- March 30, 2015
Surviving in Canada’s competitive job shops market
“It’s not easy being me.” The quote from comedian Rodney Dangerfield aptly describes job shops in Canada. Since the last economic downfall of 2008-2009, many Canadian job shops have struggled to survive. Many didn’t make it. Yet something interesting began to happen in 2009; remaining businesses in this sector began to grow stronger.
In part, it was because there were fewer job shops sharing the pie, but it was also because they found new approaches to running their businesses and embraced new manufacturing strategies to grow more competitive.
Each year, we reach out to job shops across Canada and ask them about the challenges they face running their shops. This year, Shop Metalworking Technology contacted 11 job shops across Canada. Each shop has a unique story to tell, but the common strand that emerges among them is a resilient spirit that spurs them on through tough times.
“The good times always look after themselves; it’s the tough cycles you have to really manage your way through,” says Chris Pitre, general manager at Labrador Metal Works Inc., a metal fabrication shop with operations in Wabush, NF and Bathurst, NB.
Cutting through red tape
Complying with government rules and paperwork is a big challenge for job shops. According to the Canadian Federation of Independent Business (CFIB), red tape cost businesses $37.1 billion in 2014.
Sean MacPhee, president of Velocity Machining & Welding Inc., in Dartmouth, NS, has a simple solution: “cut the red tape.”
Ron and Denise Kehler, owners of Kehfab Ltd., a sheet metal fabrication business in Steinbach, MB, say they understand and agree businesses need to comply with health and safety standards, but those who implement the rules should understand how regulations impact job shops.
“Compliance with arbitrary rules, made with little or no knowledge of our individual uses and safety concerns appear to be their only concern. We have been asked to spend thousands of dollars on safety add-ons that, with any familiarity with our industry, would clearly not prevent any incident or injury. We could benefit from safety regulations customized to our own industry...while an out of business shop won’t have workplace injuries, it also won’t contribute jobs and taxes to the Canadian economy.”
Certification is a challenge for many shops because it’s costly and time consuming.
It took SCT Welding, Laser & Manufacturing Co., a 25 year-old shop in Winnipeg, MB, five years and cost $150,000 to achieve CSA certification for building of electrical enclosures, says Shane Kulathungam, who runs the business with his father Raj.
“It makes us competitive because we’ve diversified into a new market, but the amount of testing, reports to submit and approvals that followed took us almost five years to be certified and cost a lot of money.”
It took Quin-Ko Custom Machining Ltd. in Red Deer, AB, close to one year to achieve API certification for oil field work, says Chris Koenning, general manager of Quin-Ko Custom Machining Ltd., in Red Deer, AB
“We had to fill out a lot of forms and I hired someone to come in and build the manuals to achieve API certification. It was a cost to us but we did it because we’re trying to eliminate competition in our market.”
Filling the skilled trades gap
The skilled trades shortage is not new. In fact, for South African trained machinist Mike Connelly, who purchased Tool Room Services in Burlington, ON, in 1983, it was a problem then and it’s a problem now.
“We machine high end one-off parts. For example, we machined bearings for the Seawolf, one of the largest nuclear submarines in the US Navy. We also machine pressure holes for US Navy torpedoes and most shops can’t handle this kind of work because of the accuracy and precision involved. It’s a niche market,” says Connelly, making it difficult to find people with the right skills.
One of the hardest hit areas for the skilled trades shortage is Alberta, where high paying jobs in the oil and gas industry are luring people away, says Quin-Ko's Chris Koenning.
“The situation is terrible here in a town of about 120,000. Many people are pulled away into the oil drilling market because of higher wages, so we’re big on apprenticeships. Our best success is hiring young guys in apprenticeship programs and they sign a contract to stay a year. It’s a 50/50 split between those that stay and those that leave. I don’t blame them for trying to make themselves better, but it’s disappointing for us because we’d like to keep long term employees in the business.”
The skilled trades shortage is a problem in Quebec, but in that province, youth are not being lured away into the higher paying oil and gas industry. Instead, they’re simply not interested in the manufacturing sector at all, says David Barile, who runs St. Hubert Machine Shop with his brother Cosmo and father Giovanni, a trained machinist from Italy who formed the gear cutting shop in 1979 in St. Hubert, QC.
“The shortage is an issue and we’re looking at importing foreign workers. It’s a bigger challenge for us because of the French language. Less people in Canada want to get into manufacturing; they get out of school and want to make $100,000 a year right away. I’d rather have someone with skills and no schooling. I don’t need an engineer; I need someone who knows how to work a machine. Every day I have a hard time finding people to work in our shop so I’ve been hiring older people,” says Barile, who he says have the required skills set to handle gear cutting machines.
KSM Stainless Fabricators is based in Langley, BC, and while Lisa Burgess, general manager and owner, would expect to find a good pool of people to choose from, instead what she has encountered is a pool that is “aging and depleted. We are a union shop and there are no new options in the pool. All the good employees are taken and held onto by other union shops. The new generation entering the union doesn’t seem to have the desire to work in the specialized stainless field when the rate of pay is the same for working with ducting or mild steel. As stainless steel is more specialized and requires a certain amount of patience and artistic finesse, many students pass it up for the easier metalworking applications.”
There is no doubt you have to be smart, tough and resourceful to run a job shop in today’s economic climate. For many shops, this learning curve starts the moment a job shop opens its doors.
When Peter Hermann, a Swiss-trained machinist opened his CNC machine shop, Herma-Tech Mechanical Corp. in 1987 in Calgary, AB, the economy was in turmoil.
“The Alberta economy hit rock bottom and the company I was working for went into receivership. I decided to start up my own company and everyone thought I was out of my mind. I didn’t have a lot of money so I had to live within my means and pay cash for equipment to create the initial capacity.”
Hermann approached the Royal Bank for an operating loan, “but the bank wouldn’t approve me for a $1,000 loan because I didn’t have any credit reference since I hadn’t borrowed money, so I was forced to stay within my boundaries. Looking back now it was a good thing, but at the time it was frustrating because I couldn’t take on certain jobs because I couldn’t afford to buy the machines I needed.”
For Tripar Inc., a metal fabrication shop founded in 1949 in Montreal, QC, by Ben Sevack, surviving in a tough competitive job shop market is all about delivery, says Lloyd Sevack, president and the founder’s son.
“The biggest challenges all relate to delivering quality products with short lead times, and at competitive prices. This is achieved by employing new technologies as well as process changes, such as lean manufacturing, cellular manufacturing, and conducting Kaizen on specific projects.”
In the race to succeed, the importance of good customer communication often gets overlooked, says Chris Koenning of Quin-Ko Custom Machining.
“When orders are in, a lot of companies forget to maintain contact with customers. They’ll take orders over email, but it’s important to take a day and go have coffee with your customers or take them to lunch. Don’t always talk about work and try to build a relationship with your good customers.”
While it can be costly and timely, certification is one way Camatech Inc., in Acton, ON, plans to grow, says president Ed Smith.
“We have obtained AS9100 certification and we are Controlled Goods registered, which has provided some advantages over the typical machine shop.”
To retain good skilled workers, Tool Room Services provides “what the big companies offer so my good workers don’t have to go looking for new work,” says president Mike Connelly. “I don’t have trouble keeping people because we pay them well. They receive overtime for work and have great working conditions and benefits. Most of the people have been here in excess of 10 years and we have 18 employees, including management.” SMT