By Shop Metalworking Technology Staff
Photos by Ron Ng
The economy has not been kind to manufacturers in Canada, particularly to job shops who have been on a roller coaster ride since 2008.
How have those that survived fared and what’s their outlook going forward? Shop Metalworking Technology Magazine decided to find out. Last December, we held a job shops roundtable with job shop owners from across the country. The event was hosted and sponsored by Sandvik Coromant, and held at the company’s Mississauga, ON, facility.
Manufacturing in Canada
If manufacturing is so important for the growth of an economy, what can this country do to nurture the industry? It’s a question on the minds of manufacturers and government officials who have witnessed the steady decline of what arguably is the backbone of a strong and healthy economy. An important part of the manufacturing community is job shops.
Job shops say it’s tougher to do business in Canada today primarily because the costs of manufacturing in Canada are rising but customers are demanding lower prices.
“We’re being compared to American suppliers more now,” says George Barnes, president of Foldens Machine Works. “The major companies we do work for are multinationals who are asking us for the same pricing as suppliers in the US making the same part but at six or eight times the volumes and these US suppliers’ costs are substantially lower. Most of them are located in the Southern states and it’s very hard to compete because we have higher costs for materials and manufacturing, and higher wages so we can get the skilled people we need to do some of the complex work required.”
“We compete against the world instead of just our neighbours [US]. It’s not an equal playing field and we’re not getting any help to grow the manufacturing industry here, says Marzy Anania, operations manager and co-owner of Dana Precision.
The continued uncertainty about the economy is having a big impact on orders. Several job shops say long-term commitments from customers are a thing of the past. “Five years ago customers would say to me, ‘Larry get ready because for the next two years you’ll be busy.’ Now I have no idea what work I will have next month,” says Larry Stuyt, owner of Ontario Laser Cutting.
In the fabricating business, one of the side effects of the recent recession is increased competition from metal service centres that have installed their owner fabricating equipment to boost their respective businesses.
Government policies – or lack of – is a sour point for some job shops. Some point to US federal and state governments who provide incentives to attract investment into their respective areas. A tactic not practiced in Canada. While some, such as Dana Precision’s Marzy Anania, applaud the Ontario government’s green manufacturing initiatives, he’s disappointed with the lack-lustre results.
“Two companies I know started manufacturing in Ontario in the solar panel market. One Italian company invested about $50 million into manufacturing theses cells and has not produced anything. The other company has closed up already.”
Jim Jantzi, president of New-Form Tools, does not have any kind words for the Ontario government, though he thinks the Federal government is doing what it needs to do to support and create a better environment for manufacturing.
“The Federal government is trying to reduce business taxes and [Dalton] McGuinty is fighting Harper every inch of the way. McGuinty is much like Hugo Chavez; leftist communist thinker, and his concept is we’ll pump money into things like wind mills and solar panels, give teachers and bureaucrats more money and get it from businesses. It’s ludicrous. There’s all these fees; I wanted to put in an addition on my building but I couldn’t do it because we’re getting strangled with all the red tape and the costs – you need 20 engineers to sign off on a design. Ontario has gone beserk; this is stupidity times four.”
The challenges are many, but so are the opportunities, according to some. Mariusz Lubczynski is co-owner of KLFLO CNC Machining in St. Laurent, QC. He says some job shops in Quebec could not adjust to the “dramatic changes” in the market [the recession, rising Canadian currency and competition from offshore markets]. “I don’t think these job shops are coming back because it is a challenging market and to survive, we must adjust to these changes and find a better way of communication between machine shops and their customers so that we can keep production here instead of sending it out to another country.”
In Western Canada, Ellery Manufacturing, Surrey, BC, is experiencing somewhat of a boom because of the activity in the oil and gas field.
“We’re fortunate to be busy and I know that some shops are not. We don’t normally see this Christmas rush, but it seems to be exploding at the seams for us,” says Paul Ellery, Ellery Manufacturing’s president. “We just purchased more CNC equipment – another CNC vertical turning machine that we’ve added to a recent purchase of a large horizontal boring mill…We’re moving forward; we have jobs booked into May 2013. All of the work we’re doing is custom and they’re very large projects that take one to two years to bring to production. All our customers are positive and busy.”
“Innovation” is often used to describe strategies manufacturers must employ to gain a competitive edge. When you’re a small to medium size job shop innovation means outside-the-box thinking on everything, from how you source and purchase your metals to how you build and maintain customers and good employees. It is in tough economic times that innovation becomes even more critical as companies look at creative ways to cut costs and improve manufacturing efficiencies.
Growth strategies also sometimes include redefining your business, which is what Stratford, ON, shop New-Form Tools did. While it still does custom work, much of it is now building automatic machines for other manufacturers. It also invented a new type of low-cost steel with a different melt chemistry that it now sells to manufacturers in Italy and the US.
Others have found creative ways to purchase machinery and metals, such as partnering with customers. For instance, Foldens Machine Works partnered with a military customer, for which it designs some products, to help finance equipment to meet the customer’s delivery schedule. Others, such as Ontario Laser Cutting, have partnered with customers to increase buying power for metals.
The biggest surprise for Ross Carpino, general manager of Sandvik Coromant, Mississauga, ON, which sponsored the Job Shops Roundtable, is the similarities cutting tool suppliers and job shops face when it comes to manufacturing issues.
One example is getting through a customer’s door and building stronger relationships with them. For job shop owners such as Dana Precision’s Marzy Anania or Ontario Laser Cutting’s Larry Stuyt, this is a tough challenge to overcome.
“Our biggest customers won’t let us adjust parts if we think we can do a better job of redesigning them,” says Anania.
“It’s a value-add if customers will let you in the door, but some of them have engineers on staff and they say ‘no, we’re the engineers’ and we’ll do the designing of the parts. But there are times when we can help but they won’t listen,” adds Stuyt.
Carpino says his company faces the same challenge with customers – jobs shops and other manufacturers.
“We try to convince the customer right from the start that instead of selecting the machine tool right away, get us involved because at the end of the day you can spend a million dollars on a machine and it’s the ten dollar cutting tool that drives that machine and if it’s not the right tooling, your process won’t work,” says Carpino.
It’s one reason why the company is launching a new program in 2012 “Green Light Machining.”
“It’s about helping the customer to keep running the green light running on the machine. I never thought we would have such similarities in running a business, but we face many of the same challenges that you do,” adds Carpino.
Productivity is the Holy Grail in manufacturing. Yet improving it can be a challenge. Job shops recognize the value of investing in new technologies – CNC machine tools, CAD/CAM software and automation – but it’s a significant investment and if you don’t have long-term commitments from customers, it’s hard to justify equipment purchases.
“We’ve gone to higher production machinery such as bar feeders, multi-function/twin spindle/twin turret type machines but the volumes haven’t materialized. It’s hard to justify the extra cost when you don’t have volume, even though this equipment makes parts right every time and cuts down on material handling,” explains Foldens Machine Works’ George Barnes.
For A-Line/Muru Innovative Machining Solutions, a 24-year-old machine shop in Toronto, machinery and technology investment was a focus right from the start, says owner Rob Muru.
“We started to upgrade machines in the 1980s and we’ve been on a steady upgrading program ever since. We specialize in aerospace and military and do tricky parts that many shops can’t do, so we have invested in five axis and multi-axis machining and the latest software. We currently have six machines that are more than five axis.”
The shortage of quality CNC machinists is evident across the country, according to job shop participants, and some say this shortage has a lot to do with government barriers and the poor quality of education at technical colleges.
For Ellery Manufacturing, the talent pool of skilled machine operators is so poor that owner Paul Ellery has hired head hunters in Toronto, the UK and the Philippines.
“The biggest problem is red tape with the government. It used to take 74 weeks to bring workers from offshore to work in our shop. The government has shortened it to about 16 weeks, but we’re in real need of skilled workers. The talent pool in Eastern Canada seems deeper; you have two individuals for every job. Here in BC there are two jobs for every individual. We always run the risk of losing good machinists to competitors.”
Jim Jantzi says he won’t send his workers to one of the local trade schools because he thinks the teachers are not in touch with the reality of the business.
“We refuse to send our plant workers to these schools because teachers at some of these places are not very good. They lie to students about the pay and students get disenchanted. Instead, we invest in the latest technology and train people in-house.”
Ross Carpino, general manager for Sandvik Coromant, Mississauga, ON, concurs that skills training a big issue.
“One of my managers [Brian Philip] sits on the board of a couple of colleges for curriculum selection. The government needs to step up and support training in schools. You have one campus using an engine lathe with almost unheard of technology it’s so dated and then we as cutting tool suppliers present our technology and they look at us like deer caught in headlights. I can only imagine when these students get to George’s [Barnes] shop and see his new technology and our cutting tools and they don’t understand it. There almost needs to be a revolution in skills training at the college level.”
Not everyone feels skilled trades are poor in this country. Rob Muru, president of A-Line Precision/Muru Machining Solutions in Toronto says he’s had some good experiences with employing some staff.
“George Brown and Humber College are doing a pretty good job with skilled trades. We have a couple of guys here in apprenticeship programs. I also pay for people to go to courses but we also do a lot of in-house training.”
Despite the challenges job shops face, participants are optimistic about 2012. For BC-based Ellery Manufacturing, business couldn’t be better because the company services the booming Alberta and Texas oil and gas industries with miscellaneous product lines for drilling platforms.
“We’ve just come out of a major renovation. We upgraded our offices and production operations. We’re seeing no indicators of business slowing down and in fact we’re booked into May 2013 right now for some of our jobs,” says Ellery Manufacturing’s Paul Ellery. “The work is there and the world has to continue, so there’s going to be work for job shops going forward.”
Even for job shops who have had less than stellar years, optimism reigns.
“I know we’ll improve this year over last year. I think given the long term outlook, we’ll be just fine. We may need to regroup, but we’ll do what it takes to remain competitive,” says Foldens Machine Works’ George Barnes.
“I think this is going to be a turn-around year. We watch our data base of customers carefully to see who is buying and that tells us what’s going on in the economy and everyone seems to be getting busier,” notes Ontario Laser Cutting’s Larry Stuyt.
“I’m seeing a lot of work coming back from China and I think the solar industry is going to happen and there will be more work and activity in the market,” predicts Dana Precision’s Marzy Anania.
For A-Line/Muru Innovative Machining Solution’s Rob Muru, simply put, “2012 is going to be good and we’ll see growth.” SMT