Studies & Reports
A whole new world
Four years ago, the members of Manufacturing AUTOMATION’s editorial advisory board convened for their annual discussion on the state of manufacturing. While the board members tried to remain positive, it became increasingly clear that optimism wasn’t easy to come by.
The darkening of the economy and the so-called “great recession” of 2008-09 was taking its toll on Canadian manufacturers. The automotive industry, in particular, was hurting and no one knew when the downward spiral might end.
Fast-forward to today and the landscape isn’t nearly as bleak for Canadian manufacturers.
“Three, four years ago we were cautious,” says Al Diggins, president and general manager of the Excellence in Manufacturing Consortium. “Then we were cautiously optimistic. Now, we’re just optimistic.”
That optimism was prevalent throughout the editorial advisory board’s annual meeting that took place in April at Manufacturing AUTOMATION’s Aurora, Ont. office. If there was one thing board members could agree upon, it’s that growth—any growth, no matter how small—is still growth, and is a sign that manufacturing in Canada is picking up.
“It’s in a very slow motion recovery,” says Sherman Lang, industrial technology advisor with the National Research Council’s Industrial Research Assistance Program. “There are some sectors that seem to have recovered nicely.”
But if you’re waiting for manufacturing to go back to “normal” or the way things were, forget about it. “Those manufacturers who accepted the status quo are gone,” says Diggins. “The status quo just won’t do anymore.”
“Those are the same guys waiting for the government to impose tariffs so the dollar can go back to 65 cents (to the U.S. dollar),” agrees David Green, a technology and business-to-business marketing professional. “It’s not going to happen.”
The world has changed since the recession and so has manufacturing. Instead of lamenting it, manufacturers need to focus on becoming a bigger part of the global supply chain, finding and retraining staff and collaborating with all levels of government, academia and, indeed, each other to succeed.
Accepting the reality of the global village
One of the biggest buzzwords in manufacturing these days is “reshoring,” or the idea that manufacturing is coming back to North America. And while there is some truth to it, our board members were hesitant to declare “reshoring” a reality.
“It is happening,” says Diggins, “but I think it’s happening more in the United States than it is here.”
“I see trickles of that effect of bringing it back on a very small scale,” says Bill Valedis, vice president of Precision Training Products & Services Inc.
The problem is that while some of the investment is coming back to North America, much of the work is going to the U.S. and Mexico.
“It’s a bit worrying that we don’t see much in terms of the assembly plant investment in Canada,” says Lang. “It’s all going down to the U.S. and Mexico. We’re at the point now where Mexico ships almost two-and-a-half times more parts to the U.S. than we do. Canadian manufacturers have to follow growth if they want to expand their business.”
It’s almost past time to start looking outside traditional markets in Canada and the U.S. and find a spot in the global supply chain, adds Green. “You’ve got to compete,” he says. “Where do you add value around the world?”
“Global competition is becoming more and more paramount,” agrees Diggins. “I’m always amazed at the number of manufacturers in Canada that do not export, even when export creates more wealth. I don’t understand why. A lot of them are working very hard at it, and the government is doing a good job with various funding programs.”
But growth in overseas markets doesn’t equate to getting cheap parts made overseas, he adds. We’ve all heard horror stories of Canadian companies going over to China, meeting with a manufacturer and touring what appears to be a nice facility, only to have quality drop off after a few weeks.
Instead, it’s about looking at what business you are in and where you can add value to a global market. Start by defining your business, Green says, and look for the opportunities there.
“It’s all about reinventing,” Green says. “What business am I in? What business could I be in? Where is the opportunity and what could we do? Where is there a missing piece of that value chain? Where are the opportunities?
“Some 70 per cent of our exports are U.S. bound,” he adds. “That’s going to have to change, because if we don’t change and the U.S. isn’t going to change, then China is going to take our business.”
Certainly one of the biggest trends is the advancement of manufacturing in China, India and other Southeast Asian countries. No longer content to compete on price alone, these countries are really upping their game when it comes to best practices and improved processes. And that may translate into more competition, as opposed to reshoring.
“We shouldn’t be sitting back and saying, ‘Oh, now we’ll get manufacturing back so everything is back to normal,’” Green says, “because it isn’t.”
Manufacturers who look to expand into these global markets are the ones who will survive and thrive, he adds.
All the machines and automation in the world can’t help your business if you don’t have the right people in place. That starts with the offering the right educational opportunities.
The good news is that, as with the economy, there have been some positive signs of change.
“Over the last four or five years, in terms of apprenticeship, there’s been a downward trend in terms of employers registering apprentices. But in the last year, that’s started to go up a little bit,” says Piero Cherubini, dean, Faculty of Skilled Trades and Apprenticeship at Mohawk College and Manufacturing AUTOMATION’s newest board member. “I don’t know if it’s a trend yet, but we haven’t seen it in the past four years, so I think it’s a positive sign.”
The challenges facing manufacturing and the skilled trades have not gone away, however. The recession actually made the challenge even harder, as the industry lost of a lot of the expertise it used to have.
“If you go to the machining mecca of North America, a lot of the OEMs we used to buy machinery from were in the Sarnia/Windsor/Detroit corridor. These companies disappeared in the past 10 years,” says Valedis.
One of the ways to fill the skills gap is to attract more young workers to the skilled trades. But that isn’t always easy, admits Cherubini.
“If I had 100 welders, I could place them in jobs tomorrow, but you can’t get students to take welding anymore,” he says. “I have an industrial mechanical millwright program and an industrial electrician program. We have 260 electricians that start every year, but we’re lucky to get 60 millwrights. Yet, they work side-by-side and the same employer hires one of each.”
Canadian schools are doing their part to stay cutting-edge and help young people learn the skills they need on the shop floor. In Mohawk’s millwright program, for example, textbooks have been replaced with iPads as the program goes completely mobile.
There are even some alternative education delivery methods popping up, adds Lang.
“There’s a growing innovation in education that’s happening,” he says. “People are coming into these massive open online courses (MOOCs) and maybe there’s an opportunity there to reduce some of the costs of post-secondary education. If you can deliver the same educational experience and quality online to a thousand people, if that’s possible, that’s a real revolution.”
Our strength is people
Manufacturing’s human resource challenges go beyond educating a new, young workforce. Employers are also facing challenges training current employees and keeping them up-to-date on changing technologies.
“I see a lot of companies in the last couple of years that are taking training and retraining seriously because they know what needs to be done,” says Valedis. “It’s a positive sign in the economy that they’re thinking, ‘let me reconfigure my process. Let me retrain my people.’”
But while there are plenty of ways to teach employees about new technology, there is still a need to educate them on “soft” skills such as problem solving and teamwork.
“Companies are looking for employees with a much higher level of skills these days,” says Lang. “It’s not just somebody who can run a machine. It’s someone who can diagnose problems with the machines and fix those problems.”
“And be part of a team,” adds Green. “A lot of these soft skills become important too.”
The impact of retiring baby boomers on the skilled trades has been well documented. But the aging population is having another impact on manufacturing as owners of many of the country’s small- to mid-size companies prepare to retire—often without proper succession plans in place.
“A lot of companies are owned by people who are making a good living and lifestyle out of it and maybe haven’t got to the point of thinking, what’s the next step?” says Lang. “Do I want to turn this over to my children? Do they want to come into the business and take it over? Do I take on debt to expand and grow? Or do I just slowly wind this down and make sure all of my assets are going to be valuable enough to make a nice sale?”
“Do they say, ‘we’ve operated for the last 20 years, we’ve got a certain amount of assets, we are planning our exit strategy so let’s cash out for retirement?’ And there’s another company that disappears,” adds Valedis. “Where is the succession planning?”
While some owners may want to simply cash out and retire, others are pursuing opportunities to sell their companies to employees (to keep people employed) or to a larger company that wants to enter the Canadian market. It’s all the more reason to have good succession plans in place.
Collaboration is the key to success
If Canadian manufacturers are to truly succeed, it’s time to start working together, according to our board.
“If there’s anything that’s going to save Canada, it will be collaboration between government, academia and manufacturing,” says Diggins.
The best way to start is by networking with other manufacturers in your area to see what efficiencies you can gain and what best practices you can learn.
“If I can go down the street and talk to a few suppliers, what else can I do here?” says Valedis. “It’s amazing what people will tell you when you lay down the cards and say, ‘you know what? I’ve got a problem, and here’s the price I’m willing to pay. Can we do business?’ It works!”
That type of collaboration is happening more and more, adds Diggins, whose organization facilitates this very type of sharing. “As manufacturers get together more and talk to each other more and get in each other’s buildings, they say, ‘oh, you make those things! Why don’t we work together?’” he says.
It’s not just collaboration with others in the industry that’s needed, however. Industry needs to work more with the federal and provincial governments, as well as academia, to make sure everyone’s needs are being met.
And while there have been a number of initiatives in the past, the government needs to make it easier for manufacturers to be more innovative, says Diggins. Take the Scientific Research and Experimental Development (SR&ED) program, for one.
“SR&ED, when you take away the government language and put it in manufacturing language, is a really good program,” Diggins says. “But they make the program so difficult most people don’t want to touch it anymore. The best program they had in place for true innovation in Canada is being made difficult.”
Finally, industry itself needs to continue stepping up and taking responsibility for doing things better.
“Canadian manufacturers, particularly after this double-dip recession, are more reactive,” says Diggins. “Let’s build what the customer wants instead of what we think they want. They’ve become a lot more creative and a lot more innovative.”
After all, in this new world, change is coming one way or another.
“You have to change,” says Green. “You don’t want to be forced to change because that’s the wrong environment to be in.”
This article originally appeared in the June 2013 issue of Manufacturing AUTOMATION.