Growth Potential

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by Andrew Brooks

Long-term planning key to future growth of Canada’s mould and die industry 

While Canada’s mould and die industry is doing relatively well right now–though different assessments disagree on how well–its ‘hidden’ potential for future growth dwarfs the scale of the sector right now. That growth potential can be unlocked if the industry learns how to put more rigorous, forward-looking business models into practice. But that could be a tall order for an industry as fragmented and diversified as this one.

“2018 will be the best year ever for the mould and die industry in North America, and particularly here in Canada,” says Tim Galbraith, national sales manager for Cavalier Tool & Manufacturing of Windsor, ON. “When the automotive market is building a lot of tools, the mould business is busy.”

The automotive business has been especially active lately thanks in large part to the relentless pressure to develop new, lightweight materials. 

“One of the reasons is light-weighting. At this point we’re still in the ‘plastic is lighter than steel’ mantra, so we’re working with new materials and new part designs all the time to allow us to keep the properties of steel and gain the advantages of plastic in weight savings,” Galbraith says. 

“That being said, there are more and more materials that are hybrid coming onto the market: carbon fibre inserts and things like that. It’s still in its infancy, but it will take us to the next step in automotive light-weighting.”

Up to this point, the cyclical nature of the automotive industry has been a brake on the growth of mould making in Canada. Currently, the Canadian industry accounts for under two per cent of global mould making capacity, a very small slice for an industry that can compete with the efficiency and low cost profile of developing world competitors, while also holding its own at the high end–against the technically sophisticated and highly customized work coming from industrialized countries such as Germany, France and Italy. 

Jonathon Azzopardi, chair of the Canadian Association of Mold Makers (CAMM) and president of Laval Tool and Mold of Tecumseh, ON, believes self-imposed challenges have played a major role in restricting the sector’s growth. If the industry can take action to address these constraints, he says, Canadian mould making could experience truly epic growth. 

“The industry accounts for about 1.5 per cent of the world’s mould making capacity right now,” he says. “Although we’re fragmented and diversified, we believe that reaching three per cent is likely and very realistic, if we play our cards right. I believe we will go from 1.5 per cent to 3 per cent–and within a shorter period of time than you might think.”

In large part, playing the cards right means that individual firms, even–perhaps especially–smaller ones, will have to leverage more mature business models that enable them to anticipate and ride out the market cycles that are endemic to the business.

“The inconsistency of our industry is what kills us,” Azzopardi says. “Things will go really well for several years, and then there’s a downturn and a lot of companies start to pull back. We need to enable them to stay stable so that they can continue to go forward. That’s what will allow us to grow, rather than retracting every seven years. This industry has to compete on a global scale, and the key for small to mid-sized businesses is thinking like a large business, adopting the things mould makers do on a large scale.”

Among the elements of that large-scale model a few key things stand out for Azzopardi as especially critical: 

  • benchmarking, so a business can identify and remedy the gaps between what it does and what the industry as a whole is doing;
  • developing a business and sales strategy that can anticipate market trends and avoid the worst impacts of cyclical downturns;
  • more discipline in reducing costs.

In February, CAMM, together with the WindsorEssex Economic Development Corporation (WE EDC) announced a one-year industry funding program supported by the Ontario Rural Economic Development (RED) program. CAMM and WE EDC secured RED funding through a joint application to the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA).

CAMM and Harbour Results Inc. (HRI), an economic consulting firm that specializes in manufacturing development, will manage the project to support up to 30 mould makers in rural areas as they develop their strategic business capabilities. The total project cost is $200,000, half of which is being supplied by RED.

In addition to assisting identified firms with leadership workforce development, productivity improvement assessments and market and business analysis, the program will offer targeted mould makers in rural areas access to benchmarking analytics, strategic meetings and HRI’s own market intelligence at discounted rates.

The announcement was made at Crest Mold Technology of Oldcastle, ON, one of the first mould makers to take advantage of the new program. 

“Our rural mould shops will benefit greatly from resulting sector intelligence provided by Harbour Results,” said Ed Bernard, Research & Development, Crest Mold Technology, at the media conference held to announce the program. “Although mould makers have proven capable of mastering technologies and competing on a global scale, analyzing data and international trends could be misinterpreted without this kind of external assistance.”

With the help of programs like this, Azzopardi believes that the industry could considerably more than double in size over the long term. But for now, he thinks doubling is possible within an eight to ten year time frame. 

“With the right players now, and with the industry average of 55 to 60 employees, we only need a company to move the needle about $6 million apiece. That’s not that hard to do; when you’re thinking about $1-1.5 million per tool, $6 million is very possible. But obviously people are going to need to reinvest, and to think on a global scale. A lot of these businesses have been around for decades, and they believe the way they’re doing it is the only way. We need to get them to think differently.”

Martin Craven is president of SST Canada, a supplier of machine tools, engineering services, tooling, supplies and application support–and a wholly owned subsidiary of Makino. He believes the mould and die industry is in a strong position right now, and also that its future potential is immense. But he points out that there are challenges, and that coherent public policy is a must.

“The machining industry has been under stress for the last 20 to 25 years, and I think we’re losing a lot of our skill set,” Craven says. “We need relevant apprenticeship programs, incentives for smaller companies to train people, and management incentives. It’s good to be winning business, but the die mould industry is a niche within our industry–highly specialized, highly skilled–and we need government to be providing
the proper incentives.”

Acknowledging the predominance of the automotive industry among the customer base for the mould and die industry, Craven anticipates that automotive buying patterns will send shock waves through the industry as they change and evolve.

“Fewer people are going to purchase cars; you have rideshare programs, younger urban dwellers that don’t see the need to own a car, and so on. Changing sales volumes are going to affect all aspects of the automotive industry, including mould and die.”

Laval was recently benchmarked to determine its position relative to the industry as a whole, and the result suggested that accelerating automation could give the industry a huge edge over foreign competition, at least from the mass, low-cost side.

“They told us our profits are about average,” Azzopardi says. “So there’s lots of runway to be able to make up ground, to be more competitive with all the new technologies that are coming on board. If you can be using standard technology and still stay competitive with Asian companies, there’s a huge opportunity if you can harness new technology to improve your quality and efficiency.”

Mould and die makers, which historically have industry leading rates of reinvesting revenue back into their operations, are more receptive than most to the idea of adopting advanced technologies, and they’ll need that forward thinking if they’re to develop and maintain a technological edge. 

 “It’s not a secret that anybody who’s being successful in the mould industry in Canada has had to grasp technology and invest in automation,” Galbraith says. “The world’s getting smaller; now the supply chain includes low cost countries that have advantages we don’t. Let’s put it this way: they don’t pay attention to things like IP, software licencing, wages and worker benefits and things like that, and we take care of our people and play by the rules. To compete, you need to improve efficiency by automating.” 

The future is never certain, but Craven believes the industry has to embrace it. “We’re entering a time of change, and I’m not sure any of us truly understand the impact it’s going to have. But if we get it right it could be a very exciting time.” SMT

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