The bright side: Positive trends in the manufacturing industry

It happened. Statistics Canada reported that Canadian manufacturing sales reached a post-recession high in March, increasing 0.4 per cent to $50.9 billion — the highest level since August 2008. That’s good news.
 
The RBC Canadian Manufacturing Purchasing Managers’ Index reported the manufacturing sector grew in April for the 13th month in a row. More good news.

And to top it off, an economic report released in April by CIBC deputy chief economist Benjamin Tal suggested that factories that survived the recession have positioned themselves for better times. Essentially, they’ve survived the worst of it and come out “leaner and meaner” as they prepared for recovery. Even better news.  

On that note, when Manufacturing AUTOMATION’s editorial advisory board gathered for our annual meeting in Aurora, Ont., in April, we started the discussion with a focus on the positive trends that have happened over the last year in the Canadian manufacturing industry.

And the members had plenty to say.

1. The Canadian dollar
The Canadian dollar, which opened at 91.01 cents US the day of our meeting, was the first positive mentioned by board member Al Diggins, president and general manager of the Excellence in Manufacturing Consortium (EMC), calling it the “most prominent” positive trend he’s seen.

Don McCrudden, vice-president of business development for Festo, agrees.

“The lower dollar is an advantage, or at least stimulates more manufacturing, stimulates more employment,” he says.

For Bill Valedis, vice-president of Precision Training Products and Services, the lower dollar has had a big impact on the demand for the training simulation products his company provides.

“Since most of our business is in Canada and the U.S.,” he explains, “the lower Canadian dollar is really in our favour…All of a sudden, we see much more interest in what we have to offer to the market. It’s more competitive. It creates more opportunity for us.”

Although the Canadian dollar is in a good place right now, Diggins cautions manufacturers not to get lulled into a false sense of security.

“I do hope that they (manufacturers) continue to budget at par. I think that’s where the big downfall was when the dollar went ripping through the roof,” he says. “The together companies were budgeting at par long before the dollar started to climb, and those that didn’t really got caught, and that took a lot of people off the street. I’m hoping that they continue to budget at par and treat the advantage as a bonus.”

2. Funding of innovation
Another plus, says David Green, technology and business-to-business marketing professional, is the availability of funding to help drive innovation.

“The funding of innovation is something that’s starting to happen,” he says. “There’s all sorts of people focusing on trying to support innovation [to] improve productivity. And some of that is being taken up now, it’s happening. There are real initiatives,” he says.

Diggins agrees. He shared a recent comment from the person who helps EMC members get funding.

“Her comment was, ‘There’s lots of money out there right now.’ And we haven’t heard that for a long time. In all four corners, too – innovation, training, skills, development. So that’s a positive thing. And I’m hoping that the governments are realizing that they are good investments, [that] they’re not a cost. That’s a mindset that we need to ensure keeps going in that direction. It is an investment in the future, not a cost.”

Green adds, though, that people may need help identifying innovation and understanding what they can do — whether it’s improving productivity, applying automation or training people — to really take advantage of the funding.

3. Employer engagement
There seems to be more employer engagement with academia, the board members say.

Diggins notes that he’s seeing more colleges working with industry.

“That’s very positive that the colleges, in particular, are really reacting well,” says Diggins. “Throughout Ontario, we’ve seen [in] almost every corner of the province that the college system has been very positive to react to [industry needs]. They’re actually listening now and I think their reaction time is quicker.”

Piero Cherubini, dean of the Faculty of Skilled Trades and Apprenticeship at Mohawk College of Applied Arts and Technology, says response time depends on what it is you want to get approved.

“If it’s a complete new program, there’s still a lot of hoops to go through. The ministry is a little bit more responsive, although they’ve had a freeze on new programs for the last seven or eight months now.”

But Cherubini agrees that employer engagement is a positive trend he’s been seeing.

“They’re talking to us about upskilling their workforce. We’re spending a lot of time in those companies on process automation stuff. I don’t know if it’s a huge trend, but we’re seeing it,” he says. “That to me is one of the most positive things that has happened for us in the past year — the employer engagement. I don’t know if it’s being driven by their demographics, because we’ve been hearing about aging workforces since I’ve been in the workforce, and not a lot of real attention being paid to it. But I’m feeling this year that they are paying a lot of attention to [it].”

Companies are spending a lot of time talking about retooling, upskilling their existing workforce, plus taking a lot of co-op students, says Cherubini.

“They’re actually upskilling their existing workforce in that automated, the advanced automation kind of stuff. So it’s good.”
Valedis has his own take on this trend.

“A few years ago, we talked about, ‘oh my god, the population is retiring and we need to train people.’ What did we do? Nothing, basically. And now the reason why you’re sensing that positive effect is because the components that we manufacture, whether it’s a sub-assembly or a complete assembly of something, have increased in complexity 10-fold,” and companies need to upskill their employees.

“The skills gap has increased from a little gap into a canyon, and we are trying to react now to things that we did not plan,” he says.

But McCrudden says the expertise is there.

“When it comes to assembly automation, the leading company in the world is a Canadian company. So you say, ‘Do we have the in-house expertise to be able to pull that off?’ And the answer is absolutely…We do have lots of shining examples of expertise in really high-tech areas. We’ve just got to have more.”

4. Reshoring
While the board members haven’t seen much reshoring on Canadian soil, they say the reshoring activity in the U.S. can only mean good things for Canada.

Although we have been losing some manufacturing in Canada, says McCrudden, “our Tier 1s have remained rather vibrant. And the more cars that are produced, at least in the U.S. with the reshoring, it’s good news for our Tier 1s…Tier 1 automotive is doing better than they certainly have for awhile, and I see as a silver lining that the reshoring activity in the U.S. will only fuel that, and hopefully that’s just the tip of the iceberg.”

Valedis agrees. He shared a story about Valiant Tools, based in Windsor, Ont.

“For the first time I’m bumping into systems in the U.S. that are just starting up right now as part of this automotive investment in upgrading, and I see Valiant equipment installed. And that’s very positive. I see a new beginning again for Canadian and U.S. OEMs. So that reshoring thing that we talked about last year, it’s real, it’s here, it’s now.”

“You just look at where our exports go and they’re going to the U.S., so the more activity there is in the U.S., by default it has to have a positive impact on us,” McCrudden explains.

5. An entrepreneurial spirit
There is a fundamental entrepreneurial spirit that many individuals and companies in the manufacturing industry possess.

McCrudden calls it a driving force for recognizing opportunities, which has led to success for many manufacturers.
Green agrees.

“I think the entrepreneurial piece you mentioned is a very big component,” Green says. “The piece of that is the entrepreneurial frame of mind that companies allow to happen with their employees so that no idea is a bad idea” — whether that’s giving people the opportunity to work on a side project or allowing them to work together to come up with ideas.

“Allowing some of that entrepreneurial type of ethic and spirit and practise,” says Green, “is happening more and more.”

The common thread that McCrudden sees in companies with that “fundamental entrepreneurial spirit” is that they’re all global thinkers.

“They’re selling equipment all over the world, and they’re meeting global demands for safety of the equipment, for energy efficiency of the equipment, for speed of the equipment, for uptime of the equipment, all of these broad-based topics. And the ones that seem to be doing that are the successful ones,” he says.

Challenges that remain
Because we don’t live in a perfect world, there are still challenges facing manufacturers.

Although it seems companies are engaging more with academia, Green says a big issue is getting businesses to collaborate with one another more, to learn from each other and to share ideas.

Diggins says that companies will share with one another given the opportunity, but they have to give themselves permission first.

“It’s a learned behaviour. It’s not a normal behaviour. Learning how to share is something you give yourself permission to do,” says Diggins, whose organization’s goal is to bring manufacturers together to share ideas. “Small manufacturers out there with 500 or less could use all those brains. I mean, you drive down any of the streets here, there’s thousands of people in those buildings, and they’re not talking to one another. So creating an environment for that to happen is the way of the future.

“You’ve got to learn from those who have already solved the problem,” he says.

Much of the meeting focused on the importance of collaboration and the value that can be gained when companies share ideas.

Green stresses that when companies collaborate, they can take research and engineering work and look at where else it might apply, and what other places they might be able to use it effectively in their sectors. He also suggests that it’s the colleges who should facilitate this conversation.

“There’s a bigger opportunity to look at funding and formally drive some discussions that are appropriate for the industries that are served by those institutions,” Green says.

Cherubini agrees.

“The [manufacturers] that are coming to us, they don’t need to go at this alone, and they’ll tell us that. They’ll say to us, ‘If you’ve got other companies that are experiencing the same thing, let’s get together,’” he explains, talking specifically about training challenges for companies. “I think what we can do to influence this trend that we see is to bring some people together — networking, collaborating — because at the end of the day, they’re looking for the same thing…the same sort of skill sets.”

And part of that discussion needs to include governments, institutions and the companies that are producing the widgets and the technologies. These groups need to work together and formalize the technical skills education programs, says Valedis.

“We need to set some criteria of what is required for a person with x qualifications to be employed and what that person can produce on day one when they are hired. [That’s] number one,” he says.

Valedis also sees a lack of funding in secondary schools to purchase new technology for education.

“That’s where you create the ideas and develop the juices and get the world flowing,” he says. “When you go to a high school and they don’t have enough money to spend for a $1,000 widget that will enhance a particular tech program, it’s a real problem.”

Another challenge is machine safety, says McCrudden, who wonders whether colleges are aware of the requirements for manufacturers.

“Now all electrical devices have got safety PLCs, dual redundancy, dual channels. All of that stuff has only just come on the horizon,” he says. “How in the world is a community college on top of that topic? And yet, when you’re talking about the manufacturing sector, it’s a huge topic for the employer because now all of a sudden they’ve got to make sure that their machines are compliant to safety. Who is training these people?”

Valedis says machine safety is one of his biggest concerns.

“We haven’t made any progress in that area. Not very much,” he says. “We go to companies because we do safety training, and they are completely unaware. They are completely unaware of safety regulations in Canada.”

Valedis adds that sometimes infractions are so severe that if companies don’t take safety seriously, they could be put out of business depending on the size of the operation.

“Multiple lawsuits can become a reality,” he says. “It will put you under.”

Diggins sees both compliant companies as well as laggards when it comes to machine safety.

“It’s all over the map. We have a whole health and safety program with our own people, and yes some plants it’s frightening when you go into them, [but] a lot of them are more and more proactive in all aspects — from machines to the entire building. Let’s go back to the word investment as opposed to a cost. At the end of the day, those that view health and safety as an investment do well, and they get it back. I think the ones that don’t care and don’t address the health and safety thing have a pretty short future, not only because of the MOL (Ministry of Labour), but the workforce is becoming more and more informed about safety. Let’s talk about skilled shortages; that’ll be one of the things that will be one of the attractions for me to work for you, because you’ve got a really good health and safety program.”

The cost of energy is another challenge that Diggins points out.

“It’s going to put many companies out of business,” he says. “You can have the perfect day in manufacturing. Everything has gone right. Everything is in line. You’re going to have a profitable day.”

But if you do a full analysis, he adds, you may realize you lost money that day because for about 15 minutes the price of energy spiked.

Over-regulating is another issue, he says. In some cases, it’s not that companies don’t want to meet the regulations, it’s that they just can’t do it.

“What we’re getting really good at in this country is regulating — over-regulating — so many aspects of the manufacturing business that it’s almost paralyzing,” Diggins says. “They’re going to be out of business if they do everything that the government asks for. Over-regulation,” he says, “is just getting ridiculous.”

But despite these challenges, Diggins says the industry is heading in the right direction.

“Yeah, there are ups and downs. The world will change around us,” he says, “but I think…those that are left standing after a double-dip recession, and the dollar going [up] like that seven or eight years ago, I think the manufacturing community is a hell of a lot more resilient than they used to be.”

Those who survived are stronger for it. And that’s the best news of all.

This article originally appeared in the June 2014 issue of Manufacturing AUTOMATION.