But local manufacturing wasn’t the only option the company considered. Like many in the high-tech arena, the Avigilon team investigated China as a manufacturing site, but the company quickly determined that a 100 per cent local manufacturing approach—an insourcing strategy that takes into account the entire product cycle, from research to prototyping to final production—made the most sense for them for three primary reasons: they are able to produce products more efficiently, cost-effectively and of a higher quality in Canada.
The efficiency factor
“Our headquarters are located in Vancouver, and all of our product development is done here, so having the factory close to development has tremendous advantages from a time-to-market perspective,” says Chris Ross, Avigilon’s executive vice-president of global operations. “Whenever there is an issue, our engineers can be there immediately. Also, it helps us get the product ready for mass production much sooner than it would be if it was at a third-party or even overseas.”
Ross gives the example of prototyping. The first time the prototype of a new camera is produced, he explains, it is manufactured in the same factory that it would be mass produced in, and on the same automated, high-end surface mount assembly line. The benefit there, says Ross, is that the engineers who design the product get a feel for whether or not the product can be mass produced. In addition, when a new design comes out of engineering, it’s designed to use much of the common material that the current products use, which helps speed up the prototype turnaround. Instead of taking a week or two to do, they can turn it around in a matter of days and, in some cases, a few hours.
“So when you think about the time saved in just getting rapid feedback on whether the design is viable or not, and whether it is manufacturable or not, it comes almost instantaneously. And then as we get into the other steps in the manufacturing process...there’s a lot of testing and a lot of calibration required in these cameras, and the engineers can set that up and fine-tune those processes very quickly by having the factory close.”
It is this direct line between the R&D and manufacturing teams that allows Avigilon to be able to deploy innovation quickly, adds Ross.
Although Avigilon has customers around the globe, its major market is North America. Manufacturing close to its market is the lowest cost solution, says Ross, with labour rates slowly rising in China and the cost of airfreight skyrocketing. And when you’re dealing with high-tech products where quick time-to-market is crucial, shipping on the ocean isn’t an option.
“You don’t want to have products on the ocean for six weeks, because sometimes the market demands change too rapidly,” he says. “So air becomes almost a necessity with a high-tech product today. Once you get to that point of looking at the true cost of taking a product and manufacturing it overseas and bringing it to North America, the total cost really trumps...the labour savings you get in China.”
And since Avigilon has a highly automated assembly process where the labour content is very low—just 10 per cent of the total costs—the labour savings are negligible compared to all of the other costs involved in bringing product in from Asia, says Ross.
Avigilon’s insourcing strategy allows the company to control every single step of the manufacturing process.
“Avigilon is known for providing the most advanced high-definition surveillance system around the world today, and quality is very important to us, so we can control every step,” says Ross.
And by doing everything in-house, he adds, they are able to protect their intellectual property, because as new, innovative products are fine-tuned, they can control very tightly who has access to it until it is ready to be seen by the outside world.
Gearing for more growth
Avigilon has experienced significant growth as a result of its 100 per cent local manufacturing strategy. The company closed last year at $100 million in revenue, and they are already on track to beat that this year. In the first quarter alone they reached $32 million in revenue. (Second quarter results were not available at press time.)
In addition, the number of employees at the company has nearly doubled in the last year and a half—from 149 at the end of 2011 to 277 people this past May.
Earlier this year, the company increased its manufacturing footprint by 150 per cent to meet its growing customer demand. They expanded their 10,600-square-foot facility to nearly 30,000 square feet. As part of this expansion, they added space for additional camera lines, as well as a second highly automated surface mount circuit board assembly line, which Ross expects to acquire the capital for by the end of the year. They have also created additional space for finished goods, the storage of materials, and product assembly.
“We plan to be at the $500 million a year sales level by 2016. And right now this factory expansion gets us to that space that we need to achieve that,” says Ross.
A unique approach
“I think what really makes Avigilon unique and cool is that we are a high-tech company that has elected from the beginning to manufacture all of our products in Canada, locally, close to R&D,” says Ross. Avigilon, he adds, started from the beginning doing what the big companies are starting to realize they should be doing—manufacturing locally. And it’s an approach that this Canadian company is very proud of.
This article originally appeared in the September 2013 issue of Manufacturing AUTOMATION.