When It Comes To Customer Service, Paragon Continues To Raise The (Steel) Bar

By Chad Greene
Staff Writer, Long Beach Business Journal

     This article appeared in the May 24, 2005 issue of the Long Beach Business Journal, an issue devoted to the corporate makeup of the city of Long Beach. We were surprised and flattered that the LBBJ was so complimentary and, of course, very accurate. And we thought, 'Wow, we couldn't have said it better ourselves.' So here it is reprinted with only minor editing for length.

Paragon Steel President Doug Carpenter, left, and Vice President/CFO Jim Stavis at the firm’s Long Beach headquarters.

     If you’re determined to forge a new type of steel distribution company, one dedicated to achieving higher levels of customer satisfaction, who better to partner with than a former customer. That’s the choice Doug Carpenter made in 1988, when he co-founded Paragon Steel with Jim Stavis.
      “Jim was a customer of mine,” Carpenter reveals with a smile.
      After 16 years at the helm of a firm that manufactured automotive products, Stavis had decided that he was ready for a change, but wasn’t sure which direction to take until he sat down for lunch with Carpenter, his former steel vendor.
      “I said that I was looking to start another business, and he said, ‘ Well, that’s interesting, because I’m looking to start up my own steel company,’” recalls Stavis, now Paragon’s vice president and CFO. “Doug had steelindustry knowledge and an active customer base. A lot of my background was in marketing, and I had done all the purchases [at my previous firm], so I had a perspective on what it was like on the other side of that desk.”      That combined understanding of both sides of a transaction tempered Carpenter and Stavis’ drive to make steel distribution a more customer-driven business.
      “A lot of the things that we kind of started were founded in what a customer would like to see in a steel distributor,” Stavis says. “That’s really what we focused on very much from the beginning: how to satisfy a customer’s expectations.”
      At the time, Carpenter and Stavis say, this was something of a novel concept.

     “Back when we started in ’88, there really wasn’t – in our industry – an emphasis on service. It was really influenced by the vendor’s rules, not the customer’s rules,” says Carpenter, Paragon’s president and CEO. “So we were able to differentiate ourselves pretty quickly.”
      “When we started, the levels of service that we were providing were quite unique,” Stavis says. “But our competitors began to move into those areas, so it wasn’t as unique anymore. We used to pride ourselves on being able to deliver to somebody the next day, which at that time was highly unusual, but now steel companies can not only deliver next day, they can also deliver the same day. So we had to expand the service model to provide new services that would add value to that which we were already providing.”
      About five years after founding Paragon, Carpenter and Stavis decided to launch a fabrication division offering an array of production services such as stamping, blanking, forming, punching, plate bending, welding and angle rolling. The division has a strong focus on the construction field and the fabrication of engineered parts. In recent years, Paragon has built everything from the steel-framed VIP Tunnel at the upscale waterfront venue V20 to the stainless-steel ducting for an exhaust has pipeline at the THUMS Long Beach power plant on Pier D.
      “It was mainly customer-driven,” Carpenter says of the creation of the fabrication division, “with customers coming to us and asking us if we could help them with some more services.”
      The division has grown to the point that Paragon now has as many employees working at its fabrication facility in Placentia as it does in its Long Beach offices. The company employs additional workers at its warehouse in the City of Commerce, where it recently opened a processing shop with equipment designed to augment the existing capabilities of the Placentia plant.
      “Our company, when we started, was just four people. We were located over Quinn’s Pub in Belmont Shore,” Carpenter recalls with a chuckle. “We couldn’t operate one St. Patrick’s Day, ‘cause Quinn’s Pub was so noisy we couldn’t talk on the phone.”
      Paragon’s offices have moved several times since then, but never past the city limits. They are currently located on Santa Fe Avenue near the 405 Freeway. “Long Beach has been very good to us,” Carpenter says. “We’ve made a conscious effort when we’ve moved to stay within the City of Long Beach.”

FLEXIBILITY KEY IN A MALLEABLE MARKETPLACE

     Because steel is a commodity, Paragon faces a market every bit as malleable as molten metal. In such an environment, Stavis and Carpenter agree that flexibility is the key to, not only surviving but also thriving.
      The price of steel increased by over 30 percent in 2004, allowing Paragon to ring up about $25 million in sales and eclipse the $20-million mark for the second year in a row.
      Because prices were inflating last year, they had to carry a larger inventory than normal to protect themselves from rising costs. “Prices have now receded, so you don’t want to be caught with too much high-priced steel on your floor,” Stavis says. “So, we’re being a little more conservative inventory-wise, in 2005 than we were in 2004.”
     “Because we have a broad base of products, we’re not limited just to beams or to sheets,” Stavis explains. “Many of our competitors are focused strictly on one area, and if that area drops off, they have nothing else to turn to. We can shift in and out of markets.”
      Still, Carpenter and Stavis’ primary focus isn’t on the price of steel, but the added value they can provide for their customers. “You have to be sensitive to price, because that’s always there,” Stavis says. “But a lot of our success has been created by the added value that we provide, so we try not to be overly priced-focused.”
     “In a rising market, often times we’ll negotiate a flat price with a mill and offer our customers some protection from that,” Carpenter says.