2007 Editorial Board Roundtable
June 14, 2007
By Mary Del
WANTED – Manufacturing strategy
Manufacturing AUTOMATION‘s editorial advisory board got together for our second annual roundtable meeting at our office in Aurora, Ont., this summer. The purpose: to discuss trends and challenges in the industrial automation industry.
During last year’s discussion, Canadian productivity emerged as the biggest challenge facing the manufacturing industry. This encompassed the skilled trades shortage, training and technology challenges, and the Canadian economy. It’s one year later, and time has not healed these wounds. The challenges faced by manufacturers have multiplied, and what’s really needed, according to our board members, is a strong Canadian manufacturing strategy.
It was a rainy day in mid July, and our six board members made the hike to Aurora for a meeting to discuss what has been on everyone’s minds for the past year: How can Canadian manufacturers adapt to a new manufacturing reality plagued by mounting challenges? How can they survive in this changing landscape?
All of the board members agree that a national manufacturing strategy needs to be developed; one that considers long-term solutions to all of the ailments facing Canadian manufacturers, including globalization, a rising Canadian dollar, increased competition, rising costs and changing demographics.
What should this manufacturing strategy include? What is needed to develop it? Our board members tackled these questions and more during our lively, two-hour discussion.
A strong national manufacturing strategy that considers globalization is clearly missing, according to Duncan Curd, manager, automation business at Siemens Canada. “Canadian manufacturing is not working on a global basis. Primarily it’s working with the U.S. and domestic [markets].”
But, he adds that the high Canadian dollar is going to impact trade with the U.S. and push manufacturers to start to think globally. “I’m hearing now from a number of customers that they are considering trade with Europe because it will be a more equal trade level because of the Canadian dollar versus the U.S. dollar.”
“We need to be more outwardly globally thinking. And that requires us to think a lot bigger than we have in the past,” says Sherman Lang, group leader of reconfigurable manufacturing at the National Research Council’s Integrated Manufacturing Technologies Institute.
And that’s the real hurdle, according to Trevor Jones, president of the Robotic Industries Association, and director of OEM business development for Thermo Electron Corporation. “Canadians, as much as we think that we’re very internationally flavoured, which I think we are, in the end, as a country we look very much within ourselves,” says Jones. “We don’t stretch the global bounds. And that is a mindset of a protectionist view. So I’m very concerned about that kind of position.”
Jones says that globally benchmarking your business is key to the success of a company in today’s manufacturing environment. “Find the best people, wherever they are in the world, and go and find out how they do it. And use that as a relative measure for whether you think your business is running well or not,” he says. “So much opportunity can be missed if you don’t take the blinders off and see how other people try to solve the same problem.”
Cheryl Jensen, vice-president of technology, apprenticeship and corporate training at Mohawk College of Applied Arts and Technology, agrees. “We tend to look amongst ourselves for solutions,” she says, adding that students need to be taught to think globally. “I think that it’s the responsibility of educators to start instilling that kind of inspiration to young people.”
A global strategy should also encourage international placements for students, says Curd. “I know from a European perspective that Siemens has interns from Germany going globally, and yet we try to get some interns from Canada to go to Germany, and we just picked two candidates, but there were very few people to choose from who were interested to apprentice in another country and also willing to learn the language.”
Innovation is key
The Conference Board of Canada recently released a national report card in which Canada earned a “D” in innovation because of its poor record for developing and exploiting new products, processes and services. It is no surprise, then, that our board members pointed to innovation as an area for improvement, suggesting that a Canadian manufacturing strategy should include a plan for innovation.
“For me, telling people what to build isn’t so much the point,” says Jones. “Identifying the need to build something profitably is for me a sufficient strategy when it comes to a manufacturing strategy.”
Mass production, says Jensen, has moved to places like China and India. And because of that, Canada needs to develop a new strategy. “If we can capture the niche products, the niche manufacturing, the sophisticated tooling that’s needed for our manufacturing, for example, maybe that’s where the innovation piece could fill in the gap for Canada. Maybe that’s where we should look at focusing instead of trying to capture back some of that manufacturing that has left and maybe belongs in a different environment.”
In fact, colleges are now being looked to for innovation creation; something that used to be considered a university mandate. “Colleges are now being challenged to look at technology transfer, that innovative application of pure research or a technical problem at a company and help solve those problems and invent things at the college level with our students who are very practically oriented. [They] can look at something from a different angle and come up with some very good ideas,” says Jensen.
But how do you inspire innovation? It’s up to the educators, she says. McMaster University, for example, has a master’s of innovation and entrepreneurship graduate program for engineers. The idea behind the course, Jensen explains, is to teach students to look at a need or pain in the industry or community, and invent a product that will solve that pain.
“I think we as educators have to put that innovation and entrepreneurship/citizenship model as best we can into our curriculum,” she says.
Bill Valedis, president of Imperial Automation Technologies Inc., agrees. “We need to excite the young people with how the widget is made. And we don’t seem to be doing enough at an early stage of the game. And so we breed users or consumers rather than thinkers and innovators,” he says. “So it is in the hands of educators.”
Innovation is indeed the key to the success of Canada’s manufacturing industry. And Canada is seeing innovation, says Curd, but the problem is that many manufacturers aren’t using it. “There’s a significant amount of innovation in terms of automation equipment. But what’s behind the innovation, the hardware, still requires somebody to utilize a particular functionality…There are a lot of things that can benefit manufacturing, but [manufacturers] are failing to utilize those because they’re looking for the bottom line.”
Don Mahony, automation business development manager at Schneider Electric Inc., agrees. “I don’t think our current manufacturing personnel are using these wonderful machines that we can produce for automation.”
It all comes back to education. Investing in education will go a long way towards fostering innovation, says Lang, since universities are great drivers of innovation for the regions where they are located. Investing in educational institutions will have a great impact on neighbouring communities.
Jones says that Canada needs technology clusters to inspire innovation and growth in communities. He points to the startups that surround MIT in the Boston, Mass., area, and the technology triangle in Ontario’s Cambridge-Kitchener-Waterloo area, which is designed to attract innovative businesses and investment, as examples. “I think they’ve done a tremendous job there of fostering [an] environment for growth. And I’m thinking really of those things as being the future,” he says.
Encouraging innovation at the college and university levels is one thing, but fostering innovation in companies that already exist has its own set of challenges. “There is still this divide and therefore I think there is this challenge of the IT department versus the shop floor,” says Curd. “Because I think while there is a turf war going on, or a lack of understanding, it’s really hampering the adoption of technology. So innovation is there, but it’s not being adopted.
“I know of cases of people putting in industrial Ethernet backbones but renaming them so that the IT department doesn’t find out. Or not adopting it because it would fall under the IT department and all of a sudden there would be a host of problems,” Curd continues. “That intersection of IT and automation or manufacturing engineering, that is a gap right now. It’s a roadblock.”
Show me the money
Investment, specifically in research and development, is also needed to drive innovation.
“I think that manufacturing is under stress right now because, quite frankly, money can flow anywhere, and right now money is flowing anywhere but manufacturing,” explains Jones. “Will that ebb and flow change? Probably…Will that happen in five years? Probably not. So I think that manufacturing is in a cyclical slump.”
“The government is funding a lot of R&D,” says Lang, “but there isn’t a focused investment strategy for manufacturing.”
And it’s the small companies who are suffering, he says. “The high Canadian dollar is certainly going to push some companies over the edge, but that’s going to lead to more consolidation within the industry. And I think that might be a good thing as far as investment in R&D goes, because the smaller companies really don’t have the physical capacity to make that investment.”
Valedis says that investment is what’s needed to survive. “I see that we are squeezing the bottom line unfairly,” he explains. “If you keep squeezing the bottom line without taking a proportion of that bottom line expense and investing it, I think that’s a dangerous downward spiral that we have put ourselves into…We’re trying to get every ounce of beetle juice we can from the bottom without having anything more to invest at the top. It’s dangerous.”
Foreign ownership and its impact on R&D in Canada worries Mahony. “There’s no research and development to suit Canada’s needs,” he says. “Where does the R&D take place? Not in Canada. It takes place in the U.S. and it takes place in such a way not to suit Canada, to suit the U.S. or England or wherever. If you look at what’s happening in our resource industry, more and more of that [ownership] is going outside of Canada. So the decisions that are going to be made are not going to benefit Canada, they’re going to benefit taking the money out of Canada.”
Don’t forget about the skilled trades
Any sort of strategy would have to include a long-term plan for the skilled trades, the board members say.
Mahony says the biggest problem is the aging workforce and the fact that many companies aren’t accepting students from two- and three-year programs because the co-op terms are not long enough.
Curd agrees, suggesting that longer co-op terms are necessary so that students can provide value to the company during their internship and gain experience at the same time.
The Canadian economy experienced difficult times in the 1980s and 1990s, says Jensen, resulting in job cuts. And because of that, there’s a big gap in knowledge transfer between the older generation and the young people coming out of college and university. “The challenge now, without a manufacturing strategy, is how do you mentor? Even when you get these young people through a co-op and they start into their career, who mentors those people?”
But, she says, the number of people in the skilled trades set to retire means there is a huge opportunity for the younger generation. “I’ve been with the college for 23 years, so I can watch what’s happening with the industry both from the obvious closing of the plants, but also on statistics for the hiring of our grads,” explains Jensen. “I would say the big difference I have seen in this cycle, which gives me great hope, is that our students are still getting co-op jobs and they’re still getting full-time jobs. If I look back to the mid-90s or the late ’80s, students were volunteering because they couldn’t get a paid co-op.
“That gives Canada a huge opportunity right now to remain productive in terms of employing our young people, and figure out what our manufacturing strategy is for the next 10 years,” Jensen adds. “It’s a great opportunity. Whereas before we were really in a survival mode most of the time.”
“I think a manufacturing strategy is off the radar at the highest level,” says Jones. “I really don’t see anything driving any strategy for manufacturing…When money can flow anywhere – and that’s the reality of the free country that we live in – what greater power takes over and allows a 25-year planning horizon to replace a three-month planning horizon?”
The board members agree that leadership is what is lacking – leadership from the government and leadership from companies.
“When the money is flowing everywhere and you are in a slump and you’re trying to play catch up by exhausting the bottom line, training and reducing, you’re in a reactive mode. You’re reacting to the trends in the market. Let me tell you, it doesn’t leave much room for being creative and thinking forward without any guidance from anyone,” says Valedis.
“Competition is what drives excellence. And I think that what we need is leadership, which drives the competitive spirit – competition within Canada, competition globally,” explains Jones.
“The country has got to stand up for what it wants to do over generations, not between campaigns,” he adds. “If the people who are influential in this country want to make a difference, then there’s all sorts of decisions that can be made at very high levels that will drive long-term thinking.”
It’s easy to point the finger at government officials, but Jones says the onus doesn’t rest solely with Ottawa. “At some point, reasonable business people look at their business and make a fundamental decision as to whether or not they specialize – become the best at what they know how to do – or whether they realize that that game is over and they have to go from making door handles to oil pumps.”
It is up to manufacturers to become more flexible and adapt to the changing environment. Curd says he sees some companies being proactive in this area.
“I am seeing companies adapting [and] looking at new market opportunities. That’s a positive. And that suggests that they have the capability to adapt. And I think in the future economy it will be about speed to market; it will be about the ability to adapt. As a manufacturer, you may no longer just be producing automotive parts; you may be producing parts for network cabling. It’s quite possible that we’ll see that requirement for diversity, being very quick and being very flexible,” says Curd.
Jensen says that manufacturers should be able to look to industry associations for leadership. “A lot of the growth in Canada is in small [and] medium-sized companies. They are looking every day at the bottom line and they don’t have the resources or the time to do that forecasting out to the next generation. An association can help small companies.”
Food for thought
There is a light at the end of the tunnel, according to the board members. Canadian manufacturers need to take action now, develop a long-term strategy for their companies and encourage a national manufacturing strategy. Most importantly, says Jensen, persistence is needed. Manufacturers need to believe in their industry.
“We can’t give up on a manufacturing economy in Canada,” she says. “Manufacturing is key to a very vibrant, successful economy, and if we want to maintain our standard of living for generations, we need to find a way to make our manufacturing economy successful.”