MA editorial roundtable: A recipe for growth
June 29, 2016
By Alyssa Dalton
Our editorial advisory board discusses how the Canadian manufacturing sector can turn today’s challenges into tomorrow’s opportunities
Jun. 29, 2016 – In March, Manufacturing AUTOMATION’s editorial advisory board members gathered for our annual roundtable to discuss the biggest challenges facing the manufacturing industry. The dynamic 1.5-hour conversation on Canadian productivity and competitiveness resulted in a laundry list of challenges facing today’s manufacturing: a fluctuating dollar, skilled trades education and training, a global supply base, the adoption of technology, and change management, to name a few. But with challenges come opportunities, say our board members, as they offer their insight and best practices for manufacturing success.
Manufacturing AUTOMATION’s editorial advisory board members:
David McPhail, president and CEO, Memex Automation
David Green, technology and business-to-business consultant
Don McCrudden, VP business development, Festo
Nigel Southway, founding partner and VP engineering, Additive Metal Manufacturing
Karin Lindner, founder and owner of Karico Performance Solutions
Stephanie Yakimishyn, Excellence in Manufacturing Consortium (EMC) field service advisor
Missing: Al Diggins, president and general manager, EMC; and Bill Valedis, vice president, Precision Training, Products and Services.
MA: What does the economic landscape look like now for the manufacturing industry in Canada?
David Green: I think the future from a competitive standpoint is good but there are a number of things that are an issue, like energy and labour costs, tax incentives, R&D, as well as the culture and attitude of companies and their ability — particularly small, medium-sized businesses — to adapt to change. If you’re going to deal with new technology, new practices, worry about hiring millennials, and how you work with the different workforce, it’s very hard for some companies to get their arms around that and that is something we need to provide more help with.
David McPhail: We talk to manufacturers and what I find is that the access to capital is not as prevalent as I would like to see. I would really like to sell our technology here in Ontario because it’d create more jobs locally but the reality is 85 per cent of the technology we sell is to the U.S. I think the reason is because the capital is much more readily available in the U.S. than in Canada. There’s a finance gap and I’m not sure exactly how the government is going to address that but in order to make a business successful, it has to invest in technology, whether it’s in new equipment or in consulting.
At the end of the day, it all comes down to productivity improvement and if we continue to have this productivity gap and we have no money to invest in productivity improvement, it’s not a good recipe for growth. If we don’t have access to growth capital, well, that’s going to be an important limiting factor here for us, specifically in manufacturing. I think we need more programs like FedDev that are less onerous in terms of repayment so it gives people the ramp to actually take the capital, deploy it and see the benefit, and then begin the repayment process. Access to fair-termed investment capital is going to a huge impediment, I think, if we don’t figure that out.
Nigel Southway: I’m going to be quite frank and I don’t want to use wishful thinking — the Canadian economy overall without a resource sector is going to be a rough ride. For us, Canadians, our usual hope is the U.S. will have an economy that thrives and pulls us through. We’ve always relied on that secret weapon. As for manufacturing corporations in Canada, I remain optimistic. Other than a few exceptions, they’re going to have footprints redistributed across NAFTA and offshore in their supply base, so they won’t really be Canadian manufacturers, they’ll be Canadian corporations. I’m not sure there will be many jobs actually within Canada for manufacturing. Most of them will be employed in a supply base that’s global. As for manufacturing in Canada as an entity, as a function, I’m pretty pessimistic. It looks like in certain cases like a ‘going out of business’ plan for manufacturing, locally. I think problems like a lack of funding are really symptoms of a bigger issue to do with our industrial policies.
Don McCrudden: I’ve witnessed the slow, constant decline of our Canadian manufacturing sector since 2000. I hate to say it but what stimulates our manufacturing more so than anything is the low Canadian dollar. We sell to Canadian manufacturers so our sales are a direct reflection of what’s going on. The minute our dollar goes down, our sales go up and when our dollar goes up, our sales go down. I’ve witnessed it for darn near 40 years.
Southway: I want to make it very clear as you talk about the dollar. It’s not low, it’s been obscenely high for so long. This dollar did not come down in a planned manner but for reasons to do with the resource sector dropping. So what happens if the resource sector recovers, what does that do to the dollar?
A concern I have are the economists saying it is now manufacturing’s turn. It’s really tough to ask a manufacturing guy to excel when his supply base has also gone offshore. What’s happening is you’ve got a low dollar, so how do you access low labour, or better labour, costs? Well you’ve got to bring in material now that’s more expensive from other parts of NAFTA or offshore with a different dollar, so just dropping the dollar is not going to help a lot of companies. It’s has to stay somewhere and we’ve got to figure out how to get all that stuff in place. Local supply chains are scary, a lot of people are forced to buy offshore now.
McCrudden: Although we’ve witnessed that decline, what has come out of that are some really strong entrepreneurial-thinking companies. What seems to be the common denominator is that these guys aren’t thinking of a Canadian marketplace but a global marketplace; clearly that has to be in the DNA of these companies — you have to be thinking outside the borders of Canada.
McPhail: I was in a manufacturing plant (in March) giving a tour of a customer of ours, and they have two buildings, one for all the people that operate the equipment and another that can only be described as ‘lights out.’ We walked into the building and all you hear is the equipment running, there are no lights. They have figured out a way to be competitive on the global scale by putting in automation. This mentality is now filtering down to small, medium-sized manufacturers — putting in robots, loading/unloading machines, using a system to monitor when the factory is not working so somebody can come and triage, as opposed to having them sit and just watch the equipment. There needs to be more of that to be competitive; the only way we can compete is by innovating.
Stephanie Yakimishyn: I facilitate strategic interest group sessions within the manufacturing community and over the 15 years I’ve been with EMC, I hear the same things year after year. They’re finding it tough but some of them are very optimistic. It used to be that every discussion was around Lean manufacturing, and there’s still an element of that, but what I’ve noticed recently is that the topics are around handling conflict, performance appraisals, how do I get the best out of my people, those sorts of things. There is a real trend towards what we call the soft skills.
Karin Lindner: All of a sudden, Lean isn’t so important anymore because companies aren’t getting the people process right and without people, Lean will never work. That is the reality of things. I understand there are a lot of external factors that influence our economy but I believe in focusing on what’s really within our reach. We can talk about the dollar all day long but it won’t change anything. I think it’s really about the level of assertiveness that people apply and the mindset they have. What I see in most companies is that people know what they don’t want, don’t like and don’t have but we need to shift the focus and express what we want and what we expect from our workers.
MA: Speaking of workers, do you think we are still suffering from a skills gap? What are your thoughts on cultivating the next generation?
Lindner: I disagree with the skills gap concern because I believe our organizations have people who possess more skill, talent and creativity than their current jobs allow for — that’s the number one challenge. We need more people who are able to spot the talent, and not say that we have a skills gap in our environment. And how can we get more young people and women in? We need to make the environment more appealing. Talk to each other with a high level of respect, and give people the highest form of respect you can give by allowing them to utilize their brain.
Women don’t get into manufacturing because there is often a ceiling for women. You just have to look around the management tables. How many women make it up there? In no way am I saying women are better than men, men are better than women. I think a good mix is critical in every organization because men and women just think differently and we need those differences to have good conversations.
McPhail: Isn’t the president of Ford Canada a woman? I think that becomes inspirational. You’re not going to change the mindset of an entire industry overnight. It takes somebody to blaze the trail, then that person instills that type of ambition into other people, and then those people try to accomplish the same objective.
McCrudden: If you look at certain employers, who are all the senior people up there? They are guys that were toolmakers, guys that are coming up off the floor. The drawback is there just isn’t a whole lot of women toolmakers that migrate up the food chain. The plant level managers are historically men and they’re historically the people that have morphed up through the organization from the lower level to the top level. That said, if there is a talented person regardless of gender or colour, they are going to flourish — that’s been my observation.
Southway: I think it’s a bit of a chicken and an egg situation. We’ve got a lot of young people, not just women but people, that avoid manufacturing because they believe it is not a career that will flourish. Instead of saying we don’t have enough young people, it’s more of a question as to whether the industry is vibrant enough to support them. How do I tell them there’s a career for them if I’m not quite sure where manufacturing is going? When it comes to the training and education students are getting, are we giving them the right kind of training and education?
Yakimishyn: I agree, from a high level perhaps there isn’t a skills gap, but I have a senior managers group with 15 people around the table representing 15 different companies (varying month to month) and they have a skills gap. They cannot find welders, they cannot find maintenance people, they cannot find electricians — so maybe in general we don’t have one but certainly on the ground, there is one. And now I’m seeing companies starting their own apprenticeships and doing things in-house to grow their own people.
McPhail: Maybe this is just me, but there is no better feeling than writing a bunch of software code, programming a bunch of robots, then hitting the button and watching it make a part. I just love that, but I grew up on the factory floor. How do you get the next generation inspired to do that?
McCrudden: That skills gap of understanding controls and writing code, I saw it a lot stronger 10, 15 years ago than I do today. In general, the skills are there. We hire these guys and I’m amazed at how quickly we can get them integrated into high-level code writing and understanding.
Green: There’s a lot of work being done by a number of organizations; Skills Canada is just one organization that has been very involved with elementary and secondary school students. We need to start early, around Grade 5-8, to get them interested in STEM careers and the skilled trades. I think the future is going to be more attractive in terms of what’s happening with technology. I look at the young people I’ve interacted with at Skills Canada and World Skills — they want to be doing more than just pulling wires, they’re interested in the control elements and other sophisticated components, and the skills are adapting to that.
Southway: For the kids going into the co-op programs, we need much more career guidance counselling in schools. You’ve got a young guy who’s 14-years-old, how do they know what manufacturing looks like? Who’s showing them their big brother can actually be doing fantastic things at co-op? We’ve got to build that learning system not only in the high schools but also in the co-op programs, the school systems and into the industry. That linkage is not yet in place.
MA: Why do manufacturers need to embrace emerging trends and technologies of the Fourth Industrial Revolution, namely the Internet of Things (IoT)?
McPhail: If you look at some companies that are in the lead on this, they don’t want to sell you an aircraft engine, they want to sell you time on an aircraft engine. The economy is changing, so it also changes the business model. It’s one thing to sell somebody a piece of equipment, it’s another to guarantee 95-per-cent or 98-per-cent uptime. This knowledge-based economy is centred on having information we presently don’t collect. Ninety-five per cent of manufacturers measure absolutely nothing on their factory floor, and the majority of the ones that do use a clipboard and aggregate it in Excel. That is not going to fly when we get to the next business model or the Fourth Industrial Revolution where we talk about selling a service as part of what you manufacture.
From a technology perspective, getting the Internet of Things into the hands of people who need it is not about the how but the why. What’s the business outcome? What’s the payback? These are more abstract conversations and in the U.S., they’ll accept that much quicker than they will in Canada. If you don’t get the value proposition associated with adopting the technology, the how doesn’t matter. To be competitive in the ever-changing, evolving global economy, this technology has to be adopted or you die.
The most successful companies that embrace IoT or Industry 4.0 are those that can handle change management — like when the employees are involved long before the technology hits the floor. At that point, there’s buy-in and the culture of the company is so much easier to deal with.
Lindner: In manufacturing especially, we don’t learn about the emotional aspect as to why people resist change. People in general don’t like change. Look at a boardroom table, the majority of people always go to the same seat, but if I sit where Stephanie is sitting, I can get a different perspective. I don’t think we are doing a good enough job with change management and what it means emotionally and mentally for people. Are they afraid of adopting a new technology because they think “I’m too old” or “I will be too slow?”
McPhail: Or we become so efficient, my job becomes redundant. Having brought the IoT technology sphere into manufacturing with more than 100 companies, I can tell you not one of them has fired somebody or laid somebody off as a result of becoming more efficient. I’ve seen companies take their OEE from 33 per cent to 85 per cent and more than double their top line revenue, which actually creates jobs, it doesn’t take jobs away.
Yakimishyn: For a lot of workers, it’s the idea that it’s always worked this way so why do we need to change: “If it ain’t broke, why fix it?” But it’s understanding that it may not be broke right now but it’s heading that way. When you look at change, your brain actually has to knit new neural pathways with every change. I used to drive a standard car for years and it’s been about 10 years since I’ve driven a standard but every once in a while, I come to a stop sign and my left leg starts doing all this weird stuff looking for the clutch. The pathway is still there in my brain.
McCrudden: Certainly the mindset of a 50-something-year-old versus a 25-something-year-old is different. You can see it everyday. Kids are so technology-oriented and driven. They’re not scared of technology at all, in fact they embrace it; they know what technology can bring, through the enhancements to their lives. I would say I rarely see in the marketplace this real aversion to modify your company processes in any way because it’s part of people’s DNA. They started off with a blackberry of some sort five years ago, and every six months, they get a new one that’s got 16 other features they just love. We’re going to breed a bunch of entrepreneurial-thinking young people.
MA: What strategies or best practices can manufacturers in Canada adopt for growth?
Green: Going back to when we talked about an entrepreneurial approach, we need a way of getting companies to embrace more of that, and empowering employees to think entrepreneurially: allowing people to think out of the box, to think about it as their project, giving them both the money and the resources to go ahead and solve the problem in whatever way they want with an entrepreneurial sort of approach.
McPhail: There’s a pragmatic solution for every problem. It comes down to compartmentalizing the road map — pick a challenge in your business and then solve it with technology that fits into the vision of the company. Don’t try to figure out how all these things are going to works together and the interactions they play, because it’ll be overwhelming and you’ll do nothing.
Lindner: I think we have to break it down when we speak about the country. When we speak about Canada, it becomes really big. I always look at it as changing one company at a time, and I think we could all do this in our way, which makes it more real. When I speak about the country, I feel like I can’t do anything, but when I look at the people I touch everyday, I think all of us can do a lot.
Southway: We mustn’t forget there are a lot of high-tech opportunities for lots of traditional manufacturers. We’ve got this beautiful resource sector so how can we, as an industry, get those resources to work for us? How can we add more value to the resources or get better bang for our buck as far as what we mine, grow or harvest? We haven’t done that well in Canada. We’re a resource-based economy and we blame the dollar for it, but we’re not utilizing it as industrialists as much as we should. We need to look at the byproduct side of the raw material of resources, as well as the prime usage. We can go head to head with other countries on making cars or airplanes but they’re going to move up the value chain pretty fast but they don’t have natural resources. We have the natural resources and a bunch of bright minds, we have to put this together with technology and automation.
This article was originally published in the June 2016 issue of Manufacturing AUTOMATION.