 percent nitrogen, 21 percent oxygen, and about 1 percent argon.”

Norco Inc. has two production facilities, one in Moses Lake in central Washington, and the other in southern Idaho. “We chill atmospheric air and sort it by temperature and weight – each molecule has a certain weight,” Gerry explains. “Then we pull it off in its liquid form and store it in giant vertical or horizontal cryogenic vessels. They’re just big Thermoses. Then we take it through a cryogenic pumping process, where the individual liquids get compressed back to gaseous form and can be placed into steel cylinders.” 

Norco’s major customers are in the medical and industrial markets. The majority of gases that Norco sells are oxygen, nitrogen and argon. They are compressed into a variety of high-pressure cylinders and Dewar vessels – which are named after Sir James Dewar, who invented them in 1892 – in capacities of 230 or 450 liters and at pressures from 200 to 2,500 pounds per square inch.

“The vessels roll around on wheels and are approximately 3 feet in diameter and 5 feet tall and hold a range of products,” Gerry says. “It’s essentially a large stainless Thermos on wheels to contain cryogenic liquids.” The gases need to be kept cold, so the thermal efficiency of the vessels is critical.

Inventory Locations

Norco has more than 65 branch locations in Idaho, Montana, Oregon, Nevada, Utah, Washington and Wyoming. “For a very narrow band of products, we also distribute to Canada and across the rest of the United States,” Gerry says. The gases are stored in liquid form at both production facilities and at about 25 other Norco locations. “We have liquid fill stations and/or cryogenic pumps at those locations,” he says. “We will compress the gas from liquid into gaseous form, as required by the local market, or where the cost of distribution dictates.”

Because Norco produces its own products, it has an advantage over competitors that don’t. “Most of our competitors are at the mercy of a major producer and their distribution and production whims,” Gerry points out. “All we have to pay attention to is the economics of our customer base and internal usage. We operate and maintain air separation units on our own. We’re balancing two major elements of the business: medical and industrial. We want to produce enough product to meet our bulk customers’ needs and all of our internal demand, as well. We also supply some of that bulk product to our competition and some regional partners, large and small.”

Forecasting demand accurately is important when a company produces its own products. “Forecasting is a combination of looking forward at long-term customer trends and changes and at historical sales and volumes,” Gerry says. “We do some forecasting in terms of large opportunities. We also try to contract with our larger customers so we have an idea of our commitments with them in terms of long-term volume. Having working agreements with your trusted partners allows you to forecast well into the future.”

Fortunately, sudden fluctuations in demand are infrequent, unless competing producers have a plant shutdown. “The products that we produce in general – argon, nitrogen oxygen – are pretty stable across the United States,” Gerry maintains. “Argon is the most sensitive and most valuable, and from time to time, there will be a shortage. Because we produce most of our own product, we typically are very lightly affected by those. What those shortages typically do for us is create opportunities. So if other competitors of ours are buying from another major that has a shortage, those customers will contact us, and because we control our own destiny, we typically have enough product.”

Fleet Feat

Norco transports its products with its own vehicles and contract carriers. “It’s a combination, but we very much like to own our own assets wherever possible,” Gerry says. “In terms of bulk transport, it’s our drivers and our tractors and trailers that will pick up at one of our two plants and distribute product directly to our locations in the cryogenic storage vessels that are there, and then go back to the plant to refill. Those direct deliveries are managed by our fleet director, who watches the bulk distribution capacity, loads and driver availability and manages our fleet. He does that for all seven states in terms of bulk delivery. That’s all owned by us.”

In some markets, Norco delivers products in cylinders or to Microbulk containers, depending on a customer’s usage and density. “It’s a much smaller vessel that has a footprint about one-third of a large industrial transport,” Gerry says. In dense areas, refilling customers’ Microbulk storage containers from a vehicle that drives to each location is cost-effective. “It is better to give them a liquid product and have a small liquid vessel at the facility,” Gerry says. “It’s more economical for them and us going through liquid products instead of compressing a gas into cylinders.”

Norco uses software to improve the efficiency of its routing and also cell phone telemetry to alert the company when customers’ bulk storage tanks need be refilled, which may span from daily to monthly. 

The number of company-owned delivery vehicles at each Norco location fluctuates according to the size of its market and customer base, from one or two vehicles to five or six per location. The type of vehicle varies similarly, including smaller box trucks, larger dual-axle ones, flatbed vehicles and tractor-trailers. “Another nice thing about the size of our company is when we need to make a decision on upgrading or growth in terms of adding capacity, we have ownership that is very respectful of the business requirements to invest, to take assets and rolling stock and turn them into revenue,” Gerry declares. “We can make those decisions pretty quickly. A 30-minute conversation can get you new rolling stock. A small company might simply not have the cash to pull the trigger, and a larger company might hinder the action through laborious procedures and approvals, but Norco’s size and opportunity in the market gives us enough financial backing to make those quick decisions.” 

Weekend Work

The air separation plants essentially run 24/7, 365 days a year. The plant in Idaho was built in 2002, and the plant in Washington was built in 2009 and can operate lights-out. “It doesn’t require a fleet of humans running around flipping switches and watching temperature,” Gerry says. “We have a staff that does quality checking throughout the time of production. We have certain things we look for in the produced bulk gases, mainly the existence of smaller molecules which can become sticky to larger ones and get drawn into the sorting tanks. In bulk form, we produce a very pure product, very clean from contaminants and undesired contents.  In cylinder form, we also produce a very pure product, batch-tested or certified, and we scrub for things such as moisture, hydrocarbons or any other disturbances in the gases per Norco standards, industry standards or customer standards, whichever is the highest.”

 Weekend work sometimes is necessary to help customers keep their production proceeding. “As a family owned business, we have the flexibility to really treat the customer as king,” Gerry emphasizes. “With our motto, ‘We serve you better,’ we can deliver on a combination of important elements to the customer including service, value, capabilities, education, price and relationship. In the end, it equates to being a reliable and valuable partner for their businesses. We consider our customers to be lifelong partners in business. We can and do treat the customer a little better – that’s our belief, and that’s what our track record shows since 1968.”