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Why transportation is becoming a competitive differentiator in the new age of manufacturing
Issue 3, Volume 1 â€˘ Winter 2016
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Dare to compete 2017 Western Canadaâ€™s Largest Manufacturing Conference Tuesday, March 21, 2017 | RBC Convention Centre, Winnipeg As the exclusive media sponsor, Prairie Manufacturer Magazine is inviting manufacturers from across the region to join us for this must-attend event. For full details, read the four-page feature insert in this edtion. Take advantage of early booking savings at www.daretocompete.ca and be automatically entered to win two tickets (prime seating) to the Winnipeg Jets vs. Philadelphia Flyers NHL hockey game the evening of March 21. In celebration of 2017 Manitoba Manufacturing Week, our spring issue will include bonus distribution at the Dare to Compete conference. Find out how to become involved by e-mailing firstname.lastname@example.org. Booking deadline is February 10.
Publisher Ronda Landygo email@example.com 877.880.3392
In this issue What moves you?
Transportation is quickly becoming a competitive differentiator. Prairie Manufacturer Magazine jets off for a visit to Edmonton to discover how one Canadian airport is reshaping the logistics supply chain and igniting economic development.
Training the workforce of Industry 4.0
The next generation of manufacturing is upon us — do you have the skills you need to succeed? Saskatchewan Polytechnic President & CEO Dr. Larry Rosia makes his case for what the education system must do today to support the businesses of tomorrow.
Amidst the commodities crash and one of the worst recessions on record, Alberta manufacturers are turning to their entrepreneurial instincts. Meet four provincial leaders on a quest to change attitudes — and companies.
A Semple recipe for success
2016 ABEX Business Leader of the Year honouree and Brandt Group of Companies Chairman Gavin Semple chats with Saskatchewan Chamber of Commerce CEO Steve McLellan about leadership, innovation, and the ‘most important sale.’
House of cards?
Donald Trump is about to become leader of the free world. What does that mean for NAFTA and your operations? According to Birgit Matthiesen, this is ‘the art of the deal,’ and Prairie manufacturers need to come to the table with the best cards possible.
Construction moves indoors
Business writer Joanne Paulson sits down with executives from Innovative Residential and Grandeur Housing to see firsthand how manufacturing is powering efficiency and quality in Western Canada’s home building industry.
Check out the Dare to Compete 2017 special feature inside this issue!
Next issue Our upcoming Spring 2017 issue shines the spotlight on Western Canada’s hottest manufacturing market: Manitoba. Prairie Manufacturer Magazine canvasses from Winnipeg to Winkler, Morden to Minnedosa, to talk with the people making it happen, and to explore the best practices, ideas, and world-class facilities taking the province by storm. Bonus distribution at the Dare to Compete conference. Booking deadline: February 10, 2017 Material due: February 17, 2017 4
Prairie Manufacturer Magazine • Winter 2016
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Embracing the certainty of uncertainty By Derek Lothian
o. President Donald Trump. Let’s all take a moment to let that sink in. Truth be told, I started writing this column on November 7. Ironically, it was all about disruptors — a common theme in this issue of Prairie Manufacturer Magazine. Little did I imagine, only 24 hours later, we’d be hit by one of the largest political disruptions in modern history. Granted, changes to government are nothing new. Even the most surprising election results rarely throw markets or businesses into panic. But what makes the latest U.S. voting cycle particularly unnerving is the same factor driving postBrexit instability in the U.K. and Europe: Complete, top-down uncertainty. We are entering uncharted waters in the Canada-U.S. trade relationship — in part because we simply do not know where the incoming leader of the free world stands on so many important, integrated issues. Canada’s ambassador to the U.S., David MacNaughton, has already stated on record he would be ‘happy’ to renegotiate NAFTA with Trump, although who knows if the vision for his desired ‘improvements’ would be shared by an administration pushed into power by protectionist rhetoric
and a populist desire to rip up foreign cooperation agreements. In the worlds of comedian John Oliver: “Trump is like a magic eight ball” — every time you shake him, he seems to give a different answer. Canadians should remember there is plenty of precedent for U.S. presidents to unilaterally withdraw from treaty obligations. A discontinuation of NAFTA doesn’t so much as require congressional approval — only six months’ advance notice from the Executive Branch. Now, will that happen? Probably not. If the last 18 months south of the border taught us anything, however, it is to expect the unexpected. Fortunately, as Prairie manufacturers, we are no strangers to navigating shifting currents. We’ve capitalized on emerging global growth opportunities, survived massive swings in currency, and overcome some of the most damaging bureaucratic decisions ever made (ahem, National Energy Program). As DIRTT Environmental Solutions CEO Mogens Smed explains in the View from the C-Suite column (Page 8), our cando attitude and willingness to roll up our sleeves is what has made this industry — and our region — different. It’s what
has made us successful. It’s also what will sustain us going forward. Indeed, the next four years will yield significant change on both sides of the 49th parallel. And we’ll need to adapt. Here at home, the promise of a federally imposed carbon tax continues to loom like a grey sky over the Prairies — compounded by dampened commodity prices, softened investment, and a soggy, delayed crop year. It’s a contentious issue, no doubt — one that will fundamentally impact both manufacturers and manufacturing customers, many of which are in alreadyweakened, carbon-intensive sectors of their own, including mining, oil and gas, and agriculture. No one is arguing industry should not make a renewed effort to reduce greenhouse gas emissions. On the contrary, doing so is equal parts environmental and trade priority. Former French President Nicolas Sarkozy recently floated the idea of imposing a tariff of up to three per cent on incoming goods from the United States, should President Trump fail to meet European emissions standards; and, make no mistake, this style of policy will only become more mainstream.
“Fortunately, as Prairie manufacturers, we are no strangers to navigating shifting currents. We’ve capitalized on emerging global growth opportunities, survived massive swings in currency, and overcome some of the most damaging bureaucratic decisions ever made (ahem, National Energy Program).”
Prairie Manufacturer Magazine • Winter 2016
How we reduce those emissions, though, is at the crux of the debate. First, we need to dispose of the grandiloquence, and acknowledge a common set of facts. Let’s begin with the argument that any carbon-pricing regime can be ‘revenue neutral.’ It can’t. Taxes, by their very nature, are expensive to administrate (CRA, anyone?). The notion that any federal carbon tax can be offset fully by the collected levies is outright nonsense. And if — as many have suggested — provinces may choose to return the funds to those from which they are collected, what in the seven circles of hell is the point? Then there are the business implications. According to a study from Canadian Manufacturers & Exporters, 54 per cent of companies indicate they would pass along increased costs to customers (many, as I mentioned, who have already fallen on tough times). Another 16 per cent said they would move production to another jurisdiction altogether, essentially
shifting all the economic benefit outof-market while securing zero of the environmental benefit. Talk about stimulus! Now, to be fair, there are several examples of how stronger environmental controls have actually led to better longterm business outcomes. Automobile production is one of them. The imposition of stiffer North American emissions rules in the early 2000s translated directly into increased international sales. Yet, there are two main differences to that approach. Most importantly, it was a regulation that set targets and left it up to individual businesses to achieve compliance. It also harmonized the rules between Canada and the U.S. to reflect the interdependent nature of our economies. After all, as former ambassador Gary Doer so eloquently puts it: “You don’t need a NEXUS card for the movement of air.” It’s time we learn from the successes we’ve already enjoyed, and trust in our
ability to think outside the box and solve big, tough problems. Just look at how farming has changed over the past 50 years. The way we grow food today is nothing short of a miracle. We feed 7.3 billion people on only 11 billion acres of arable land. But we know that’s not enough. By the year 2050, we will need to expand production by 75 per cent on roughly the same mass of land. How will we do it? The same way we will reduce our carbon footprint — by innovating. Disruption of any kind is often uncomfortable, and there are seldom quick fixes. On the Prairies, we know that better than anyone. So, let’s set the goals, dream up the big picture solutions, and empower the best and brightest to make them happen — right here in our own backyard.
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View from the C-Suite
Prairie Manufacturer Magazine â€˘ Winter 2016
Technology: The platform for diversification By Mogens Smed
e might as well start the conversation off by recalling the devastation of the National Energy Program in 1982. It was certainly my comeuppance and wake-up call in business. And, yet, here we are facing a savage drop in the price of energy — the Holy Grail for Western Canadians and Canadians at-large. It is still our source of feast or famine. This, despite declaring we are on a quest for creating businesses not reliant on the price of a barrel of oil or other non-renewable resources. Yes, over the years, numerous success stories outside the energy industry spawned in Western Canada. Stantec, PCL, and Ledcor (there are many others) demonstrate excellent success in the international arena. The time and investment to attain their stature, however, is absolutely staggering and well beyond the means of most aspiring entrepreneurs, especially given the sparse availability of investment capital for start-up ventures. How can we succeed? Through technology.
The last 10 years have brought us to the verge of the fourth Industrial Revolution. The first was machine-driven, the second brought production lines, the third — which some are still catching up to — is the digital revolution, and now we build on the digital, where boundaries between the physical and digital merge, leading to new realities like mass-customization. We are entering the ‘age of exponential growth,’ and it’s all driven by technology. In the fourth Industrial Revolution, all manufacturers will be run more like social media, where the user is in charge. Manufacturers will give their clients the tools to run their facilities and price their products. Mass customization will be the norm. Offshoring for lower labour costs and materials will be a thing of the past — all thanks to technology, which is improving so quickly, its only downside is that it feels impossible to keep up with. This innovation is so completely disruptive, we have seen individuals working in their garages for just a few years grow from nothing to
being instant multi-millionaires. These are the people who saw huge opportunities in industries that were mortally wounded (they just hadn't recognized it yet), and used technology to completely revolutionize these vertical markets. Dazed and confused is how I would describe the manufacturing sector that continues to wait for a low dollar to take effect or the government to bail them out. That ship has sailed, and the sooner companies react by embracing technology allowing them to respond to their clients’ true and specific needs, the better. There are tremendous examples of Canadian companies already leading the way in additive manufacturing and 3D printing. These are just scratching the surface of what will be possible in a few short years or even months. But, to get there, you need a tremendous appetite for constant adaptation. DIRTT Environmental Solutions is one of those stories. With the discovery of two (brilliant!) cofounders, a strong team of people (1,000 of us, give or take a few), and a Continued on Page 10
“It is my belief that the come-from-behind win for Canadian manufacturing will indeed start here on the Prairies. The innovation and technologies we invented for the commodities sectors were no fluke. We see a challenge and we put our backs and brains into finding solutions.”
culture unlike anything the corporate world has seen, we found our opportunity in the construction world. Here, skilled labour is on the verge of being extinct, yet labourintensive methods are still being used. Providing the speed and certainty of manufacturing isn’t enough when it comes to building spaces where people work, learn, heal, and live. You have to be able to build what people want — not some standard selection of finished boxes. So, we started the ball rolling with a software platform that would allow our clients to design, price, and build exactly what they need, and components that would self-organize to create the physical elements. Having said that, we are in no way using technology as a panacea. Without people who dream big, we would be nothing — both inside and outside our company. Were it not for the entrepreneurial spirit permeating
every aspect of our Prairie society and the incredible support of the people in the energy industry, our early adopters, DIRTT would not exist today. For me, it started back when our family emigrated from Denmark to Calgary in 1952. The adventuresome spirit of my mother and father, Lydia and Kai, joined a community that supported and rewarded the efforts of anyone who wanted to do an honest day's work. Ambition and the courage to try something new was treated as a badge of honour — not the negative envy of people who just couldn't understand the wisdom of risking it all. It is my belief that the come-frombehind win for Canadian manufacturing will indeed start here on the Prairies. The innovation and technologies we invented for the commodities sectors were no fluke. We see a challenge and we put our backs and brains into finding solutions.
Prairie Manufacturer Magazine • Winter 2016
Luckily, for folks like me, technology is taking care of much of what used to be the ‘back’ part of the work. We simply need to jump onboard fast so we can lead the world in this revolution. While the dynamics are dramatically different from when my parents immigrated here, the recognition and support for those individuals and companies who are trying to make a difference is still the foundation for our unique business culture, as opposed to those other regions who believe a plan and a dreamed-up strategy take precedence over a strong vision, and the passion and perseverance to make it happen! Mogens Smed is the co-founder and CEO of DIRTT Environmental Solutions, a Calgary-based manufacturer of customized construction interiors. ‘DIRTT’ is an acronym for ‘doing it right this time’ — a play on improving from past business shortcomings.
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Money & Markets
Risk, opportunity abound in 2017 By Craig Wright
he economic and political risks to the global economy remain elevated as Prairie manufacturers head into 2017. Earlier worries regarding a sharp slowdown in China have moderated, as activity has held steady at just under seven per cent for three consecutive quarters. Policy options for Chinese authorities remain abundant, and there will not be any reluctance to use any and all options if the growth outlook deteriorates. The uncertainty with respect to the fallout from the Brexit vote has diminished for now, and the economic data for both the U.K. and the Eurozone have exceeded expectations. The challenging part of Brexit, however, is still ahead. Europe and the U.K. have yet to begin the renegotiation of their relationship in a post-Brexit world. The combination of political posturing and policy uncertainty will keep overall uncertainty heightened, likely weighing on investment spending in the U.K. and Eurozone next year. It also poses downside risks for a global economy already suffering from a confidence shortfall. The U.S. economy started 2016 on a weak note, with growth averaging only one per cent in the first half of the year, weighed down by unexpectedly soft investment activity. Although not unique to the U.S., the disappointing investment numbers likely, in part, reflected political uncertainty heading into one of the more divisive elections in recent memory. In the end, the uncertainty was warranted, as the outcome fell outside of any and all polls. President-elect Trump will now be closely watched to see whom he surrounds himself with and which of the many policy proposals launched during the campaign will be pursued.
While still early in the mandate, it would appear some portion of the cuts to personal and corporate taxes face the path of least resistance, suggesting fiscal stimulus is likely in the pipeline, along with rising deficits and debt. Unfortunately, anti-trade rhetoric was high during the campaign, posing the risk of a significant thickening of the border in the years ahead, which could slow down the movement of trade, investment, and labour, to the detriment of the long-run outlook for the North American economy. Economic growth in 2017 is expected to come in at 2.2 per cent, following an estimated rise of 1.6 per cent in 2016. Despite the risks from continued economic and political uncertainty, we still expect global economic growth to accelerate into the 3.5 per cent range next year, reflecting the continued support from aggressive monetary policy and expansionary fiscal policy. A firmer global economy should provide support for a more constructive outlook for global trade and commodity prices, paving the way for the long-awaited acceleration in Canadian exports. Additional support is expected to come from the more competitive Canadian dollar, which is expected to hover around the 75-cent mark over the coming year as oil prices average $56 USD. The Canadian economy, meanwhile, is expected to expand by a meagre 1.3 per cent this year, before accelerating to 1.8 per cent in 2017. An expected pick-up in global growth and commodity prices alongside stronger U.S. activity and a competitive Canadian dollar should boost exports. Investment will prove to be a lift to overall growth, with support coming from additional federal (and some provincial) infrastructure spending along with some recovery in oil prices.
Prairie Manufacturer Magazine â€˘ Winter 2016
The gains in exports and investment will offset an expected slowing in consumer activity, as the housing sector continues to cool. Earlier housing price gains, combined with regulatory tightening, have contributed to a slowdown in housing resale and a moderation in prices, which slowed in September on a year-over-year basis for the first time in 19 months. Although the Bank of Canada has expressed a preparedness to ease further if needed, our expectation is that growth will be sufficiently strong that policy will remain on hold through 2017. For the Prairie provinces, following a couple of very challenging years, we look for growth prospects to improve in 2017. The forecasted recovery in exports â€” both international as well as interprovincial â€” should prove to be a lift to a manufacturing sector dominated by export-oriented businesses. Stronger exports will support a recovery in employment and an eventual pick-up in investment. Further support is predicted to come from infrastructure spending, as governments continue to provide a boost to the economies. In aggregate, GDP growth in 2017 in the Prairie provinces is expected to outpace the national economy for the first time in a couple years, led by Manitoba, which is the most manufacturing-intensive province of the three. Alberta and Saskatchewan are forecast to be only slightly behind Manitoba, following contractions in activity in 2015 and 2016. The region will also benefit from the projected recovery in commodity prices led by oil. Craig Wright is the senior vice president and chief economist with RBC Royal Bank.
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Lessons in Lean
From dollars to sense: My experience as a lean CFO By John Povhe
o many business leaders, the phrase lean finance is an oxymoron. And to other professional accountants, it can be downright foreign. Seven years ago, I found myself in the same boat. I was the new CFO of a struggling company in a sector I knew little about — manufacturing kitchen cabinets. Lean wasn’t in my vocabulary, nor was it on the radar of management. Fortunately, our operations leadership group could see opportunity where we didn’t.
Prairie Manufacturer Magazine • Winter 2016
Manufacturing on the Prairies is less of an industry than it is a community. Everyone knows everyone, and employees tend to transition within seemingly dissimilar environments with relative ease. So, it should be no surprise our lean program at Superior Cabinets was actually kick-started by a handful of employees who had migrated over from the farm implement world. They saw the benefit of a culture that looked at problems differently, valued grassroots input, and captured savings to do things better. In many ways, it was a natural process that allowed us not only to survive, but thrive. For me personally, it served as a re-education — in more ways than one. I even have my Lean Green Belt Certificate hanging on the wall to prove it. But it was also an exercise in re-evaluating my own processes and how I was adding value. There are three main reasons why corporate accounting exists: To measure profitability (monthly and yearly); to inform shareholders, as well as the Canada Revenue Agency; and, to provide timely financial information to help guide business decisions. Before I jumped into lean with both feet, the latter suffered from virtual paralysis. It would take us roughly 30 days to close off the previous month-end, which forced us to make decisions based on data that was, at best, a month old. We were always looking in the rear-view mirror, and consequently seldom had the appetite to change the direction we were heading. We just waited for next month’s financials on the hope and prayer things would improve. Moving to continuous flow accounting was the big first adjustment we had to make. As opposed to waiting for the end of the month to begin working on month-end, we now do the work required for reporting daily. This means we are executing processes more frequently, leading to increased familiarity, improved efficiency and timeliness, and better information that enables smarter decisions. Of course, we could not do this in isolation, as we rely on many different areas of the business to feed us information. We found a high level of support with our team, and valued their
ideas to assist with making the process better. Through collaboration, we removed processes that did not add value, and are now able to complete our month-end in three business days with a finance team of only four. How we manage our inventory is another example of doing a lot with a little. Our manufacturing operations are located in a 55,000-square-foot facility, with a very fixed footprint, producing highly customized products. We have no
physical room to expand, so space is at a premium. This is a challenge we continually need our vendors to help us solve. We utilize 19 rigorous criteria for supplier assessment and, for those that are still standing, bring into place strategic partnership agreements to help us control delivery schedules and demands on storage. Sure, we probably aren’t the easiest customer to do business with at first; but we are one of the few manufacturers I Continued on Page 16
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“While numbers are finite, not all indicators of success are. Senior executives, CFOs included, must be adamant about measuring as many key performance indicators as possible in a lean implementation, but — at the same time — trust their eyes and ears (and people) to recognize the impacts that cannot be measured.”
know able to turn inventory over 60 times per year. Yes, 60. That is Toyota-class inventory management. Think of the cash flow that frees up. At the moment, we produce 25 kitchens each day — roughly twice as many per square foot as other cabinetmakers. When you hear lean experts speak (and I don’t claim to be one of them), you repeatedly hear how lean is all about empowering staff to drive continuous improvement. Until you see it for yourself first-hand, it can be a difficult concept to fully understand or — for that matter — believe. A few months into our lean journey, one of my staff approached me with the idea of going paperless in our purchasing and payment process. She mentioned a friend working in a nearby business, who had effectively digitized records and invoicing processes. Knowing full well
my own technological limitations, I sent her off to learn more. That simple cycle of conceptualize, listen, learn, trust, and improve has helped us chisel 22 physical boxes of paper records retained each year down to two, and payment of virtually all invoices has transitioned from paper cheque to electronic transfer. These are not isolated stories. You can look at every aspect of our business and visually see the difference lean has made. In our administrative offices, we have reduced our leased space by 43 per cent. We have added hundreds of thousands of dollars’ worth of automated, more productive machinery and equipment, many with proven paybacks of less than 16 months. All savings are not based on estimates from equipment suppliers — we work with our manufacturing leaders to build visual scorecards that track
Prairie Manufacturer Magazine • Winter 2016
reduced spending and result in bottomline benefit. These outcomes are then shared with staff, suppliers, and business stakeholders. Although our plant is in the best, most organized shape it has ever been in, we are constantly looking at changes to make us even better. All in, we’ve saved somewhere in excess of $1 million to date. For many people, accounting is an absolute practice. While numbers are finite, not all indicators of success are. Senior executives, CFOs included, must be adamant about measuring as many key performance indicators as possible in a lean implementation, but — at the same time — trust their eyes and ears (and people) to recognize the impacts that cannot be measured. Engagement precedes improvement. Put faith in your people and the profit will come. John Povhe is the chief financial officer of Superior Cabinets — an award-winning manufacturer of premium kitchens and cabinets, with showrooms across Alberta and Saskatchewan.
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PHOTO CREDIT: Edmonton International Airport
What moves Why transportation is becoming a competitive differentiator in the new age of manufacturing By Derek Lothian
Prairie Manufacturer Magazine â€˘ Winter 2016
or Jerry Bigam, it was a case of the chicken or the egg. The CEO of Edmonton-based Kinnikinnick Foods long knew it was time to expand beyond the North American marketplace. For years, however, his ambitions were surpassed only by the growing list of challenges to serving a global consumer base in a highly niche industry. At the helm of one of the largest glutenfree food manufacturing facilities in the world, Bigam’s primary obstacle was exposure to risk. Existing transportation infrastructure meant he would need to anticipate demand at least six weeks in advance, allowing the company time to ship product to tidewater, and then across either the Atlantic or Pacific Ocean by container. It was a risk he wasn’t willing to take. “It didn’t matter where we were looking overseas, the competitive economics were too hard,” recalls Bigam. “Nothing kills a new product in a new market quite like empty shelves. We would have needed to build up a ton of inventory in the hopes it would eventually move; and it didn’t make sense to tie up significant capital to invest in taking that chance.” But, in 2015, the game changed. Despite showing signs of recovery, the U.S. economy was still sluggish, and the introduction of new shipping routes with Icelandair, KLM, and Air China Cargo at nearby Edmonton International Airport (EIA) forced Bigam to take a second look at new offshore export opportunities. So, he boarded a plane and began attending trade shows. “We have a very specialized product required in most countries in the world, but in smaller volumes,” explains Bigam. “We needed to start small and build up. The benefit of better air service was that, if we got a run on specific lines in different corners of the world, we could actually transport pallets instead of containers, and customers could have them in a day or two instead of waiting a month and a half.” Before long, Kinnikinnick Foods was fielding multiple orders from Europe and Asia. And, this past January, the company began selling to the U.K., leaning on popular Internet retailer Amazon to help boost revenues and build brand awareness. According to EIA Vice President of Commercial Development, Myron Keehn, it is an example of how the logistics supply chain can function as an economic driver. “After safety and security, our number one Continued on Page 20
PHOTO CREDIT: Edmonton International Airport
focus is economic development,” says Keehn, who notes cargo volumes at the airport have increased in each of the past seven years. “We try to find out what these emerging markets are looking for, and then we work on building the ‘air pipeline’ to connect the goods.” It is also a matter of modal integration. EIA recently joined forces with Rosenau Transport to unveil a 210,000-square-foot, on-site warehouse and distribution centre, providing a central, Western Canadian link between air cargo carriers and both the Yellowhead and Queen Elizabeth II highways — the latter of which runs as far north as Peace River and as far south as Mexico. Rail access is equally important. The nearest rail yard is less than 10 kilometres from the airport, and other inland ports on the Prairies — such as CentrePort in
Winnipeg and the Global Transportation Hub in Regina — have incorporated rail facilities directly into their site plans. “In logistics, speed is everything,” says Keehn. “A lot of industries, like manufacturing, are moving away from competing on volume to a strategy where they’re competing on service. Our job is to help them sharpen that competitive edge.” Bigam couldn’t agree more. Although Edmonton is not generally thought of as a gateway for exports, he contends there are strong regional advantages. “From an air traffic perspective, Edmonton is on a polar route, which gives us some unique non-stop flight options to ship into the Pacific Rim or Europe,” he says. “If I’m moving product into England, instead of shipping from Edmonton down to Louisville and having it forwarded, I can take the same shipment directly over the
pole into the U.K. market a day quicker and notably cheaper.” Speed to market is especially key when dealing with perishable food. Because of EIA’s ability to offer quicker turnarounds, the airport shipped roughly 420 tonnes of cherries last year alone, and has cultivated a new ‘fresh fish’ phenomenon in landlocked Edmonton, with Arctic char, cod, and other ocean delicacies pouring into city stores via Icelandair’s soon-to-bedaily inbound flights. Manufacturers in the oil and gas sector, meanwhile, are able to provide made-to-order technologies and replacement components to extraction operations in Scandinavia, Asia, and the Middle East — markets previously out of reach for an industry that winces at the slightest notion of downtime. Yet, identifying these opportunities is not always easy. In fact, Heather Stewart has made a career out of it. Continued on Page 23
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Prairie Manufacturer Magazine • Winter 2016
The president of BBE Expediting Ltd., a freight management firm with 40 years’ experience in remote northern and international multi-modal shipping, Stewart recites a litany of considerations that factor into effective logistics management — from route planning and vendor sourcing to shipment verification, contingency preparation, and regulatory compliance. Innovation now matters, too. With the advent of drone technology, autonomous transportation, and e-commerce capabilities, selecting the right long-term logistics partners can be more about looking toward the future than procuring on current needs. Just this fall, Anheuser-Busch teamed up with Uber to move 45,000 cans of Budweiser in Colorado using a selfdriving 18-wheel truck — the first commercial delivery of its kind. The beer maker estimates the technology could save the company up to $50 million per year if applied across its entire distribution network. Stewart’s best advice: Like any other specialized skill set, if you don’t have it, ask others who do for help. “Anyone who has been in manufacturing for several years can likely attest to how critical — and how complex — shipping has become over the past decade,” she says. “The service used to be a commodity — lowest price used to win almost by default. Now it’s much more of a value-driven business, and cost is only one factor. Exporters are much more attuned to the predictability and efficiency of delivery.” Even the smallest details have become differentiators. EIA’s decision to consolidate many air cargo service options with the Canada Border Services Agency (CBSA) is one of those underappreciated specifics. Instead of having to transport goods off the tarmac and across the grounds for inspection, CBSA agents screen shipments in the same building as BBE and its carrier affiliates. This seemingly minor change has dramatically increased productivity and reduced processing errors. Securing the area as a designated Foreign Trade Zone (FTZ) is attracting domestic and international attention as well. A partnership between EIA, Edmonton Economic Development, and the federal government (dubbed collectively Port Alberta), the FTZ allows companies situated within its radius to — amongst other benefits — defer duties on imports, and, for businesses with export sales north of 90 per cent, waive GST on some purchased goods. “The FTZ is another tool manufacturers have at their disposal. The trick is knowing when and how to leverage it,” says Andrew Jones-Krysler, branch manager with Pentagon Freight Services and one of the foremost authorities on cargo forwarding in Northern Alberta. “Being geographically isolated from many of our region’s core sales destinations, you need to do your homework, and have a proactive plan that balances shipping considerations with corporate production, warehousing, and investment decisions.” Few domestic companies will argue with any progress that moves the needle. A recent nationwide survey of manufacturers pegged transportation infrastructure and logistics as the second
Three key exporting tips (From the perspective of a freight forwarder) By Chris Lemke
1. Choose the best Incoterm for the job Incoterms, or International Commercial Terms, are published definitions that set the global standard for the interpretation of common contract clauses in trade, including the costs and responsibilities of the buyer and seller. Know them, and know what controls they entail. Ex Works classification, for example, absorbs the majority of risk and cost onto the seller, while Delivery Duty Paid transfers the risk and cost onto the buyer.
2. Know your freight forwarder Not all freight forwarders are created equal. Select yours carefully. Ask for referrals, ensure they present you with options in terms of transit time and rates, carefully examine their in-market relationships, understand their use of technology, and match the scope of what you’re asking against what they’re capable of delivering upon.
3. Adapt to customer preferences What does your customer want? That is the first question any business should ask, and it’s the first question in choosing a freight forwarder. Does your packaging protect the product from moisture and the rigors of multiple handlings? Are there specific compliance issues in the country to which you are shipping? Consider how you can make your customer’s life easier and thus encourage future business. Chris Lemke is the Edmonton-based business development manager for Kuehne + Nagel Ltd. — an international logistics firm founded in 1890.
Continued on Page 24
PHOTO CREDIT: Edmonton International Airport
“After safety and security, our number one focus is economic development. We try to find out what these emerging markets are looking for, and then we work on building the ‘air pipeline’ to connect the goods.” greatest encumbrance to doing business in foreign markets, and the top challenge to increasing exports. It is a narrative, BBE’s Stewart believes, the industry must work together to change. “A single link in the supply chain that doesn’t perform sends ripples right back through the entire economy,” she says. “It has an effect at the community level. That’s why it’s critical we’re innovative in how we collaborate and deliver service — and I think EIA has demonstrated itself as a model for how we can bring those players together to push in the same direction.” Those grassroots impacts are apparent. One year ago this fall, EIA introduced the region’s first-ever nonstop service to Shanghai (and Canada’s only scheduled freighter service to mainland China), operated by Air China
Cargo. Early estimates suggest the route has helped inject upward of $31 million into the economy since. Regionally, though, the most obvious impacts of trade are arguably seen a few hours to the east, in Saskatchewan, where one out of every five jobs is reliant on exports. Roughly 70 per cent of all goods produced in the province eventually find their way to markets beyond Canadian borders — to China, the United States, and a growing number of ‘non-traditional’ markets. DynaIndustrial, for instance, has set its sights on South Africa. Founded in 1976, the custom manufacturer and metal fabricator manages locations in Regina and Saskatoon, in addition to a sales office in Mobile, Alabama. With the slowdown in the natural resource sector, Director of Sales Victoria Rhodes says the
Prairie Manufacturer Magazine • Winter 2016
company needed to re-evaluate what other jurisdictions had a demand for its specialized expertise. “Being from Western Canada, we have a natural affinity towards mining, and oil and gas,” quips Rhodes. “We know those industries well. It just so happens that South Africa is also home to one of the largest mining operations on the planet.” Despite suffering a notable dip in output from its all-time peak, South Africa remains the world’s fifth largest producer of gold, and is a leading exporter of diamonds, iron ore, platinum, chromium, palladium, and a cornucopia of other minerals. DynaIndustrial found its break in gold. After more than three years of promotion and negotiation, this past November, the company saw its first ‘rock bolter’ operate in the South African market. The DynaBolter is a semiautomated machine that installs steel bolts into the roof and back of mine bores to prevent cave-ins and the dislodging of debris. Several similar units have been
sold into Canadian ‘soft rock’ potash mines over the years; however, this is the first that has been commissioned specifically for ‘hard rock’ environments. “Global business of any kind takes time, but that is particularly true when you’re dealing with highly customized products,” says Rhodes. “You need to find partners who share your corporate values and beliefs, and who do business the same way you do. You need to carry out your due diligence in the transaction. And above all else, you need to be sure your
customer can get your product when they need it.” That ability to deliver is often what makes the difference. “In the resource space, when people want product, they want it now,” she says. “The competitiveness of the market is such that you need to be better, faster, and more responsive than everyone else if you want the sale.” Back at EIA, Keehn and his team have embraced the same philosophy, and point to the $500 million worth of recent
private sector investment as proof they are on the right path. “Manufacturing on the Prairies is deceptively diverse,” he adds. “We innovate so many different products for so many different markets that providing the right shipping service can be a moving target. But that is where the business is going, so that is where we need to go, too. “Canadian manufacturers can have the best solution in the world, yet it’s all for naught if they can’t get it to market on time, reliably, and cost competitively.”
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The Principal Resource
Training the workforce of Industry 4.0 By Dr. Larry Rosia
Prairie Manufacturer Magazine â€˘ Winter 2016
ull disclosure: I’m a lifelong academic. I’ve been immersed in the world of education and training for more than 35 years — as an instructor, program chair, dean, and now president and CEO of one of Canada’s most dynamic polytechnic institutions. But don’t hold that against me just yet. I’m actually here to plead industry’s case for a better, more responsive, and more innovative training sector. There is no doubt higher education is one of the most important ingredients in the economic chain. Human capital is the universal input for all businesses, and we in polytechnics, community colleges, and universities are responsible for ensuring the quality of those inputs. Admittedly, however, academia often forgets that you — manufacturers and employers — are our customers, our clients. And, sometimes, we haven’t been the best suppliers. That’s not because we’re bad at what we do. To the contrary, I’d argue Canada has one of the strongest post-secondary systems in the world. In fact, according to the Organization for Economic Co-operation and Development’s 2016 benchmarking report, Canada again leads the globe in adults aged 25-64 who have completed tertiary education. That’s not to say everything is sunshine and rainbows. The World Economic Forum ranks Canada 19th in higher education and training, and a sluggish 24th in overall innovation. The nagging narrative of ‘jobs without people and people without jobs’ is a vivid illustration of the disconnect that persists — a disconnect that also occurs between higher education and industry. Nobina Robinson, the head of Polytechnics Canada, a national policy advocacy association of Canada’s leading polytechnics, recently wrote the reason for this is straightforward: “We are stuck with a hierarchical understanding of education. We believe certain types of education have prestige and earning power, while thinking other types should be left to the weaker students even though they fill an obvious need.” I don’t think many in the private sector would disagree — a resetting of perception to reality when it comes to education is needed. And industry is, and should be, leading the call for a fundamental overhaul as to how we prepare students for the workforce. Robert Hardt, president and CEO of Siemens Canada, has long talked about Industry 4.0 — the fourth Industrial Revolution, and a paradigm shift from labour-intensive processes to a system supported by advanced technology, big data, and intelligent production design. The road to future competitiveness, he argues, is paved with digitalization, automation, and ‘the interconnectedness of things.’ The early stages of this metamorphosis have already begun, and we need to get ahead of it. True opportunity belongs to those that do not only respond to market Continued on Page 28 www.prairiemanufacturer.ca
demand, but anticipate it; and Canada has a short window to stake its claim on the future of industrial excellence. In the last issue of Prairie Manufacturer Magazine, we heard from Terry Bergan, the president and CEO of Saskatoon-based International Road Dynamics, on how autonomous vehicles are revolutionizing the transportation of goods and people, and the business opportunities created as a result. It is an industry, though, in its infancy — and there are many others of equal bearing, or even related consequence, that do not yet exist. For instance, if autonomous vehicles lead to a drastic reduction in the number of accidents causing death, the supply of natural organ donations for transplant could be instantaneously cut back by 70 per cent. How will we innovate a solution? If Canada is going to seize on these opportunities and navigate these challenges, where will the talent come from to make it happen? We need to train for the skills of tomorrow — not necessarily just for the jobs of today. Here’s what it will take:
Courage and political will Becoming a leader in next-generation education will require serious investment on the part of government and business. We need to make the deliberate decision to forge our way to the forefront of the global economy, with a high-value labour pool, knowing the return may be years in the making. There are inherent risks to that approach, yes, but there are larger risks to maintaining the status quo.
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World-class equipment and facilities We need to train on leading-edge equipment, in state-of-theart facilities designed with flexible spaces that can be reconfigured in minutes, and via interactive, distance learning technologies, such as virtual reality (reducing our physical footprint and the costs associated). This will help pull Canadian companies towards where the market is heading, and — paired with new mentorship and incubation supports — will stimulate a wave of new businesses and commercialization. The Geographic Information Science (GIS) Lab at SaskPolytech’s Prince Albert Campus is a small, albeit effective, model for what these flagship facilities can look like. The lab is the first in the province to use modern, Cat 6 wiring to a top-tier Cisco network switch, enabling each of the 18 workstations to quickly communicate at a full gigabit each. The 10-gigabit fibre optic connection to the main server room also allows students to fully utilize 60 terabytes of high-performance storage. This facility has helped the college become a leader in using unmanned aerial vehicles, or drones, for watershed and shoreline mapping.
A rethinking of credentials It’s time to customize curriculum pathways, and put a greater emphasis on blended learning. Perhaps we should consider doing away with the traditional diploma and degree altogether. Do employers trust credentials, or are they looking for the skill sets
those credentials bring? No two students — or businesses, for that matter — are the same, so why do we treat credentialing programs the same way? I remember sitting beside a student at a SaskPolytech function a few months ago, who was enrolled in our environmental technology program. He also had a law degree to his name. “What compelled you to go from being a lawyer back to school for environmental technology?” I wondered aloud. As it turns out, there is a certain high-demand mineral that can be extracted from various sources in outer space — the next frontier, he believes, in mining exploration. He wants his firm to be the first to specialize in the laws and regulations that are sure to come. That is the type of thinking — and the type of student — we need to do a better job supporting. Nobina Robinson is right: Before we can do anything else, we must first modernize how the public values trade school and applied learning in comparison to university undergraduate education or graduate school.
Strengthen collaboration Research has shown that technologists and technicians comprise more of the workforce performing research and development in Canadian companies than master’s or doctoral students. Earning potential between the different levels of
education is at par in many industries, if not slanted more favourably to vocational or technical graduates. Let’s recognize we’re all in this together. That starts with greater collaboration between parts of our education and training system. Here in Saskatchewan, with a population of 1.15 million, we have two universities, four federated colleges, six affiliated colleges, one polytechnic, four institutions dedicated to Indigenous and northern education, eight regional colleges, and dozens of career colleges and private training bodies. We need to remember we are not competing with each other (and operate in that manner). We are working to provide you, businesses, with the skills you need, and will need, to grow. In manufacturing, you know one of the best sources of innovation is your own supplier. And, as a taxpayer, postsecondary education is the largest public investment you make in innovation. Send us the right signals through involvement in program advisory committees, partnering in applied research, offering work integrated learning (WIL) opportunities, donating equipment, and sharing industry expertise by becoming part-time faculty or instructors. Start expecting and demanding more for your money; and — like any other supplier — it will be up to us to deliver you solutions. Dr. Larry Rosia is the president and CEO of Saskatchewan Polytechnic, which serves 27,000 students at four campuses across the province.
#AlbertaInnovates Amidst the commodities crash and one of the worst recessions on record, Alberta manufacturers have turned to their entrepreneurial instincts By Joanne Paulson
hile CTV’s hit show Corner Gas is widely associated with small town Saskatchewan, its theme song these days could very well apply to the province’s westerly next-door neighbour: ‘You think there’s not a lot going on; but look closer, baby, you’re so wrong.’ Without question, Alberta’s economy has been hard hit. Weakened crude prices, which first dipped below $30 USD per barrel in January, compounded by one of the most devastating wildfires in Canadian history, have left oil producers and those who service the industry reeling. And who can be the least bit surprised? At its peak, the sector churns out upwards of $30 billion worth of output annually — hardly a drop in the bucket by any standard. But, if you look beyond the gloomy headlines and political bombast, innovation is beginning to reclaim centre stage. That’s not to say it ever left. Perhaps the rest of the country is simply taking notice. “I chuckle when people maintain there is no innovation in Alberta,” says Marlon Leggott, chief manufacturing officer with Packers Plus Energy Services. “They just haven’t looked very far, or very hard. I think they’re looking for a sound bite instead of facts.” Leggott points to the company’s prerecession evolution as a case study. A global leader in hydraulic fracturing, or fracking, Packers Plus has been around since 2000, and specializes in advanced technologies to enhance oil and gas production. Once a well is drilled, isolation mechanisms are inserted into the open hole. The port — a tool used to remotely open the bore — is then inserted, allowing operators to pinpoint the precise area they
would like to fracture the rock. This process is known as stage fracking. When the business was young, Packers Plus could manufacture a handful of components per shift. Today, with facilities in both Calgary and Edmonton, its production capabilities exceed 15,000 units per month. “One of the biggest changes for us was the introduction of automation,” recalls Leggott. “Using robotics, we have automated assembly, inspection, testing — you name it. We’ve transitioned to production lines that build volume, and maintain or exceed quality standards from the old way of doing things. “Sure, we did it to meet a growing demand at the time; but, we also did it to so we could better manage our costs and service our customers when demand fluctuated.” For Ken Chapman, a former executive director with the Oil Sands Developers Group and Edmonton Economic Development Corporation, it’s a philosophy he wishes more manufacturers had embraced during the ‘boom years.’ Yet, he acknowledges it wasn’t due to a lack of trying. In many companies, innovative ideas were aplenty — it took a recalibration of priorities, however, to bring those ideas to the forefront. “Everything was just too big, and all change happens in the margins,” he says. “No one in the system had the time to talk to anyone else. There was churn as well — employees moving companies all the time. You’d start building out an idea, you’d get it going, and then you’d have to start from scratch all over again.”
The science of diversification Oil and gas is not the only sector beating the innovation drums in Alberta.
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Environmental technology, agriculture, bioscience, nanotechnology, and forestry are all seizing the provincial slowdown as a window to retool and invest in research and development. Alberta Pacific Forest Industries, or AlPac, is a company doing just that. The last major pulp mill to be built globally, AlPac has welcomed digitization as a disruptor, but not a job killer. Instead, they are adapting to a world that will use less and less paper. “They’re starting to reinvent themselves by using the cellulose opposed to the lignin,” explains Chapman. “The lignin is what makes the paper products work. Cellulose, on the other hand, is the biological product you can use for everything from making artificial skin to plastics. “They are looking at how they can take the forest and turn it into more of a chemical plant.” Boreal (formerly Boreal Laser Inc.) is another manufacturer that has successfully transformed in years passed to address changing pressures in the marketplace. The company originally began out of an Edmonton garage, serving the Canadian defence sector. When many of the research groups moved out east, however, the co-founders needed to explore new applications for their laser-based gas detection technology. “Originally, we never thought of ourselves as a manufacturing company,” says Jim Bauer, Boreal’s vice president of mobile monitoring. “We were going to be a pure service provider. We were going to build equipment for ourselves and use it to provide measurements.” Then, unexpectedly, they were approached by a refinery in California, which wanted a virtual ‘fence line’ monitor, installed around an operating unit to see if gases were coming in or out of the plant. The customer insisted on purchasing the technology outright; and, instantly, Boreal became a manufacturer. “It became clear early the industry wanted something that was not a finicky laboratory instrument,” says Bauer. “It had to be something solid, that someone could throw in the back of a pickup truck, drive out to site, and take a measurement without needing a Ph.D. in laser physics to use it.” Boreal laser detectors are now light and portable, roughly a foot-long in each
direction. They measure the concentrations of several different types of dangerous gasses, including hydrogen fluoride, methane, ammonia, and carbon dioxide, and are sold in close to 50 different markets around the world. “Every gas, when it’s hit with radiation, like light, vibrates and absorbs some of the energy at a specific frequency,” explains Bauer. “We tune the laser to that frequency and scan back and forth. When the beam encounters molecules of the gas, our detection technique can tell how much is absorbed and, subsequently, how much gas is present.”
Changing attitudes — and businesses The latest iteration of the former Alberta Research Council, Alberta Innovates (AI) is the government agency responsible for stimulating innovation in the province. It is currently consolidating four dedicated corporations — bio solutions, energy and environmental solutions, health solutions, and technology futures — under a single umbrella, focused on research and commercialization. “Research and innovation are critical priorities for the province,” says AI CEO Pamela Valentine. “Great ideas and technologies created by Albertans need the best support system we can offer, as well as easier access to the full breadth of our services.” Medical device manufacturing is an industry that has continued to flourish in Alberta under Valentine’s leadership. Piggybacking on the province’s commitment to supporting high-value specialty components, materials engineering, nanotechnology, and imaging, companies like MagnetTx and Applied Quantum Materials are revolutionizing healthcare delivery. Chapman commends the work of AI, adding they are an integral part of a more macro cultural change that is still young. The next phase, he says, is to go global. “Edmonton is the third largest manufacturing centre in Canada, yet only 10 per cent of companies export. I’m optimistic we can advance that, but we need to think bigger. Diversification needs to be more than doing variations on a theme.”
A Semple recipe for success 2016 ABEX Business Leader of the Year honouree and Brandt Group of Companies Chairman Gavin Semple chats with Saskatchewan Chamber of Commerce CEO Steve McLellan about leadership, innovation, and the ‘most important sale’
Steve McLellan denoted by the initials SM; Gavin Semple denoted by the initials GS. SM: Mr. Semple, thanks so much for sitting down with me, and congratulations on your recognition as the chamber’s 2016 ABEX Business Leader of the Year. GS: Thank you, Steve. SM: Let’s start by talking a little bit about the idea of opportunity. How does Brandt look for new opportunity in a ‘rainy day’ type of economy? GS: When things are good, business is booming, and we’re all focused on keeping up with demand, there is sometimes a tendency to think shortterm instead of long-term. The converse is, when things happen in the market that hurt your business, it forces the whole organization to rethink what new products you can introduce, what new markets you can enter, and what new ventures you should take on to grow. Coming out of the storm, Brandt has expanded its product line in just about
every division. We’ve entered into new partnerships, and we’ve captured market in places we hadn’t previously done much before, such as the Maritimes. But when we do look for those opportunities, we look for synergies with the business we already do. For example, about eight years ago, we decided to get into the manufacturing of attachments for construction equipment sold through Brandt Tractor. Now, we employ about 100 people in that division alone. We’ve also now entered the trailer business. Every piece of equipment we sell usually leaves our lot on top of a trailer, so we asked ourselves why those trailers couldn’t be made by Brandt. SM: Is leadership in this sense about seeing the economic downturn as having a silver lining, or is it an absolute necessity for business innovation? GS: What doesn’t kill you makes you stronger. So, whether you’re a football team or you’re running a business, sometimes losing causes you to do some soul-searching, look for the areas that need improvement, look for the areas
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that are ripe for opportunity, and take advantage of them. Winning, believe it or not, can make you weaker. The reality of the marketplace is that all businesses cycle. One of the things we did a long time ago was diversify our business — no different than the farmer who grows six different kinds of crop. They’re not all going to be high-priced or bumper crops at the same time; but, on average, you can have some consistency in profitability. SM: Brandt has roughly 2,000 employees today — about 10 per cent of which are managers at various levels. If one of those managers comes to you and asks you to define what you expect of them as a leader, does it change depending on their specific position or experience? GS: The vision may vary, but the qualities of a leader I don’t think change, regardless of the level. It takes an ability to interact with people, to listen and understand the needs and desires of the people within the organization, and to lead them by example.
Good leaders have a strong work ethic. They have a bias towards positivity. And they expect to win. They invariably have their own ideas of where the organization is heading, too, so they need to be strong communicators and persuasive. SM: That’s very clear, thoughtful advice. Were there times in your career when you said: Hey, there’s a lesson for me as a leader, or where you came across a leader you wanted to emulate? GS: There were several, but there was one in particular that had a big impact on me. He was the owner of Ditch Witch down in Oklahoma. He was a very modest, quiet, principled leader, who truly valued his people. So, a lot of the things we’ve done at Brandt — both my son, Shaun, and I — have been patterned after that example. Celebrating success as an organization, for instance, so everyone feels they were a part of it, he did very well. We’ve tried hard to do just that and recognize achievement. He had such
positive people — and he cultivated that environment by leading from the back. He was a big inspiration on my life. SM: You mentioned Shaun, who now leads Brandt as president. You’ve been fortunate to be able to come to work with your son every day and see him grow throughout his career. What is one lesson you’ve learned from Shaun? GS: Shaun has a lot of strengths I don’t. He’s a ‘long thinker,’ a big thinker — a bigger thinker than I am. He’s also a bigger risk-taker. He won’t make decisions because they’re easy, and it’s taken me a long time to learn that lesson. When you’re dealing with a difficult situation, there are often a variety of paths forward. Some are easier, shortterm fixes, and others are tougher, long-term solutions. Shaun defaults to the long-term. SM: That’s an interesting place to pivot. Let’s look to the long-term. Fifteen years from now, what does Brandt look like?
GS: I expect to see Brandt continue to grow reasonably aggressively. It will probably be slanted towards manufacturing, as we enter new markets and introduce new technologies on the shop floor. I know Shaun and his team have some big plans on the horizon. That said, we will also expand on the distribution side — and part of that is technology-driven as well. We recently launched a positioning technology division, using a product called Topcon, which is akin to precision farming, but for construction equipment. We sell that to our contractor customers, who use it to improve their productivity and gain a competitive advantage when using our equipment. SM: If a company does not have a formal or informal innovation strategy or appetite right now, what advice would you give them? GS: That’s the direction the world is going. It’s pervasive — it’s in every sector. Advanced technology is not all that advanced anymore. In many ways, it’s actually quite standard. Continued on Page 34
how our industry works.” Melissa Vencatasamy, Co-owner, genAG Farm Equipment Retail
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“We have four core values at Brandt: Quality, innovation, commitment, and customer-focus. Everything we do in the first three is to satisfy the fourth. That is the source of all our success. But for that to work in an organization, it has to be truly believed by staff and management. It has to be part of your culture and fundamental to how you do business.” For us, innovation is embedded into each of Brandt’s business units. We have about 60 people solely dedicated to engineering, so they’re on the leading edge of the technical aspects of innovation, but it’s not their responsibility alone. It’s up to everyone in each division to know the industry they’re in, empower creativity, and drive innovation in every product and process. Lean is a big part of that at Brandt. It engages every employee and systematically allows us to continually improve what we’re doing and deliver better results for our customers. SM: One of the core tenets of lean is adding value for your customer — that’s front and centre. And whenever I hear you talking about any aspect of the business, you tend to always circle back to the impact on your customers first. Where does that come from? GS: Back to Ditch Witch. Their entire focus is on the customer — meeting with the customer, learning from the customer, fulfilling customer needs. They hammer that point home in their training. We have four core values at Brandt: Quality, innovation, commitment, and
customer-focus. Everything we do in the first three is to satisfy the fourth. That is the source of all our success. But for that to work in an organization, it has to be truly believed by staff and management. It has to be part of your culture and fundamental to how you do business. SM: Let’s, for a moment, get to know a little bit more about you. What does the typical day look like for Gavin Semple? GS: I’m an early riser — between 4 a.m. and 5 a.m. The first thing I do in the morning is spend an hour on the treadmill. While I’m on there, I switch the television back and forth between CNN, BNN, and CTV, so, by the time I’m done, I’m caught up on the news, the markets, and those crazy politics south of the border. Then I get ready and head into the office, usually for 7 a.m. at latest. Once I’m in the office, it’s usually a day full of interacting with people. I spend a lot of time in meetings, liaising back and forth between associations and government, and — of course — on the shop floor talking with staff. I’m home for supper by 5 p.m. most days, unless there is a [Regina] Pats [hockey] game that evening.
Prairie Manufacturer Magazine • Winter 2016
SM: Apart from the Pats, what are some of your hobbies? What do you do to decompress? GS: Every weekend, we go out to the farm. I have a large extended family; so, we have a lot of family gatherings. It’s not uncommon to have 25 guests out for supper on a Saturday night — usually on short notice. SM: No opera as a pastime? GS: I don’t sing opera, but I did grow up in a home that listened to opera. I do like music, though. I own four guitars. In fact, one of them was owned by Garth Brooks. I usually don’t admit to being a guitar player because my brother, Jack (a Juno Award-winning blues musician), outshines me. But, at the farm, when you’re 30 miles from people, you can play guitar and pretend to know what you’re doing. SM: You’ve been married to your wife, Annette, for more than 50 years. What role has she played in your professional career? GS: She’s always encouraged me, even when she didn’t have much to go on. She’s believed in me and supported me — and that’s real important when you’re an
entrepreneur with everything on the line, especially in the early stages. It’s a big family sacrifice. Convincing your spouse to come along on that journey with you is really the first, and most important, sale you have to make. SM: Jumping back to business and current affairs, there has been a lot of talk about the carbon tax. Say the prime minister came to you and said, “We need to reduce emissions, we looked at our options, and now we need a solution — what should we do?” What advice would you give him? GS: Much like our own business, I would suggest we look at what Canada is already doing and find ways to leverage it. What concerns me is that it seems the general public believes industry doesn’t care about the environment. Nothing could be further from the truth. I merely think a carbon tax is an inefficient and ineffective way to reduce emissions. And we haven’t thought through the unintended consequences to the economy and small businesses. I just look at our customer base. Take agriculture: It is a modern miracle, if you
back up and compare to what it was like 30 or 40 years ago, how productive and ecologically efficient our practices and equipment are today — and we still can’t feed the world. I spoke to one farmer that estimated a carbon tax would cost him in the vicinity of $120,000 per year. Pressures like that aren’t going to move the needle on emissions — they’re going to put families out of business. Instead, my advice to the prime minister would be to focus on innovation. Encourage entrepreneurs and companies to develop and adopt technologies that reduce emissions. And, in the process, we may very well create a whole host of new opportunities, world-leading businesses, and revenue streams that didn’t exist before. SM: Last question I’d like to finish with: What advice would you give to a new manufacturing leader on the Prairies? GS: First, if that’s your passion, commit to pursuing it. Don’t be afraid to ask people for advice, who have already been down the road you want to travel. You don’t have to take their advice. I have
asked many people for advice over the years — some I listened to, and some I didn’t; but I learned a lot from other leaders who had more experience in the industry than I had. It’s always good to hear from others who have been where you want to go. Second, you can’t do it alone. I came to the realization in the early stages that I needed to build a team of capable people especially in areas where I lacked experience. It took me a while to learn to trust their judgement, which is another important factor — especially as the organization grows. Attracting and retaining capable members of the team who share your values is the most important factor in the success of any organization. Third, don’t quit. In business, one is faced with disappointments and setbacks on a regular basis. Determination and resilience is the cost of entry for entrepreneurs. If you don’t have it, don’t enter. Finally, celebrate success with your team! Everyone likes to be part of a winning team.
Foreign trade can’t be so foreign anymore By Jayson Myers
ood news about CETA. For those keeping score, this is the third time Canada’s Comprehensive Economic and Trade Agreement with the European Union has been signed, but another major hurdle has been crossed on the road to ratification. It now goes to the European Parliament (expect another signing ceremony!), and then enabling legislation must be passed in Canadian and European national parliaments. If all goes well, the treaty will come into effect next year. CETA will open new opportunities for Canadian business in Europe. And none too soon. The International Monetary Fund (IMF) has just downgraded its forecast for world economic growth to a disappointing 3.4 per cent for 2017. It expects advanced economies to chug ahead at a measly 1.8 per cent next year. The problem? Well, there are several. Commodity markets will remain depressed. China is pivoting away from infrastructure and heavy industry to consumer and services-led growth. There’s a lot of excess capacity in industrial markets. Businesses are cutting costs and capital investment is expected to remain weak, especially for heavy machinery, mining, drilling, and agricultural equipment. Governments are trying to keep their deficits in check. Over-indebted consumers don’t have a lot of money to spend. Unemployment remains stubbornly high. Protectionist pressures are mounting. It’s all a recipe for very slow growth in domestic markets and international trade. But, there are a few bright lights on the horizon. The United States, our largest export market, is expected to outperform other major economies — the IMF projects 2.2 per cent growth next year — thanks to an improvement in employment and household income. A high U.S. dollar will also help boost sales south of the border (although increasing costs in Canada). U.S. construction activity is expected to pick up and demand for consumer products, including cars and light trucks, will remain strong. It says a lot, though, when a sub-normal growth forecast for the U.S. economy becomes a beacon of hope for exporters. Of course, it will not only be Canadian companies looking to sell into the American market. Exporters from around the world will be competing there — many with the advantage of currencies that have sunk just as low, or even lower, than the Canadian dollar against the almighty greenback. Meanwhile, the risks of doing business in the U.S. are on the rise. If Prairie manufacturers are going to grow, they need to look beyond their existing markets in Canada and the U.S., and double-down on making international business an integral part of their operations. It can’t be ‘business as usual’ anymore. Few manufacturers can rely on a low dollar, existing product lines, or 36
Prairie Manufacturer Magazine • Winter 2016
current distribution and supply chain relationships to guarantee even short-term export success. To help you along the way, here are the top seven tips I’ve learned from Canadian companies on growing international business in a slow-growth economy:
1. It’s not about markets. It’s about finding and developing manageable business opportunities. There is a lot of change — and a lot of challenge — behind slow-growth market conditions. Start by identifying specific business opportunities that you will be able to exploit ahead of the competition and effectively manage as they evolve.
2. It’s not about sales. It’s not about getting product out the door, either. It’s about offering unique customer solutions. Business development starts with understanding customer expectations. Even hightech companies realize their real differentiator is their ability to offer innovative, value-adding solutions to their customers that are reliable, competitively priced, and easy to manage.
3. It may not be about exports at all. Canadian manufacturers can grow by investing in offshore production and services operations. The sales of Canadian affiliates located abroad far exceed the value of goods and services exported from Canada. Foreign investment in Canada also provides a channel to export around the world. Canadian businesses might be better positioned to grow internationally by integrating their product or service into a broader value chain solution for customers offered by larger companies with a multinational presence. Roughly 80 per cent of the world’s non-commodity trade takes place within multinational companies and among their top-tier suppliers. CETA should help to attract even more European multinationals to invest in Canada. Think about leveraging locally anchored value chain opportunities to go global.
4. It’s difficult to capture market share. It’s easier to secure business during a process of new product development. The competition for existing business is intense. It’s transactional. Canadian companies will succeed if they are able to offer unique products and services at competitive costs. But, those able to build relationships with customers as part of their product and service development process have a better chance of long-term business growth.
“Remember, introductions are only a start. The Chinese say that talk happens over Peking duck, but business is done over noodles. Don’t rely on the Internet — plan to spend a lot of time in your target market.”
5. No one can do it alone.
7. Yes, it takes money.
Partnerships are important. There are lots of businesses, government agencies, trade associations, and other organizations that can help build international business opportunities and mitigate the risks along the way. Canada’s Trade Commissioner Service and Export Development Canada are two especially important entities that can help prepare companies to enter new markets and connect with other business partners and opportunities abroad. International trade is risky business. But, like any venture, the returns are significant if managed well.
Whether it’s in developing the right products and services; investing in the right technology, production, or distribution platforms; managing risk; hiring the right people; or growing and sustaining business relationships, international business growth comes at a high cost. So, business planning needs to take working capital requirements into account. Export insurance is more important than ever in today’s slow growth, highrisk environment. And, customer financing services can be a very attractive component of the business solution offered to international customers. Vision without money is hallucination.
6. It takes face-time and patience. International business is built on trust, and it’s built by people. Even in North America, sustained business growth depends on interpersonal relationships. Canadian companies have a bad reputation of not following up on business opportunities. Remember, introductions are only a start. The Chinese say that talk happens over Peking duck, but business is done over noodles. Don’t rely on the Internet — plan to spend a lot of time in your target market.
Jayson Myers is an award-winning business economist, specializing in industrial and technological change. He is an advisor to both private and public sector leaders, and has counselled Canadian prime ministers and premiers, as well as senior corporate executives and policymakers around the world.
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By Birgit Matthiesen
Prairie Manufacturer Magazine â€˘ Winter 2016
he 2016 election was the longest in U.S. history. For more than 85 weeks, American households were bombarded with lofty promises and grand ambitions. President-elect Donald Trump will assume the Oval Office on January 20, 2017, without any previous public service experience. In doing so, he will be taking the reins of the world’s largest economy, and Canada’s most prominent trading partner. How he leads, however, remains to be seen. On trade policy, Trump went further than any other candidate, promising to ‘rip up’ existing agreements, including NAFTA, impose a 35 per cent tariff on imports from Mexico and a 45 per cent duty on imports from China, and potentially even pull out of the World Trade Organization. He will arrive in Washington supported by a GOP-led House of Representatives, as well as a GOP majority in the Senate. Legislatively, one would expect smooth sailing for the next two years minimum, until the midterm elections. But these are not normal times. In the weeks following the November 8 vote, my phone has blown up with calls from U.S. and Mexican companies wondering what a President Trump will mean for cross-border business. While there are some early signals, the reality is that there are still far more questions than answers — an uncertainty few businesses can afford. Let’s start with NAFTA. The trade debate is no longer just about the ‘if or when’ of an Asian-Pacific accord. This is NAFTA we’re talking about. This is here and now. The grassroots anxiety over the loss of American jobs was palpable across every corner of the country — specifically in the rust belt, which was largely responsible for swinging Trump to Electoral College victory. Now, the candidate-turnedpresident will want to make good on his promises (or, should I say, some of them). President Trump and his new economic team will want a ‘win’ to headline the administration’s first 100 days. Building a wall will take some time. Repealing ‘Obamacare’ will surely run into partisan delay tactics. Trade could be it. The surprise announcement from Prime Minister Trudeau that Canada would entertain the possibility of NAFTA 2.0, quickly followed by a similar gesture from Mexico City, hands the president that early opportunity. First off, can he do it on his own? In short, the answer is yes. Since the beginning of the 20th century, the president has enjoyed considerable authority over foreign affairs, and Congress has delegated much of its role to the Executive Branch. In modern times, this transfer of power has taken the form of the Trade Promotion Authority. So, if the White House decides to withdraw, renegotiate, or revisit a trade pact, it could, although Congress would need to be properly ‘consulted’ — not an easy task, and one that would require many visits down Pennsylvania Avenue for meetings with nervous House and Senate leaders. Secondly, is this an action he would consider? We simply don’t know — at least not yet. Many here in D.C. are
readying for the possibility that the Trump administration will propose something between ‘ripping it up’ and an attempt at ‘modernization.’ It remains unclear whether the three North American leaders will go so far as to change preferential trade provisions, such as duty rates or domestic content rules. So, NAFTA is all of a sudden back on the docket. What should Canadian manufacturers do to prepare? Start planning. Now. Do not wait. One strong suggestion is for executives to fully take stock of bottom-line dependence on NAFTA. And, to do this, they will need to ask the right questions of the right people within their organization. They will need to understand the rulebook. NAFTA rules, though, are two decades old; and they will need to be dusted off and analyzed anew though the prism of a company’s supply chain and customer base. What portion of your inputs and sales are subject to preferential NAFTA tariffs? What would a removal of that preferential treatment mean? How would a rule change on regional value content affect your business? Could a NAFTA rewrite bring a broader choice of component parts? Does your company use drawback rules? How would the lifting of the NAFTA exemption on U.S. merchandise process fees erode your bottom line? These answers require information, and good information takes time to gather. But good information leads to good decisions. Canada’s partners and competitors to the south have been strategizing for some time now. It’s time for Canadian enterprises to catch up. This is real and the time is now. The ‘wait and see’ approach is not an option. That evaporated during the prime minister’s November 10 press scrum. There are other truths Prairie manufacturers will need to recognize: The 70 cent loonie will not be a business buffer in the months ahead. Global facilities will not necessarily lead to better global options (whether it’s understood or not, Canadian companies still depend on the U.S. and Mexico — especially when international trade rules are not completely comprehended). China hasn’t gone away. Absent the Trans-Pacific Partnership, NAFTA is a firewall for North American competitiveness. And, Canada has more to lose than Mexico. Just follow the money. The next four years will be game-changers. Trade in the Trump agenda is the new ‘risk point,’ and the mitigation of that risk involves understanding the dynamics at play, realizing the consequences of outcomes, formulating proactive checks and balances, and seeking the best counsel to provide the ‘long view.’ In Trump’s own words, this is ‘the art of the deal.’ Companies need to come to the table with the best cards possible. Birgit Matthiesen currently serves as co-chair of the CanadaU.S. Cross-Border Business Affairs practice at Arent Fox LLP — a prominent K Street law and lobbying firm in Washington.
moves indoors How manufacturing is powering innovation in Western Canada's home building industry By Joanne Paulson
ometimes, it’s all in a name. When Canada’s housing market began to heat up in the mid-2000s, and the dream of home ownership inched further and further out of the reach of many consumers, the term affordable housing became more than just a price category — almost overnight, it transformed into a call to action for policymakers and builders alike. It was a dilemma that had reached new heights, and one that required out-of-the-box solutions. Enter Innovative Residential. Co-founders Alex Miller and Tyler Mathies began their construction careers like many young entrepreneurs in the industry — by flipping homes. But, soon, a rather uncharacteristic opportunity presented itself that would change their business forever. Against the backdrop of Saskatchewan’s economic heyday, the Saskatoon airport had started to attract unprecedented volumes of travellers. With the boom came the need to better develop nearby commercial opportunities, including a parcel of land just south of the airport, in the city’s tired McNab Park neighbourhood. To make way for a slate of new hotels, a cluster of wartime barracks were put on the market for pennies on the dollar. The catch? They needed to be moved. Miller and Mathies were up for the challenge. A new community was selected, new foundations were poured, and the buildings were relocated. After thorough renovations, the units were back on the market, completing the transition from dilapidated accommodations to comfortable, quality homes. It also provoked an interesting question: How could they use that concept — a foundation there one day, a dwelling the next — and build more affordably, with quicker turnarounds and superior craftsmanship? The answer was only 830 kilometres away, next door in Winkler, Manitoba. “We ended up touring 19 facilities in Canada and the northwestern United States that specialized in modular construction,” recalls Miller. “Grandeur [Housing Ltd.] in Winkler was absolutely number one.” Continued on Page 44
Prairie Manufacturer Magazine • Winter 2016
â€œOnce you have a model, the question is how you make it more efficient. If you are going to make a repetitive product, the modular approach helps to optimize the process. It takes the variable of weather out of it. It addresses a ton of safety issues. Ultimately, it has positioned our business to be scalable.â€?
Construction meets manufacturing Eight years later, Innovative Residential and Grandeur have the system down to a science. Once land is purchased and designs are completed, Grandeur builds entire modules from floor to ceiling, ranging in size from 700 to 1,500 square feet. Electrical and plumbing hook-ups are positioned, interior fixtures are installed, and — as they say — ‘even the kitchen sink’ is dropped into place. The entire process lasts only five weeks. The modules are then shipped to site and craned into position. It takes a single worker eight hours to finalize setup, which includes connecting all necessary utility hook-ups. Finally, a roof is built on top of the modules. From start to finish, construction time is cut by more than half over traditional building practices. “Once you have a model, the question is how you make it more efficient,” explains Miller, who is educated as an engineer. “If you are going to make a repetitive product, the modular approach helps to optimize the process. It takes the variable of
Prairie Manufacturer Magazine • Winter 2016
weather out of it. It addresses a ton of safety issues. Ultimately, it has positioned our business to be scalable.” Chris Guérette, CEO of the Saskatoon and Region Home Builders’ Association, says Miller’s theory has been proven true by the popularity of Innovative Residential in the marketplace. “It’s a company living up to its name by doing things differently — and it’s working,” she says. “Even in an environment where a considerable amount of multi-family housing has been recently built, they’re selling well because it’s an attractive option and they are adding to the diversity of choice.” For Miller, the factory-based methodology is equal parts efficiency and reliability. In a standard build, most local jurisdictions require four or five separate inspections. By comparison, at Grandeur, the quality assurance protocol translates into between 1,200 and 1,500 quality checkpoints per module. “It’s how a manufacturing factory is supposed to work. There are no surprises. You know what is behind your walls. Nobody drills holes on-site. Everything is done prior to assembly. It’s the only way to build.”
As of Spring 2016, Innovative Residential had 670 homes that had been lived in for more than a year — all entry-level townhomes or apartment-style condominiums. But Miller’s most satisfying statistic: Zero written complaints — a proverbial ‘flying pig’ in much of the home building sector. “We’re a young business that cares about doing the right thing,” he iterates. “We won’t compromise on the things that are important. There are a lot of ways to build a home and, when I look at building in the factory, it’s impossible to site-replicate that. You can’t beat it.” The business results tell the same story. The company is a recurring tenant on the Profit 500 list, with annual sales of roughly $35 million. In addition, they’ve received 30 local and national industry awards, including recognition from the Canada Mortgage and Housing Corporation.
The Grandeur way Modular construction is, by no means, entirely new. Grandeur, which has been in operation for 40 years, has built close to 1,500 modules for Innovative Residential alone. Today, the company occupies 200,000 square feet of indoor production space and averages 300 full-time employees. “Our homes are really no different in the fact they are still homes,” explains Jeff Enns, director of sales and marketing at Grandeur. “The only difference is that we build them in a factory setting, which makes us extremely consistent in what we do. It’s a
“Our homes are really no different in the fact they are still homes. The only difference is that we build them in a factory setting, which makes us extremely consistent in what we do. It’s a controlled climate, so the same amount of work and expertise is going in at minus 30 degrees as when it’s plus 30 outside.”
controlled climate, so the same amount of work and expertise is going in at minus 30 degrees as when it’s plus 30 outside.” Grandeur welcomes the label of manufacturer with open arms; but Enns is quick to mention that the word factory is often misrepresented, associated with a single-point product or an assembly line allowing for little change. Like many of North America’s premier manufacturers, however, customization is baked into their success. Grandeur produces roughly 400,000 square feet of finished space each year, from custom-built homes and apartment complexes to RCMP detachments and day care centres. “We are still able to surpass the demands of any architect, engineer, local building authority, or building code,” adds Enns. “We’ve been around four decades because of our commitment to quality and customer service. “If you take care of those two things, and your staff, manufacturers can sell anything more than once.”
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MacLean: The days of carbon pricing are upon us By David MacLean
Prairie Manufacturer Magazine • Winter 2016
t’s happening, so we best get ready. By January, more Canadian manufacturers will be operating under some form of carbon pricing regime than not. The writing has been on the wall for a long time. But, when Prime Minister Trudeau issued an ultimatum to the provinces, announcing Ottawa would impose a price on carbon even if the provinces don’t, things got real in a hurry. Trudeau’s national policy, broadcast on the floor of the House of Commons in October, has several elements that manufacturers need to pay attention to. It calls for a broad-based carbon price in every region of the country. The emphasis on a ‘carbon price’ is important, as it signals the federal government is eschewing more economically burdensome ‘command and control’ or regulatory-based approaches to carbon reduction. Ottawa wants the carbon price to be equal across Canada, so one region doesn’t
grab an unfair advantage over another by setting a lower price — and they want that price to gradually rise over time. The provinces will be free to choose the mechanism (cap and trade, for example) but the revenue will stay in the province in which it is collected. Basically, the law of the land will be that, if the provinces don’t implement their own carbon price, Ottawa will go ahead and do it for them, and then hand over the revenue. The minimum price on carbon will be $10 in 2018 and rise to $50 dollars by 2022. All of this creates an interesting quandary for Canada’s manufacturing community. Sure, we can communicate with the federal government about stringency and price, but when you boil it down, provinces have all the say. They control the method of pricing and whatever complementary policies (such as emissions reduction incentives) are
implemented. Perhaps most importantly, they control the revenue that will be collected and how it will be spent. Each province will have its own internal conversation about what kind of system to adopt, as well as what can be done to mitigate impacts on our economies and overall competitiveness. Alberta’s economy-wide carbon tax takes effect in 2017 with a price of $20 per tonne. The government expects to collect $3 billion in net carbon tax revenue — part of which is to be used for rebates to low-income families, and the remainder to stimulate growth in renewable power generation and other policies aimed at reducing emissions. Coal power will be phased out by 2030 (rolled out as a national mandate in recent weeks). Alberta’s plan calls for the price to rise to $30 by 2018, and then by inflation plus two per cent each year thereafter.
This is where we run into a problem. The Province hasn’t announced the price in the years beyond 2018, but if it follows the recommendations of its Climate Leadership Panel, chaired by Dr. Andrew Leach (as it has for the most part so far), the price will be $35 by 2022 — significantly less than Prime Minister Trudeau’s policy of $50 per tonne. Premier Notley’s swift response was that she wouldn’t be playing along with Ottawa’s plan unless they approve a pipeline for energy exports. In Saskatchewan, things are muddier. Premier Brad Wall is leading the charge against a national carbon price, arguing it will render Saskatchewan’s most important sectors less competitive. The Saskatchewan government released a white paper on reducing emissions that emphasized carbon capture and renewable technologies, and innovation, as pathways to reduce emissions. Continued on Page 48
“As we move into what looks to be a new era of carbon constraint, however, we need to remember that manufacturers have been leading the way on carbon emission reductions, decreasing by 14 per cent nationwide since 1990, while simultaneously increasing sales revenue by 150 per cent.”
Manitoba Premier Brian Pallister ruled out a cap and trade system for his province, but was non-committal on an Alberta-style carbon tax, arguing that a ‘one size fits all’ solution will not work for Canada. As we move into what looks to be a new era of carbon constraint, however, we need to remember that manufacturers have been leading the way on carbon emission reductions, decreasing by 14 per cent nationwide since 1990, while simultaneously increasing sales revenue by 150 per cent. This was achieved through improvements in energy efficiency, the use of lower carbon fuels, and the adoption of new and less emission-intensive industrial production processes. Investment in improved plant facilities, machinery, and equipment has been key.
The only way Canada will be able to sustain strong economic growth and reduce greenhouse gas emissions is by accelerating this trend. Governments should help defray the costs of complying with the patchwork of policies across the country, and avoid picking ‘winners and losers’ by sector. The focus needs to be on results — not micromanaging the road to how we get there. Most importantly, we will not be improving overall environmental performance or achieving economic growth if we are simply forcing Canadian manufacturing and their emissions to foreign countries. We must ensure a level playing field for Canadian companies and their global competitors. While the increased costs associated with a national carbon price will be a
challenge for many manufacturers, the news isn’t all bad. The same technologies and processes that help us reduce emissions often have the pleasant side effect of improving productivity. And carbon constraint also presents a new market opportunity for manufacturers in the environmental and renewable energy space. Make no mistake: There’s a lot of uncertainty around carbon policy on the Prairies. Manufacturers need to be at the table with elected officials and bureaucrats to ensure the right mix of policies and programs are adopted — ones that foster continued manufacturing growth across Canada. David MacLean is the Alberta-based vice president of Canadian Manufacturers & Exporters.
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Prairie Manufacturer Magazine • Winter 2016
The truth about 5S Workplace organization is not housekeeping — it’s the key to mission-readiness in 2017 By Dave Hogg
odern workplace organization methodology — or 5S — can be traced back to Henry Ford’s CANDO thinking in the early 1900s. The idiom stood for cleaning up, arranging, neatness, discipline, and ongoing improvement. From there, half a century later, the Japanese derived the popular 5S system used globally today: Sort, set in order, shine, standardize, and sustain. Ford entrenched this philosophy as common practice with every member of his staff. It was an expected responsibility of both managers and shop floor personnel. He was careful never to call it housekeeping (you should avoid doing so, too!), as that particular word implies it is perhaps someone else’s job. Actually, it’s part of yours.
Mission-readiness Workplace organization is a sign of professionalism. It means being able to put your hands on whatever you need without wasting time. It means not having to break your concentration when solving a problem. And, it means protecting an image with customers that are about to place their trust in you by purchasing a product or service. Above all: It means being mission-ready in 2017. If you are not ready when opportunity knocks, there may soon be no mission. I recall a visit to the former Orenda Engines F-18 rebuild plant many moons ago. Visually speaking, their 5S program was immaculate, with every tool and fixture not on the shadow board in use. Work areas were spotless and thoughtfully organized — and they were kept so without the help of janitors, since keeping the workplace organized was ‘just part of everyone’s job.’ It was impressive. When the tour leader commended the operator for ‘one of the best 5S examples’ he had ever seen, the operator chuckled and replied, “You just don’t know how angry a pilot gets if I leave a wrench in his engine!” This environment is not contrarian from how a hospital operating room must be organized — and for many of the same
reasons. If your chest cavity is ratcheted wide open on the operating table, the right instruments must be present, in the right sequence, with the right orientation, and must enter and leave the surgeon’s hands without error. In both settings, failure equals death. Strict discipline is mission-critical. Earlier this fall, it was a joy to see first-hand New Flyer Industries’ OPEX system in place on their production floor in Winnipeg. To facilitate the right thinking amongst their workforce, the company trains using a dentist’s office to drive home how a world-class plant floor should be organized, clean, and professional.
The time is now We are in threatening and uncertain times. Margins are shrinking and changes abound. The election south of the border and recent signing of the Comprehensive Economic and Trade Agreement, or CETA, with the European Union are two major disruptors. Business performance will start with a refreshed vision — a change in thinking — and by embracing lean and workplace organization as mission-critical. Lean practitioners know workplace organization is just the beginning. To adapt to the realities of Manufacturing 4.0 and the ‘Internet of things,’ continuous improvement and lean thinking must serve as your organizational bedrock. It must be rooted in a commitment from leadership and a respect for your people. Everyone across the organization must be open to and contribute to change. If you change the way you think, your inefficient processes will naturally change with you. Dave Hogg is one of Canada’s premier thought leaders on lean manufacturing, and previously served as long-time editor of the distinguished Accelerate the Journey newsletter..
“Lean practitioners know workplace organization is just the beginning. To adapt to the realities of Manufacturing 4.0 and the ‘Internet of things,’ continuous improvement and lean thinking must serve as your organizational bedrock. It must be rooted in a commitment from leadership and a respect for your people.”
By Joanne Paulson
afety is our number one priority. It’s a statement echoed by virtually every manufacturing leader on the Prairies. And rightfully so. Apart from being the ‘right thing to do,’ there is a proven business case for investing in safety performance. An Aberdeen Group study co-sponsored by Rockwell Automation in 2011 found manufacturers in the top 20 per cent of safety performers enjoyed an injury frequency rate 60 times lower than companies in the bottom 30 per cent, as well as 12 per cent less unscheduled downtime, and 14 per cent better overall equipment efficiency — a measure used to compare how well a manufacturing plant performs relative to its designed production capacity. Like manufacturing, however, the business of safety has endured immense change over the past decade, and is on pace for yet another revolution. The days of scattered forms, four-inch-thick policy manuals, and stuffy classroom training courses are near an end. Technology is now beginning to usher safety into the digital age.
App-lying safety systems No one understands the marriage between IT and safety better than Ryan Quiring.
Quiring and his Calgary-based business partner, Craig Fraser, founded SafetyTek in 2015 — a software company dedicated to removing paper from safety management and compliance processes. Using a cloud-connected, mobile-friendly interface, the SafetyTek system enables clients to access safety records, track training progress, submit forms, and coordinate corrective action from anywhere, all with the click of a button on a smartphone, tablet, or laptop device. “In many ways, it’s a risk management tool,” explains Quiring. “It’s not just about digitizing a process — it’s about increasing visibility and real-time access to data. You need that information to make preventative decisions instead of reacting to incidents that have already occurred.” Wayne Brylikowski concurs. The safety and health manager for Monarch Industries in Winnipeg, Brylikowski credits ‘app’ technology with changing how the 500-employee operation actively mitigates its exposure to risk. “Whether your company has only a few machines or several hundred, having a structured means to identify the level of risk to your workers is significant,” he says. “The premise is to assess and score risk, but also to measure and manage improvement. What gets measured will get managed.”
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Prairie Manufacturer Magazine • Winter 2016
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Online training changing minds Good training programs are seldom cheap. That has been especially true for Prairie manufacturers — many of which have historically been forced to absorb significant time and travel costs to send employees from rural areas to classrooms in major centres. For the Safety Association of Saskatchewan Manufacturers (SASM), it is a familiar problem. Only a third of SASM’s 11,000 member employees are located in either Regina or Saskatoon. The rest are found in communities like Frontier — situated in the province’s southwest corner, three hours and 40 minutes from the nearest international airport (in Great Falls, Montana, out of all places). So, it would be only natural to consider online learning as an alternate delivery mechanism. But, initially, SASM Executive Director Ken Ricketts wasn’t convinced. “When we looked at the online training that was available, they had a seven-hour class reduced to 40 minutes and still called it training. That’s not training. It’s an awareness blurb — it’s an infomercial,” exclaims Ricketts. “We said, ‘No, if you’re going to take online training from us, you’re going to get every bit of theory you would get in a classroom.’” He meant it. SASM’s new online training offerings are inarguably longer and more intensive than the industry norm. Each course
“When we looked at the online training that was available, they had a seven-hour class reduced to 40 minutes and still called it training. That’s not training. It’s an awareness blurb — it’s an infomercial. We said, ‘No, if you’re going to take online training from us, you’re going to get every bit of theory you would get in a classroom.’”
requires the completion of an exam, and a mark of at least 80 per cent to pass. The rigorous standards are even compelling urban-based manufacturers to take a second look. Degelman Industries in Regina has gone so far as to set up a dedicated training room to help facilitate SASM’s online training platform. The company trains primarily for the use of forklifts and overhead cranes — Degelman has 60 on-site — in addition to ‘train the trainer’ courses for supervisors. Roughly 90 per cent of its organization-wide training is now delivered online. Outside the city, 280 kilometres north in the town of St Brieux, Bourgault Industries has been leaning heavily on webbased learning to keep its 650 employees up-to-date on the latest safety practices. Continued on Page 52
“Being in a remote location, online training gives us the flexibility to coordinate training around what works best for our organization and production deadlines. Say we have a material shortage or a piece of equipment that breaks down. We can easily move people around and have them take a course right then and there.”
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“Being in a remote location, online training gives us the flexibility to coordinate training around what works best for our organization and production deadlines,” says Frank Blandin, the plant’s corporate health and safety training team leader. “Say we have a material shortage or a piece of equipment that breaks down. We can easily move people around and have them take a course right then and there. “We can train one, or we can train 20, and it doesn’t affect our line as severely.” According to Blandin, the uniformity of online training is another benefit. “You have consistent, predictable delivery each and every time,” he says. “You don’t have to worry about information being left out. Our team members have the ability to go back and review content if they don’t understand it. They can learn at their own pace and their own comfort level. “We see SASM as assisting us in our safety program — not as standing in front of a classroom, training.” Ricketts, meanwhile, is happy his initial hesitations helped to shape the eventual outcome instead of preventing it altogether. “Our members receive their quality training, they receive their evaluations, and it’s much less expensive. They love it!”
about sponsorship marketing With Brent Barootes, president and CEO of Partnership Group — Sponsorship Specialists®
How has sponsorship changed over the past 10 or 15 years?
But isn’t sponsorship supposed to be about philanthropy, not marketing?
For many businesses, sponsorship used to be a discretionary line item, dependent on how profitable operations were in a given quarter or fiscal year. It was viewed largely as a donation, made with few expectations or conditions. Today, however, corporate sponsorships are an integrated part of marketing strategies, on the same footing as advertising, trade shows, and social media. It is an indispensable lever used to immerse an audience into your brand. Since 2006 alone, the sponsorship industry in Canada has ballooned by more than 60 per cent. Roughly 29 per cent of brand marketing budgets last year were spent on sponsorship and ‘experiential’ marketing, and three-quarters of those decisions came directly from marketing and communications departments. As a result, metrics now matter. Sponsors are now more akin to investors, and sponsorship is now a business relationship — one that can be negotiated, accelerated, and terminated, contingent on performance.
That is an antiquated viewpoint, propped up by a lack of creativity and education on the part of some rightsholder organizations — in other words: Those searching for sponsorship funding. Former CBC Dragons’ Den investor and FirstEnergy CEO, Brett Wilson, said it best: “We’ve used charity as our marketing budget since day one. People would say, ‘No, giving is supposed to be altruistic.’ But I have said bullshit from the start. There’s nothing wrong with the scratched back approach to giving.”
Where should manufacturers spend their sponsorship dollars? The answer to that question will change depending on each company’s customer base, its objectives, its values, its brand identity, and its budget. Potential benefactors should be able to clearly articulate, provide options for, and place an informed value on what you will receive for your sponsorship (naming rights, recognition, signage, category exclusivity, advertising, speaking opportunity, etc.). Make sure to get that information in its entirety upfront before making any contribution decisions. Nationally, a quarter of all sponsorship spends are local (in the same geographic area the sponsor has bricks and mortar), and three-quarters have some kind of community focus. By dollar value, in 2015, 31 per cent were earmarked for professional sports, 23 per cent went to community events, 18 per cent to amateur sports, and 11 per cent to educational endeavours. Like any other type of marketing, the audience and message will ultimately determine the medium.
What can sponsors do to make sure dollars are well spent? Make sure your sponsorship efforts are aligned with your marketing goals. Not each investment needs to cover off each goal, but — as a comprehensive plan — they absolutely should. Position your investments so you receive due credit for what you bring to the sponsorship. You should be seen as offering more value to the event, program, or audience than just your attendance, which will translate into gratitude and brand loyalty. And, as with any true partnership, be comfortable with the ‘give and take.’ Feel empowered to propose and craft customized opportunities tailored to your company — just do so in a way that respects the level of value the rightsholder brings to the table.
Where does in-kind sponsorship fit into the mix? Out of every $10 invested in corporate sponsorships, close to $8.50 is contributed in cash. That’s an all-time high. So, it would be fair to say that in-kind sponsorships are on the decline. But that doesn’t mean they are any less valuable. Staff time, in-kind services, or product in-lieu-of can, instead, be more valuable than the cash resources you may have at your disposal to invest. It’s a good alternative that can be used to sustain community relations or engagement programs during times of financial slowdown. Know what your budget is, know what expertise, products, or services you can contribute, and strive to create a win-win scenario for everyone involved.
Investing in the future of Canadian manufacturing BDO invests in the CME Industrie 2030 Roundtables to bolster manufacturing of tomorrow By Chris Kauenhofen, CPA, CA Manufacturing is a vital part of the Canadian economy. As the industry continues to evolve, new trends emerge to challenge industry executives. Current trends include an increasing reliance on technology, and pressure to reduce operating costs while improving efficiencies and innovation. With over 3,000 clients in the manufacturing industry, it’s important that we are at the forefront of creating future prosperity for the industry and our clients.
Chris Kauenhofen is a partner with BDO Canada LLP, and is based out of the firm’s Winnipeg office.
With this in mind, BDO joined Canadian Manufacturers & Exporters (CME) to learn about the current state of manufacturing in Canada, and asked one daring question: “What would it take to double manufacturing output and value added exports from Canada by the year 2030?” In addition to collaborating with CME on their bi-annual survey, BDO also participated in an initiative called Industrie 2030. Across the country, several industry executive roundtables were held to discuss overcoming challenges, growth opportunities, job creation and innovation within manufacturing. To remain competitive, the roundtables recommended building a strong labour pool and skilled workforce; accelerating adoption of advanced manufacturing technologies, fostering innovation, commercialization and new product development; creating a competitive business environment in Canada; and increasing access to domestic and foreign markets. What we learned reinforces what we’ve heard from our clients from coast to coast. From reinvesting in new plants or upgrading existing ones, to implementing new technologies to reduce operating costs, Canadian manufacturers are positioning themselves to enter a growth phase. It’s encouraging to see the continued focus on growth that manufacturing executives display. While much of the country finds manufacturing on the rise fueled by an attractive U.S. dollar, Prairie manufacturers face other challenges. Depressed oil prices have devastated oil field services; wet harvests and a bearish cattle market are not helping agricultural industry services improve. There is no doubt that Prairie manufacturers need to assess their own competitiveness, as there could be more opportunities and volatility to come with major trade liberalization agreements. The roundtables are just the beginning. It is crucial to the future of manufacturing in Canada that we continue the conversation, be forwardthinking, and impact the decisions our government makes. For more information on the roundtables, the CME Management Issues Survey or to inquire how BDO can help, please visit www.bdo.ca/Manufacturing-Distribution.
Prairie Manufacturer Magazine • Winter 2016
“Turns out we’d been under-forecasting.” People who know Manufacturing and Distribution, know BDO.
The Manufacturing and Distribution Practice at BDO BDO’s Manufacturing and Distribution practice combines accounting, tax, and business advisory with industry prowess. Whether you’re looking to leverage international operations, grow through acquisition, or optimize inventory management systems, BDO stands ready with proactive information and guidance wherever in the world you do business. In the Prairies, our BDO locations proudly include: Brandon | Calgary | Edmonton | Grande Prairie | Lethbridge | Pembina Valley | Portage la Prairie | Red Deer | Winnipeg Proud partner of:
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unCONFERENCE2017 MARCH 21 | RBC CONVENTION CENTRE WINNIPEG
HELPING MANUFACTURERS GROW 15 YEARS STRONG When was the last time you made an investment that paid off on the spot? Dare to Compete does! Manufacturing matters on the prairies and CME helps you stay at the top of your game. Through CME’s national Industrie 2030 initiative, we met with manufacturers across the country. You told us loud and clear what you want. And Dare to Compete delivers! 15 years strong, our conference is organized around the Industrie 2030 themes: Human Resources & Skills Development; Technology & Innovation; Trade & Business Development and the Business Environment. We’ve lined up experts to deliver real-world solutions that work. If you’re in the manufacturing business – large or small – you’ll walk away with at least one key benefit for your business. Investing a day can seem like a big commitment, but with a day full of manufacturingspecific solutions, ROI is guaranteed. Invest in your business. Invest in yourself. See you in Winnipeg this March!
Ron Koslowsky Vice President, CME Manitoba
WHAT PAST ATTENDEES ARE SAYING: Attending CME Manitoba’s annual conference has become a must do for me, and it is because of the value I receive each year. [Un]Conference 2016 was no exception. I learned new things, I connected and reconnected with great people, and I came away (re)motivated and (re)inspired! – Don Oldcorn, MacDon Industries CME events help Winpak stay on top of best practices and connect with other leaders in manufacturing. – Dave Johns, Vice President, Winpak
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The Political Landscape: Where Are We Headed?
Andrew Coyne is thoughtful, intrepid, and never afraid to speak his mind. He has established himself over the last two decades as one of this country’s most passionate and articulate commentators on political and economic issues. The former national editor of Maclean’s, and currently a nationally syndicated columnist with Postmedia, Coyne’s topical and timely presentation is sure to ignite debate and discussion. Andrew is also a long-time member of the CBC’s popular At Issue panel on The National.
Understand how emerging companies are using innovation to foster growth. Learn more about successful, inventive strategies to navigate growing pains on the journey to maturity, overcoming regulatory challenges and financing growth.
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Learn effective ways to focus your sales, improve your team performance and pursue exports, across provinces or across the globe. Take away hands-on, applicable solutions to everyday business development challenges.
Understand how the fourth industrial revolution will affect your business this decade. The internet of things, digital revolution, smart factory – these Industry 4.0 hot topics are popping up everywhere. Learn what it means to you, as a manufacturer, today.
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Technology and Manufacturing – Closing A Critical Gap
Canada has both strong manufacturing and technology sectors. Unlike other countries, these sectors operate independently. With the development and adoption of technologies in manufacturing being critical to growth, how does Canada leverage its technological capability to drive growth in manufacturing? How are successful manufacturers leveraging technology and what is needed to increase technology adoption? Mr. Onuoha will reference findings from Industrie 2030 and discuss the importance of a national innovation strategy.
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How Great Teams and Organizations Pull Together
Stephen Shedletzky strives to engage people in meaningful ways. He supports leaders and teams as they create environments where their people feel inspired to go to work and accomplish remarkable things. Using Simon Sinek’s concepts and Stephen’s own examples, Stephen explains how leaders can harness the natural drivers that exist in us all to create an environment that attracts the right people, inspires their engagement and loyalty, and encourages them to work together to create remarkable results.
See how LEAN and safety go hand in hand. Internalize the business case for safety and predict common barriers along the way. Learn to apply LEAN employee engagement philosophy to create a safer, smarter workplace with front-line buy in.
Benefit from a moderated discussion with companies who used connections to find and build businesses, working together to access new clients and markets. Explore strategic collaboration with competitors, supply chain providers and more. See how these firms created better products, together.
HUMAN RIGHTS VS SAFETY
How far does accommodation have to go? Join our panel of experts for an open discussion on legal, safety, business and people perspectives. Learn how others have achieved balanced solutions when human rights conflict with safety.
Learn how to create a brand movement. Embrace a grass roots marketing perspective, service philosophy and homegrown product to create a loyal following for prairie-made goods.
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Why transportation is becoming a competitive differentiator in the new age of manufacturing. Check out the Dare to Compete 2017 special fea...