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Volume 70, No. 06 November/December 2011
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SMEs are confident and spending on their plants over the next two years
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HIGHLIGHTS Take back manufacturing! PFEP your materials flow Protect against interruptions Plastech saves with solar Get your head in the cloud 11-12-06 11:23 AM
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Bringing back the business
S
ome would say Canada’s manufacturers are in a long decline, perhaps to irrelevancy. Plants have been closing and jobs disappearing at a brisk pace, hastened in part by an outflow of work from North America to China where wages are far below western levels. Manufacturers have in the past proved to be resilient when facing challenges, but the fight to secure global business won’t be easily won. First, let us acknowledge that manufacturing is experiencing a decline. In 1999, it was responsible for 19.2% of the country’s GDP and was the biggest employer. Today it’s responsible for about 13% of GDP and has slipped to third-largest employer. Apparently we’re having a great deal of difficulty getting away from the view of Canada as a hewer of wood and drawer of water. We export natural resources to countries where someone else profits from adding the value, then we buy back those resources as finished products. Ironically, our bountiful commodities are also driving up the value of the dollar and impeding our value-added exports. As a result, Canada has been pricing itself out of manufacturing, which bodes ill. Manufacturing jobs are key to Canada’s prosperity. In the automotive industry, for example, one job at an assembly plant supports 7,500 other jobs, and yet we’re losing a lot of them: 322,000 between 2004 and 2008. No one pretends developed countries like Canada can back out of the globalized economy, but the Toronto chapter of the Society of Manufacturing Engineers (SME) says the time has come to rebalance what should be done offshore and what should be made here. Its Take Back Manufacturing (or TBM) campaign so far has attracted 25 technical associations, three trade associations and representatives from education, government, media and business who feel the same. The SME plan is to raise awareness and prepare for the return of jobs. Phase 2 will involve working with governments on tax, trade and education policies that will enhance manufacturing’s competitiveness. Canadian Manufacturers & Exporters has already given this topic some thought and says we need lower taxes for those investing in new products, technologies and skills; an extended capital cost allowance for investments in machinery and equipment; better innovation and commercialization of new products and technologies; help for businesses to develop and take advantage of international opportunities; and to enhance the competitiveness of North America’s integrated supply chains. The third phase involves ensuring manufacturers have the resources to improve technology development, productivity and innovation; and creating a strong infrastructure for apprenticeships, professional training and career development. This second point is of particular importance. Canada suffers from a chronic shortage of skilled people and so far the government plan is to fill the gaps by bringing workers in from abroad. The SME offers a better way: making the education/training stream more flexible and responsive by growing talent at home through a process that takes candidates along an integrated career path that starts with a trade and progresses to technician, then technologist to engineer. TBM’s timing is uncanny. The Boston Consulting Group predicts China is approaching a tipping point where the cost advantage is shrinking because of rising wages, high energy costs and logistics challenges, prompting companies to rethink where they produce goods for the North American market. BCG forecasts up to 3 million jobs will come back to the US by 2015. How we respond to these evolving global conditions will determine just how relevant Canadian manufacturing is destined to be in the 21st century. Joe Terrett, Editor Comments? E-mail JTerrett@plant.ca.
Vol. 70, No. 06, November/December, 2011 Executive Publisher: Tim Dimopoulos 416-510-5100 TDimopoulos@bizinfogroup.ca Publisher: Michael King 416-510-5107 mking@plant.ca, mking@cienmagazine.com Group Editorial Director: Lisa Wichmann 416-510-5101 LWichmann@canadianmanufacturing.com Editor: Joe Terrett 416-442-5600 ext. 3219 JTerrett@plant.ca Contributing Editors: Ron Richardson, Steve Gahbauer Art Director: Kathy Smith 416-442-5600 ext. 3215 KSmith@plant.ca District Sales Managers: Amanda Bottomley 416-859-4527 ABottomley@canadianmanufacturing.com
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Catherine Martineau (Quebec) 647-988-5559 cmartineau@bizinfogroup.ca Deborah St. Lawrence 416-510-6844 DStLawrence@canadianmanufacturing.com Derek Morrison 416-510-5224 DMorrison@canadianmanufacturing.com Ilana Fawcett 416-510-5202 IFawcett@canadianmanufacturing.com Market Production: Barb Vowles 416-510-5103 vowlesb@bizinfogroup.ca Circulation Manager: Diane Rakoff 416-510-5216 DRakoff@bizinfogroup.ca Editorial Advisory Board: Robert Hattin, Hattin Holdings • Ron Harper, Cogent Power • Greg MacDonald, Wentworth International Services • Roy Verstraete, Anchor Danly BIG Magazines LP Vice-President of Canadian Publishing: Alex Papanou President of Business Information Group: Bruce Creighton
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PHOTO: THINKSTOCK
Editorial
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Features
>> TRENDS
9 Business Outlook 2012 PLANT’s annual survey of senior manufacturing executives shows they are investing an average of $1.4 million on machinery, equipment and technology over the next two years.
Forecast Canada’s private companies are hot on growth, and their confidence is at its highest since 2005, says a PwC insights report.
10 Reshoring The cost benefits of sending work to China are reaching a tipping point and the SME’s Toronto Chapter says it’s time to take back manufacturing.
>> OPERATIONS
12 Think Lean A PFEP will pull together all the parts information across your plant to maintain continuous materials flow.
Lifting Systems Konecranes’ assessment of load-bearing lift equipment will spot hidden trouble before it leads to catastrophic failure.
14 Tech Tip Your motors will last longer if you use electrical signature analysis.
>> MANAGEMENT
14 Exporting Trade expert Mark Drake offers a report on Canadian trade, the challenges and the opportunities ahead.
Productivity A Conference Board of Canada report tracks where we would be if we kept up with US productivity gains. We’re about $7,500 behind in disposable income.
16 Insurance How to shield revenue streams used to pay fixed costs when your business suffers an interruption. Marketing Formulate an effective marketing strategy with a clear sense of purpose.
>> INNOVATION
18 Skills Fill skills needs from the inside by setting up a cross-company intern program. Intellectual Property The world’s IP market is accelerating and China is a major player as the second largest R&D spender.
>> SUSTAINABILITY
19 Solar Plastech is saving $6,000 heating its shipping area with solar energy instead of natural gas.
>> TECHNOLOGY
20 IT for Industry Leveraging cloud computing offers flexibility in the procurement and operation of technology.
Departments 4 Industry View 6 Events 7 PLANT Pulse
8 Labour Relations 21 Product Showcase 22 Postscript
Canadian PLANT—established 1941, is published by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd. Tel: 416-442-5600, Fax: 416-510-5140 80 Valleybrook Dr., Toronto, ON M3B 2S9 Privacy Notice: From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374 Fax: 416-442-2191 E-mail: privacyofficer@businessinformationgroup.ca. Mail to: Privacy Officer, 80 Valleybrook Drive, North York, ON M3B 2S9 Subscriber services: To subscribe, renew your subscription or to change your address or information contact us at 1-800-387-0273. Subscription Price: Canada $69.00 per year, Outside Canada $141.00 US per year, Single Copy Canada $5.50. Plant is published 6 times per year except for occasional combined, expanded or premium issues, which count as two subscription issues. Contents of this publication are
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protected by copyright and must not be reprinted in whole or in part without permission of the publisher. Publications Mail Agreement #40069240. Performance claims for products listed in this issue are made by contributing manufacturers and agencies. No responsibility for the accuracy of these performance claims can be assumed on the part of Canadian PLANT or BIG Magazines LP. Contents copyright© 2011 BIG Magazines LP, may not be reprinted without permission. Canadian PLANT receives unsolicited materials including letters to the editor, press releases, promotional items and images from time to time. Canadian PLANT, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such unsolicited submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. This statement does not apply to materials/pitches submitted by freelance writers, photographers or illustrators in accordance with known industry practices. We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund CPF for our publishing activities.
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Canadian PLANT 3
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Departments
>> Industry View
>> Bulletins BioteQ Environmental Technologies Inc. in Vancouver as a $1 million deal with an un-named international mining company to install a mobile water treatment plant for a site in Canada. The plant will apply BioteQ’s process to remove and recover dissolved metal from water. Suncor Energy Inc. plans to spend $7.5 billion on its capital budget next years, with oil sands production expected to grow 12% and synthetic crude oil production by 30%. The Calgarybased company said production will average between 530,000 and 580,000 barrels per day. The Argentine Air Force has selected Pratt & Whitney Canada’s PT6A-62 Engine for its Pucara aircraft powerplant upgrade program. The Argentine military has 30 of the aircraft, made in the 1970s and 1980s, in service. Lakeside Steel Inc., a Welland, Ont.-based steel pipe manufacturer, has set up a five year $22 million loan with LSA Thomasville LP, a Delaware limited partnership to build the company’s new pipe mill in Thomasville, Ala. Fortrex Industries Inc., a manufacturer of metallic parts and profiles based in Lavaltrie, Que., has received $94,250 in repayable funding from the federal government’s Temporary Initiative for the Strengthening of Quebec’s Forest Economies. The money will be used to acquire a plasma cutting system that will allow the company to do outsourced work in house. Atlas Tube’s manufacturing facilities in Chicago, Harrow, Ont. and Plymouth, Mich. are among the first steel tubular producers in North America to earn the right to display the Steel Tube Institute of North America’s Certified Producer Mark on its products. Atlas passed a series of third party independent audits and product testing to assure that a manufacturing facility’s processes, procedures and products adhere to ASTM and other nationally recognized standards. Hyduke Energy Services Inc., an oilfield services manufacturer based in Nisku, Alta., was awarded a contract to provide two turn-key 1000HP AC electric drilling rig packages to an un-named South American customer. The $32.2 million contract will be completed over the next nine months.
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CAE soars with $159M deals MONTREAL: CAE Inc. has been awarded $125 million in contracts from defence forces in the US and other unidentified countries for simulators and flight training systems. The Montreal-based aerospace company said contracts include two multi-crew simulators for a new undergraduate program of the United States Navy, additional work for the United States Air Force as part of the KC-135 Aircrew Training System (ATS) contract, and two contracts from undisclosed customers in the US and the Middle East to design and manufacture seven (L-R) Jeff Robert, CAE’s president for civil simulation products, training and services, operational flight trainers. signs a $34-million contract with Emirates executive Adel Al Redha. PHOTO: CAE Simulators for the US Navy A Boeing 777 simulator will go to the Emirates’ undergraduate flight officer program will be based training facility in Dubai in the first half of 2013 on CAE’s existing mission crew trainer and tactiand an Airbus A380 simulator will follow in the cal mission trainer products. second half of the year. Delivery is to take place in 2013. Emirates flies to 115 destinations in 67 counCAE also secured a $34 million deal with Emirtries, including Canada. ates airline for two full-flight simulators.
$22.5M military protective gear deals NEWMARKET, Ont.: AirBoss of America Corp. has received two new contracts worth up to $20 million to supply the US military with protective over-boots and gloves, and a Canadian military contract worth $2.5 million. The Newmarket, Ont. manufacturer of rubber and customized compounded products said the order includes up to 240,000 pairs of CBRN protective over- boots and 400,000 pairs of gloves. Deliveries for the first batch worth about $7 million will be ready to ship in the first quarter of 2012. The company also started production of its first major contract for the injection moulded CBRN over-boot for the Canadian military.
Velan scores $16.2M China nuke deal MONTREAL: Industrial valve manufacturer Velan Inc.’s French subsidiary has won contracts worth $16.2 million from the China Nuclear Energy Industry Corp. (CNEIC). The Montreal-based company said Velan SAS in Lyon, France will supply nuclear-classified gate and globe valves for two new nuclear power plants of FuQing Units 3 and 4 in Fujian province, China. “The scope of supply is mainly high-pressure forged valves complete with electric or
pneumatic actuators for service inside nuclear containment. These valves are scheduled for delivery from 2012 until 2014,” the company said. Velan also signed “significant contract amendments” with CNPEC for the third generation C-EPR nuclear power plant under construction at Taishan. And it has also been awarded aftermarket contracts from Daya Bay Nuclear Power Operations and Management Co. for onsite nuclear services, including a safety upgrade at LingAo units 3 and 4, and for the supply of spare parts.
Enbridge buys into $330M wind project MONTREAL: Enbridge Inc. is investing $330 million for a co-ownership of the 300-megawatt Lac Alfred Wind Project in Quebec. The Calgary-based energy company and CEDF EN Canada Inc., a renewable energy developer in Montreal, will share the project 50-50. The project, located in Quebec’s Bas-Saint-Laurent region, will consist of 150 wind turbines supplied by REpower and made with locally manufactured blades, towers and converters. Construction will get underway in two phases starting in June and will be completed by December 2013. When fully operational, the project will generate enough electricity to power 70,000 homes. Hydro-Quebec will buy the power under a 20-year power purchase agreement and construct a 30-kilometre transmission line to connect the project to the grid.
NRGreen, GE recover waste energy CALGARY: NRGreen Power and GE will be implementing a technology that recovers energy from waste heat without additional emissions. This new recovered energy project planned for Northern Alberta will produce power with the first global application of GE’s ORegen system, which recovers waste heat from gas turbine exhaust. It improves plant efficiency by as much as 50% and doesn’t require the use of water or on-site supervision. The system, to be installed at Alliance Pipeline’s Windfall Compressor Station near Whitecourt, Alta., is the latest in Organic Rankin Cycle technology. Construction begins in May. The NRGreen Power Limited Partnership, jointly owned by Veresen Inc. and Enbridge Income Fund Holdings Inc., is a developer of clean energy.
Startec tech going into ACTL CALGARY: Startec has been commissioned to provide refrigeration technology to the Alberta Carbon Trunk Line (ACTL) – the province’s first major carbon capture storage (CSS) program – that will liquefy CO2 from a fertilizer plant near Redwater, Alta. The Calgary-based company specializing in refrigeration, compression and processing solutions, said the CO2 from the un-named plant will go through centrifugal compressors and then to a Startec refrigeration unit where it will be liquefied for pumping into the ACTL. The 240-kilometre pipeline will transport CO2 to conventional oil recovery projects throughout central Alberta where it will be injected into oil reservoirs allowing tough-toextract oil to flow more freely. The Alberta Carbon Trunk Line (ACTL) by Calgary-based Enhance Energy Inc. is the world’s largest carbon-capture and storage project. At full capacity, the pipeline gathers, compresses and stores up to 14.6 million tonnes of CO2 per year, the equivalent 2.6 million cars taken off the road annually.
solar plant closes LASALLE, Ont.: United Solar says demand for solar panels is declining worldwide and will close its four plants, including one on Ontario. United’s 7,000 square-foot plant in Lasalle, Ont. opened in May with a production capacity of 15 mega-watts after an investment of more than $12 million to renovate the former plastics factory and purchase new equipment. The company says the closures are temporary, and it’s hoping to reopen sometime in the new year, depending on demand. CanadianManufacturing.com
>> Feedback
Shocking productivity gap Excellent lead editorial (Wanted: Innovation with payback, PLANT, September/October 2012). I was shocked by the the Deloitte information that output is about 86% of what our US peers produce. Very discouraging. I am grateful that you keep hammering our readership with information that keeps us awake at night. Mark Borkowski President Mercantile Mergers & Acquisitions Corp. Toronto We’d like to hear from you. Send letters to JTerrett@plant.ca with your name, address and phone number. Letters will be edited.
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Industry View << Departments MEMC making solar tech for Northland TORONTO: Solar tech manufacturer MEMC will be making solar photovoltaic (PV) modules at its Newmarket, Ont. plant for Northland Power Inc.’s 130-megawatt Ontario project portfolio. Northland Power, a Torontobased clean power generation company, said the modules, part of a master supply agreement with MEMC Singapore Pte. Ltd., an affiliate of MEMC Electronic Materials Inc., fit into its $600 million investment in Ontario ground-mounted solar projects. Northland didn’t reveal the financial details of this agreement, but said its investment is expected to create 700 new engineering and construction jobs. The company operates more than 1,000 megawatts of diversified generation and is developing renewable and thermal projects in the province, including wind, run-of-river, co-generation, as well as 400 megawatts of pumped storage facility east of Peterborough, Ont. Earlier this year, MEMC began manufacturing solar PV panels in Ontario for SunEdison, its solar energy subsidiary, to help the company meet the 60% domestic content requirements of the province’s feed-intariff program. In July, MEMC announced the expansion of production with Flextronics, its manufacturing partner.
Merck completes $33.2M plant expansion MONTREAL: Merck Canada has completed the $33.2-million modernization of its Pointe Claire, Que. manufacturing plant, establishing the facility as a Centre of Excellence for manufacturing liquids, ointments and creams. Merck expanded plant capabilities and installed new production equipment. It will also refit production and storage areas to increase competitiveness internationally and preserve local jobs. The modernization project began with the construction of a new 56,500-square-foot warehouse, which includes seven new manufacturing and packaging lines to produce of 14 new products. The Pointe Claire plant, which employs 264 people, is one of Merck’s global network plants outside of the US to received QSP-2 certification from the US Food and Drug Administration, which permits Canadian products to be exported to the US. Merck, a Montreal-based manufacturer of prescription medicines, vaccines, consumer and animal health products, said $20 million of the overall investment went to Quebec suppliers. CanadianManufacturing.com
CanEl buys treated wood plants
$545M upgrades for Toyota plants
VANCOUVER: CanWel Building Materials Group Ltd. is adding pressurized lumber to its repertoire with the purchase of treatment plants from NorthWest Wood Preservers in Prince George, BC. A letter of intent covers the purchase for an undisclosed amount through CanWel’s subsidiary CanWel Building Materials Ltd. in Vancouver. The deal includes four operating treating plants and several distribution centres located across Canada. CanWel, one of Canada’s largest wholesale building-material distributors, said the acquisition is expected to close in the fourth quarter of this year.
CAMBRIDGE, Ont.: Toyota Motor Manufacturing Canada Inc. says it will invest $545 million to upgrade its Ontario plants in Cambridge and Woodstock. Upgrades include new machinery and equipment, employee training and various projects to increase efficiency and reduce waste. Toyota intends to invest more than $400 million at the Cambridge plant, which covers about 3 million square-feet between two production facilities that make the Corolla, Matrix, Camry Solara and Lexus RX vehicles. Construction is expected be complete by the spring of 2013. Toyota is also upgrading its plant in Woodstock, Ontario, which opened in 2008. It’s more than 1.8 million square-feet and manufactures the RAV4. The Cambridge and Woodstock plants employ about 6,500 people. CanadianManufacturing.com
Heroux-Devtek Mexican plant complete
An ABB arc-welding robot in action.
PHOTO: ABB
Valiant adds ABB to its systems mix WINDSOR, Ont.: Valiant Corp.’s automation systems will now include ABB robotic technology. The Windsor, Ont.-based manufacturer and production systems provider has signed a Strategic Systems Integrator agreement as a channel partner with ABB Robotics–North America. Valiant will provide ABB robot-based solutions in heavy-metal fabrication applications including welding, grinding, de-burring, cutting, drilling, tapping and machine tending for the aerospace, construction, forestry and alternative energy sectors. ABB has more than 190,000 robots installed worldwide.
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QUERÉTARO, Mex.: HérouxDevtek Inc. has completed its new manufacturing facility in Querétaro Aerospace Park in Mexico. Production at the 47,200 square-foot facility is expected to begin in December. The Canadian manufacturer of aerospace and industrial products will invest $20 million over the next three years, including an expansion to manufacture and assemble aerostructure and landing gear systems. Querétaro, about 200 kilometres north of Mexico City, has developed an aerospace cluster of more than 50 companies, such as Bombardier and General Electric Co. CanadianManufacturing.com
Aecon wins $132M oil sands fabrication contracts TORONTO: Aecon Group Inc.’s Industrial West Division has been awarded two contracts worth $132 million involving fabrication and module assembly work for an un-named oil sands operator in Fort McMurray, Alta. The Toronto-based construction and infrastructure development company said the contracts are for two large steam assisted gravity drainage (SAGD) oil sands projects. One contract involves the fabrication of pipe spools and assembly of 90 wellpad modules. The second involves off-module fabrication for the project’s plant facility. Work will begin in November at Aecon’s fabrication facilities in Sherwood Park, Alta. and will be completed by the fall of 2013.
Aecon said work will also be spread out to its facilities in Cambridge and Brantford, Ont., plus Dartmouth and Pictou, NS. The company recently announced its Lockerbie and Hole Eastern division has been awarded two contracts worth up to $250 million at mine sites in BC and New Brunswick with the Thompson Creek Metals Co. and the Potash Corp. of Saskatchewan Inc. Aecon will install the interior structural steel, equipment, piping, electrical and control systems at Thompson Creek’s Endako Molybdenum Mine site located just west of Fraser Lake in BC. The second contract is for work at Potash Corp.’s Picadilly site in Penobsquis, NB. Aecon will install mechanical equipment, process and utility piping systems as well as all electrical and control systems.
>> Careers Harry Marshall has been appointed CEO of Seprotech Systems Inc., an Ottawa-based water and wastewater treatment company. He was most recently president of Wesa Technologies Inc., an Ottawa-based industrial wastewater company. Jordan Grant has resigned as interim CEO and continues as the company’s chairman. Longford Energy Inc., a junior Canadian oil and gas exploration and production company based in Calgary, has appointed an interim CFO to replace Darren Moulds, who has resigned. Deborah Battiston is a Certified General Accountant who is the CFO of a number of Canadian public companies. Dale Schneider is the new CFO of Linamar Corp., a Gueph, Ont.-based automotive parts supplier. Starting as a co-op student in September 1990, he has held various accounting manager and controller positions with the company, rising to vice-president of finance. Craig Yamauchi, executive vice-president, Americas has left 20-20 Technologies Inc., a 3D interior design and furniture manufacturing software developer in Laval, Que. In the interim, the CEO Jean-François Grou will lead the management team. IBC Advanced Alloys Corp., an integrated manufacturer and distributor of rare metals based in Vancouver, has engaged an internationally recognized high performance autosports materials and metallurgical consultant to assist the company with product development for the autosports market. Chris Huskamp is currently an associate technical fellow at The Boeing Co. in St. Louis and the owner and president at Huskamp Motorsports Engineering. BioteQ Environmental Technologies Inc. has a new CEO. Jonathan Wilkinson takes over the role at the industrial wastewater treatment company based in Vancouver from retiring CEO Brad Marchant. Wilkinson brings executive clean tech experience from his positions with Nexterra Systems Corp, QuestAir Technologies and Bain & Co. Montreal-based Bombardier Aerospace has a vice-president and two regional vice-presidents overseeing its business aircraft sales team in an area split into two territories: China and Asia-Pacific and Austalia. Christophe Degoumois moves up from regional vice-president to vice-president, adding China, Asia-Pacific and Australia to his responsibilities for Central and Eastern Europe, Russia and Commonwealth of Independent States countries. Michael Han moves up from sales director to regional vice-president, China. An appointment for Asia Pacific and Australia is pending.
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Departments
>> Industry View
Blanco faucet wins global design award TORONTO: Households that have installed a Blanco Culina faucet in their kitchens will be pouring water in style – officially. Blanco Canada, a manufacturer of kitchen fixtures based in Mississauga, Ont., has announced its German parent won the 2012 iF (International Forum) product design award, which recognizes product innovation and design excellence. The Culina, a semi-pro style faucet designed in Germany and available in Canada, was selected by 44 judges who looked at more than 4,300 products from 48 nations. Its tall, arching, flexible-coiled spout features 360-degree swivel movement for an extended range of motion, a dual-spray function and a magnetized attachment for the insulated hand-spray. “The flexible tightly coiled spout helps to make this faucet exceptionally elegant and gives it a streamlined look,” said Alexandra Marshall, Blanco Canada’s director of marketing. “But it is also much more practical than faucets with an open coil where dirt can get trapped in the gaps. Consumers have told us they like this feature very much.” Since its introduction earlier this year, the faucet has received three other international awards, including the RED DOT award for product excellence, the KBCULTURE award and the IDEA award.
Another Norampac plant closing Blanco’s Culina taps into style and elegance. PHOTO: BLANCO
KINGSEY FALLS, Que.: Cascades Inc. is closing its Norampac plant in Le Gardeur, Que. as it continues to consolidate the division’s corrugated converting operations in the province. The Le Gardeur plant, with annual revenues of $8 million, will redirect its operations to other Norampac Quebec-based plants. Nearly 50 employees will be affected by the closure that will be concluded before the end of the year. They’ll be directed to other Norampac operations, and those who can’t make the move or lose their jobs will get employment assistance. Marc-André Dépin, Norampac’s president and CEO, said demand in the Canadian corrugated industry has been affected by unfavourable economic conditions for the past few years. “This initiative will allow us to optimize our production in the province, reduce our costs and improve our profitability...” he said.
>> Events MODEX SM 2012 MHIA Feb. 6-9, Atlanta The Material Handling Industry of America (MHIA) presents the supply chain event for manufacturing, distribution and supply chain professionals. Education sessions will run concurrently with more than 500 exhibitors showcasing material handling and supply chain management solutions. Visit www.modexshow.com. MainTrain 2012 PEMAC Feb. 13-16, Toronto The Plant Engineering and Maintenance Association of Canada (PEMAC) presents its peer-developed maintenance, reliability and asset management conference. Learn how to create and measure maintenance, reliability and asset management success. Visit www.maintrain.ca. 2012 Lean and Six Sigma Conference ASQ Feb. 27-28, Pheonix, Ariz. Choose from more than 40 concurrent sessions, hands-on workshops and networking opportunities at this quality event presented by the American Society of Quality (ASQ). Visit http://asq.org/confrences/ six-sigma. FABTECH Canada 2012 SME March 20-22, Toronto Canada gets its own FABTECH show presented by the Society of Manufacturing Engineers (SME), Fabricators & Manufacturers Association, Intl. (FMA) and American Welding Society (AWS) featuring the latest technologies, tools and trends with a special focus on fabricating technology. Visit www.fabtechcanada.com. 2012 CME National Lean Conference CME June 4-7, Winnipeg Thought leaders and practitioners share their insights and perspectives on continuous improvement, hosted by Canadian Manufacturers & Exporters (CME). Download the details at http://mb.cme-mec.ca/ download.php?file=gtvi0shh.pdf.
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Current dollars 2002 constant dollars
Economy << Departments JOB PLUNGE IN OCTOBER
per cent 9.0 8.5 8.0
SOURCE: STATISTICS CANADA
7.5 7.0 6.5 6.0 5.5
J
J 2008
J 2009
J 2010
O 2011
Employment declined by 54,000 full-time jobs in October pushing the unemployment rate up by 0.2% to 7.3%. Manufacturing was down for a second month losing 48,000 jobs, a 2.7% decline compared with October 2010. Over the last year, total employment rose by 237,000 (1.4%). MANUFACTURING SALES HAT TRICK seasonally adjusted Current dollars 2002 constant dollars
SOURCE: STATISTICS CANADA
$ billions 56 54 52 50 48 46 44 42 40 38 36 34 32 30 S J 2008
J 2009
J 2010
S 2011
September marked a monthly sales hat trick for manufacturing, up 2.6% over August to $49.2 billion thanks to 10 of 21 industries. Petroleum and coal products led with a 13.7% increase to $7.6 billion. Transportation equipment rose 7.1% to $8 billion.
TRADE BALANCE GOES SURPLUS $ billions seasonally adjusted 45
Exports Imports
43 41
SOURCE: STATISTICS CANADA
39 37 35 33 31 29 27
S
J 2008
J 2009
J 2010
ECONOMIC DE VELOPMENTS AND TRENDS
Customers fuel order books
M
anufacturing growth held steady in October despite continuing uncertainty in the global economy, according to the RBC Canadian Manufacturing Purchasing Managers Index RBC PMI. Output and new orders continued to increase solidly but at slower rates rate, with firms citing greater demand and new customers. The RBC PMI, based on data from purchasing executives in more than 400 industrial companies, posted a 53.7 composite score, down from 55.0 the previous month. “The Canadian manufacturing sector has been weathering external macro events and market conditions reasonably well, and we expect to see modest economic growth for the remainder of the year,” said Craig Wright, senior vice-president and chief economist at RBC. Almost 30% of the companies registered larger volumes compared with September; however, the rate of growth was the weakest since July, with a modest decline in new export orders. The index shows a robust increase in production at a slower pace. Backlogs fell and stocks of finished goods were reduced further, in some cases to meet higher new order requirements. Input levels also increased but inventories were depleted for the second consecutive month, with a number of respondents citing leaner stock holding policies. Subsequently, supplier delivery times lengthened further as input demand strengthened, but the increase in lead times was the weakest in the RBC-PMI’s 13-month history. Higher input costs were led by fuel and raw materials such as metals. Firms passed on greater cost burdens to clients by raising selling prices, although output charges rose only modestly.
The RBC Canadian Manufacturing PMI Report is conducted in association with Markit, a global financial information services company and the Purchasing Management Association of Canada (PMAC).
GLOBAL ECONOMY ON THE MEND: EDC The global economy is righting itself for a resumption of growth in the latter half of 2012 and Canadian exports continue to grow, according to the Fall 2011 Global Export Forecast by Export Development Canada (EDC). The Ottawa-based federal export agency expects the world economy will continue to find remedies for the shocks and weaknesses that weighed down near-term growth, with momentum lifting growth in developed markets from 1.6% this year to 2.6% next year. More diversified Canadian exports are expected to perform well growing 7% next year adding to an 11% gain this year. A mixed performance will yield Canadian GDP growth of 2.3% this year and a US resurgence will counter weak domestic markets for a 2.4% gain in 2012. “Canadian exports have been remarkably resilient. The recession wiped out one-quarter of our trade, but by mid2012, we will have recovered all of the momentum lost in the global downturn,” said Peter Hall, EDC’s chief economist. He forecasts the US economy to take the lead, with Japan’s reconstruction boosting 2012 growth. Austerity will confine Western Europe to the back seat, while emerging markets outperform and ride the increase in OECD growth to rack up back-to-back gains of 5.9% this year and next. Global growth is to accelerate from 3.7% this year to 4.3%. EDC’s forecast is available at www.edc.ca/gef.
S 2011
Canada’s global trade balance rose from a deficit of $487 million in August to a surplus of $1.2 billion in September, the first surplus since January. Exports rose to $39.7 billion, the highest value since October 2008, while imports decreased to $38.5 billion. Exports to the US increased 5% to $28.2 billion while imports decreased 1%.
LEADING INDICATORS ADVANCE $ billions seasonally adjusted 1.6 27
SOURCE: STATISTICS CANADA
0.8 0.4 0.0 -0.4
J J A S O N D J F MAM J J A S O N D J F MAM J J A S O 2009 2010 2011
The composite leading index rose 0.2% in October with increases in five of 10 components. Four declined. New orders drove the weakness in manufacturing with a 5.5% decline led by lower demand for aircraft.
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Departments
>> Labour Relations
Harper is blind to buy-Canadian benefits BY KEN LEWENZA
C
anada’s beleaguered shipbuilding industry is going to receive a $35-billion facelift over the next 30 years. This is welcome news for an industry that has for years faced uncertainty. Fierce global competition and a skyrocketing trade deficit (thanks to mounting imports and declining exports) claimed the jobs of one in every two shipbuilders since 1992. But the Harper government is making good on a prom-
Investment dollars will rebuild hard-hit communities and put “skilled trades workers back on the job... ” ise to build new naval, coastguard and icebreaker vessels. This record-breaking purchase under the National Shipbuilding Procurement Strategy will create and secure tens of thousands of jobs at the Halifax and Vancouver shipyards, plus countless spin-offs jobs. Canadian shipbuilding is among the sectors hardest hit by neo-liberal economic policies, marked by free trade and government’s “hands off” approach to
investment and sector development. Ironically, no foreign competitors were eligible to bid on the contracts and all of the associated economic benefits have been earmarked to stay within Canada’s borders. This is certainly an odd twist for Prime Minister Stephen Harper and his cabinet. As they’ve enthusiastically and relentlessly opposed any serious “Made in Canada” public purchasing policy since
Change
is in the Air…
Canadian PLANT is evolving with a new look and enhanced editorial.
winning office in 2006. Prior to the ship purchase, Harper and his trade ministers dismissed countless proposals made by unions, civil society organizations, municipalities and opposition politicians to establish ‘“Buy Canadian” rules that ensure at least some of the economic benefits of public funding. In fact, the Tories have embarked on an ambitious free trade accord with Europe that would forever strip away the rights of provincial and municipal governments to implement buy-local policies. This cynicism about buy-domestic policies climaxed in February 2010 when Harper infamously denounced Barack Obama’s “Buy American” stimulusspending rules. He considered these protectionist measures would pose a “huge risk” to the global economic recovery. Not that his argument was convincing, especially since there is widespread use (and general acceptance) of buy-national policies from the US to Europe and throughout Asia. No current piece of international trade policy prohibits buy-national policies in some form. Nevertheless, Harper has consistently sided with free market orthodoxy in matters of economic policy. For example in 2009, the Tories awarded a $274-million military truck contract to a foreign supplier, while a Chatham, Ont. truck plant was desperate for new work.
Developing industry sectors
Beginning with the January/February 2012 issue. PLANT and CIEN Magazine will be providing readers with more comprehensive coverage of what’s new in technology, products and equipment. Powered by CIEN Magazine, which has been providing product news to Canadian industry since 1940, these exclusive New Technology sections will feature product news, application stories and case histories that will improve the production efficiency and competitiveness of Canada’s manufacturing and process industries.
Serving you better with the most in-depth manufacturing editorial and now the latest in product technology!
This storyline has been repeated far too many times, but the shipbuilding purchase offers a good example of how Made in Canada plays an important role in developing strategic industrial sectors. And it will help Canada compete with other shipbuilding nations such as Norway and South Korea for international work. Investment dollars will rebuild hard-hit communities and put skilled trades workers back on the job, generating hundreds of millions of dollars in tax revenue – more if we consider the spin-off economic activity. Unfortunately, the success of this purchasing program appears to be more of an anomaly than a strategic change in political direction. Instead of rightfully championing a Made in Canada approach, the Harper government is falling back on old habits. It openly criticized Barack Obama’s inclusion of Buy American provisions in the proposed US jobs bill, calling the policy move “regrettable.” This public criticism reeks of hypocrisy. It also re-opens the same old, tired ideological debate that pits neo-liberal, “freemarket” policies against “protectionism.” On that debate, the ship has certainly sailed, and even Stephen Harper knows it. Ken Lewenza is the president of the Canadian Auto Workers Union, which represents 225,000 workers across the country in 17 different sectors of the economy. E-mail cawcomm@caw.ca. Comments? E-mail JTerrett@plant.ca.
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Business Outlook 2012 << Trends
Investing in
2012 MANUFACTURERS ARE CONFIDENT AND SPENDING MONEY ON THEIR PLANTS
Business is lookinig up for 83% of Canadian manufacturers. PHOTO: THINKSTOCK
PLANT’s annual Business Outlook survey shows senior executives plan to spend an average of $1.4 million on machinery, equipment, technology, training and R&D next year. BY JOE TERRETT, EDITOR
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he world may be perched on the brink of another economic meltdown, thanks to the precarious position in which the European Union finds itself, but even with several member countries perilously close to drowning in red ink, Canadian manufacturers are still optimistic about their prospects in 2012. That’s despite aggressive global competition, a high-value loonie, soaring costs and a sluggish US economy punctuated by another round of “Buy American” protectionist measures. PLANT’s 2012 Business Outlook survey finds Canada’s manufacturers are investing in their plants and feeling pretty good about the next three years. The survey, conducted in partnership with sponsor Grant Thornton, a global consulting firm, polled 367 senior manufacturing executives from across Canada. Most (71%) are small and medium enterprises, 87% privately owned, and 62% are family owned. Just 14% identified themselves as subsidiaries of a multinational company. Annual revenues for the entire group will average $62.3 million this year and potentially $70.1 million next year. Of this group 83%, are most confident about their ability to forecast in 2012, but become less so in three years (55%) and five years out (38%) – a similar outcome to the views of last year’s respondents. Most manufacturers (58%) expect orders and sales dollar values (59%) to increase next year, while 31% are looking at price increases and 41% are forecasting higher profits. Of course, there are challenges and what keeps 46% of them up at night is controlling costs next year, although the number drops to 32% when they look ahead three years. Increasing sales and
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revenue in 2012 is a challenge for 40% of them, but in three years fewer (32%) see it as a concern. The economy is high on the list for 40% of the respondents, but their anxiety level drops at the three-year mark (29%). Competition is the greatest constraint to increasing revenue outside North America for 42%, followed by transportation and logistics issues (38%). Although the loonie is hovering near parity with the US greenback and is interfering with manufacturers’ export revenues, its higher-value and the Harper government’s extension of the two-year write off for machinery, equipment and technology
investments are encouraging many of the respondents to spend some money on their plants over the next two years. Machinery and equipment top the list for 61% of them and are among the top three priorities for 75%. For 40% of respondents, machinery is the top priority. Training is next for 55%, followed by technology for 51% and R&D for 49%.
Investing in productivity Canadian companies prefer to do their shopping closer to home: 88% look for machinery from Canada, 83% from the US. Germany is a distant third (34%) followed by Japan (18%) and Italy (15%). And 86% are either very or somewhat confident about getting financing. Not a lot of manufacturers have nice things to say about banks, yet 57% are using them; however, 51% are coming up with their own funds and government programs are
>> Forecast
Hot on growth, despite slump PWC SURVEY SHOWS BUSINESS CONFIDENCE HIGHEST SINCE 2005
T
he threat of a global economic slump hasn’t cooled the confidence of Canadian private companies, according to global consulting company PwC’s insights survey. In fact, they’re hotter than ever for growth and expansion. The PwC Business Insights Survey of Canadian Private Companies, which polled 306 leaders from a variety of industries, shows a general business confidence level that’s at its highest since 2005, showing 82% of respondents striving for growth compared to 66% last year. “Canadian private companies learned a lot through the recession about how to survive and they’ve repositioned their businesses to face the challenges. Having adapted to the new business reality, they are ready for whatever the markets throw at them, which accounts for the optimism,” says Tahir Ayub, Canadian leader of PwC’s Private Company Services practice. However, many of the companies surveyed are more reserved with their expectations for growth. Only 10% were looking to aggressively grow by 15% or more, compared to 24% last year. When surveyed in June/July 2011, 83% said they expect their business to do a little or a lot better over the next 12 months. In September, the number dropped to 74%. The respondents predict the top three issues over the next 12 months will be: competition (34%), profitability (29%), and labour shortages (26%). Their top priorities include: improving processes (47%); reducing costs of operations (46%); improving staff skills (39%); and better targeting of customers (37%). Visit www.pwc.com/ca/businessinsights for more information.
part of the mix for 27%. Almost three-quarters of the respondents (74%) are aware of or have used government incentives, but there are still 24% who identify themselves as unaware. Most (26%) are investing under $100,000 next year, while 19% are putting up between $100,000 and just less than $500,000. Looking at all companies, they are averaging $835,000 in 2010, almost $1.4 million this year and is anticipated to be more than $1.3 million in 2012. Only a small number of companies (11 of 367) were not investing this year or next and more than half said they either didn’t need to invest or were just trying to keep their companies going. Investment in technologies is key to productivity improvement plans for 33% of the senior executives, followed by employee training for 28% and automation for 24%. The survey results show companies are investing in product development again. In 2010, 21% spent nothing. The number dropped to 15% this year and just 11% will be keeping a lid on R&D next year. Most (30%) will be spending between 1% and 3% of revenues, 19% say 4% to 5%, 10% intend to spend between 7% and 10%, while another 10% say they’ll invest more than 10%. The anticipated average for all companies is 4.3% for 2012, compared to 3.8% in 2011. More than half (52%) of the respondents have not taken advantage of the SR&ED tax credit compared to 44% who have done so. Manufacturers are still playing primarily to a home audience: on average almost 70% of them derive most of their sales from Canada, although numbers reflect slowing of trade with the US (23% in 2009 to 20.7% in 2011). But they’re slowly increasing their dealings with China, up from 0.7% in 2009 to 2% this year. The world may or may not be on the brink of another recession as conditions in Europe threaten to impact most points of the global economy, yet manufacturers are looking head with confidence – tempered, of course, by typical Canadian caution. Comments? E-mail JTerrett@plant.ca.
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Trends
>> Reshoring
Taking back
manufacturing A new plan for economic prosperity The SME-Toronto initiative aims to rebalance Canada’s position in the global supply chain and bring some manufacturing home. By Joe Terrett, Editor
T
here is much to gain from the opportunities offered by a global economy, but the downside has been the loss of North American manufacturing capacity and jobs. In 1999, manufacturing generated 19.2% of the country’s GDP and was the biggest employer. Today it’s good for about 13% and has slipped to thirdplace as an employer behind trade, and health care/social assistance. More than 322,000 jobs were lost between 2004 and 2008, according to Statistics Canada, and the erosion continues. In October another 48,000 jobs (mostly in Ontario) were lost out of a national total of 54,000. Manufacturing jobs are key to our prosperity. In the automotive industry, one job at an assembly plant supports 7,500 other jobs. (Imagine the economic fallout that will follow the closure of Ford Motor Co.’s assembly plant in St. Thomas, Ont., which involves 1,200 lost jobs). We are doing very nicely on the commodity side, exporting our natural resources to countries where someone else profits from adding the value. The TBM roadmap addresses knowledge transfer to incoming generations as baby boomers retire. PHOTO:THINKSTOCK Yet ironically, commodities are driving up the value of the dollar, which is eroding manufacturers’ exports. perience walks with them. Better they should pass valuable experience to an incomThe Toronto chapter of the Society of Manufacturing Engineers (SME) ing generation tasked to move manufacturing into the future. believes it’s time to take action. It’s marshalling the country’s stakeholders to rebalStakeholders need to act now because some of the work and the jobs are on the way ance what is made offshore and what we should be manufacturing here. back. The Boston Consulting Group has released a report that observes China is ap“Manufacturing is not going to come back to North America until we take it back,” proaching a tipping point where rising wages, high-energy costs and logistics challenges said Nigel Southway, a manufacturing consultant, engineer and operations team leader are shrinking the cost advantage. BCG says up to 3 million jobs will be back by 2015. of the Toronto chapter. He is one of the SME volunteers driving the appropriately Transportation goods such as vehicles and auto parts, electrical equipment includnamed Take Back Manufacturing (TBM) campaign that endeavours to do just that. ing household appliances and furniture are among seven sectors that will reach that Southway, who actually spent the last five years helping companies take products to tipping point. BCG says in many cases companies will shift production back from China, has found that business leaders are thinking the exodus has gone too far. China or choose to locate new investments in the US, which is also expected to be“We’re not saying reverse the flow, but [apply] next-generation capability, using new come a more competitive export base for Europe and Canada. automation and systems, and improve our prosperity.” Other sectors most likely to return are plastics and rubber products, machinery, fabSo far TBM has attracted an impressive list of stakeholders that includes technical ricated metal products and computers/electronics. The seven groups together mean associations, three trade associations and representatives from education, governan additional $100 billion in output for the US economy. ment, media and business. “This does not mean factories in China will close,” noted Michael Zinser, a BCG part“We looked at a lot of organizations actively working to improve the situation, but ner who leads the firm’s manufacturing work in the Americas. “Instead, more of their felt their efforts were largely being ignored,” says Marie Laird, the Toronto chapter’s output will be consumed in the fast-growing domestic market and elsewhere in Asia.” chair. “We believed there’s an opportunity to work in a non-partisan way to get all the With Chinese wages rising at 15% to 20% per year and the value of the yuan conpeople with a vested interest in manufacturing to work together on one agenda, to tinuing to appreciate against the US dollar, the report predicted the once-enormous make manufacturing strong again.” labour-cost gap between Chinese coastal provinces and certain lower-cost US states TBM is more directly focused on manufacturing in Ontario, but Laird says the expectawill shrink to less than 40% by around 2015. tion is to engage interested parties and organizations across Canada. Chris Kuehl, economic analyst for the Rockford, Ill.-based Fabricators & Manufacturers Association Intl., notes the rising costs of production has become a major Career development concern for the Chinese. The plan is to first raise awareness and prepare for the return of jobs. TBM held a “There is no way to reverse that trend without creating some serious social unrest kick-off meeting in June and followed with Southway and Laird running sessions in China. Wages and salaries have been going up fast – estimates are that wages have throughout the Canadian Manufacturing Technology Show in Toronto. risen by more than 1,000% in the coastal regions just in the last year or so,” says Kuehl. Phase 2 will involve governments working on tax, trade and education policies that The Chinese are losing ground to rivals in other parts of Asia and to nations such as enhance manufacturing’s competitiveness. Mexico, where he says wages have risen by less than 25%. The third phase involves ensuring manufacturers have the resources available to Southway says Canadian manufacturers have an opportunity to return to the way improve technology development, productivity and innovation and to create a strong manufacturing used to be done: come up with an idea, make a prototype and manufacinfrastructure for career development. Canada is suffering from a chronic shortage ture it at home rather than shipping the work and the intellectual property overseas. of skilled people. The TBM plan recommends making the education/training stream Continuing to follow the path we’re on, he warns, will make us “distribution centres more flexible and responsive by growing talent at home through a process that goes for an economy that can’t afford to buy the goods in the shop window.” through progressive transitions. This model is based on Southway’s education growing up in the UK, where work Visit http://sme-tbm.org/tbm-information/ for details about the Take Back Manuexperience was combined with academics on an integrated path to career growth. A facturing campaign. kid would start by learning a trade, then work as a technician for a year, as a technoloVisit www.bcgperspectives.com to read The US Manufacturing Renaissance: gist for another year and then move on to engineering and a degree. The current path Which Industries? to a career upgrade obliges the potential engineer to start over. With the pending retirement of a generation of baby boomers, TBM’s approach also Comments? E-mail JTerrett@plant.ca. addresses the critical issue of knowledge transfer. When those people leave, their ex-
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>> Think Lean
Operations
Maintain
continuous flow Implement a lean materials handing system for parts A PFEP will pull together into one place all the parts information that resides across the organization to enhance the creation of value throughout the plant. By Richard Kunst
M
anagers are making progress in creating areas of continuous flow but many are having trouble sustaining steady output. The problem is likely the lack of a lean material-handling system for parts to support the cells. Your plant may be leaner in terms of operating cells, but a mass producer when it comes to supplying them. The result? Processes starve, there’s a loss of flow and you end up wasting a lot of effort and money to keep too much inventory and spend too much time hunting for missing items. Key elements of a door-to-door lean material handling system for parts include: a plan for every part; a properly located and managed parts market; a rigorous material-delivery route using standard work; and pull signals to tightly link areas of continuous flow to the supply of materials. When introducing such a system, you have to understand how each part is received, packaged, stored and delivered to its point of use. Much of this information exists within your organization, but it’s stored in many different places under the control of many managers and it’s mostly invisible. So the first step in creating a lean material-handling system for parts is to collect all
of the information in one place. That’s where Plan for Every Part (PFEP) comes in. It lists elements such as part number, description and daily use. Note that as conditions change, the specific items in your PFEP may need to change. To ensure the PFEP is flexible, your information management system must be able to accommodate continuous change. Make the information visible to everyone in the facility, and sort by categories (part description, order
WHAT A PFEP DOES FOR YOU The PFEP filled with parts information and properly managed enables you to: • Create a lean material-handling system and subsequently develop a parts market, delivery routes and pull signals. • Store pertinent current data on all parts in one central, accessible location. • Sort parts data by various categories, such as container size, supplier location and use. • Provide quick response to operations questions regarding parts and suppliers. • Extend the lean material-handling system to your plant-toplant material movements.
>> Lifting Systems Assessment spots hidden lift trouble
S
potting defects and deficiencies in critical, load-bearing lifting equipment is tough to do, especially when many of the potential problems are not visible to the naked eye. Konecranes, a Springfield, Ohio lifting systems manufacturer with offices across Canada, offers an assessment service that will help avoid catastrophic failure by detecting trouble typically missed by routine inspection. Its Critical Component Assessment applies non-destructive technology (NDT). Certified Konecranes inspectors use thermal imaging and electromagnetic-inductive technology to assess the condition of critical components such as: internal wires, strands, and wire rope core; mechanical coupling between hoist motor and gear box; motor winding insulation; gear box and mechanical load brakes; and mechanical components. A complete bottom block hook inspection using NDT can also be conducted to check for cumulative fatigue that could lead to hook failure. Elements of the assessment include: an overall crane inspection and analysis; an evaluation of the operating environment; a key components analysis; and a maintenance and reliability study. A report summarizes the current condition of the equipment including its current operating capacity and the extent of its usability to help you maximize service life and use, prioritize maintenance schedules and forecast maintenance expenses. www.konecranesamericas.com A Konecranes inspector checking a lift system. PHOTO: KONECRANES
A PFEP will solve unsteady output issues.
PHOTO: THINKSTOCK
frequency, container type, and hourly usage), so you’ll need to use either a computer spreadsheet (such as Excel) or computer database (such as Access). The next step is to load the data in the smallest element possible. For example, don’t put a container’s height, length and width in one column. Create a separate category for each dimension. This is critical information for designing storage locations. Similarly, avoid putting suppliers’ addresses in one column. Break them up into city and province/state so you can sort by these categories in case you want to set up an external material movement system (milk runs) among plants.
Add value streams Begin filling the PFEP with parts data from one cell and add it cell by cell throughout the value stream. Ultimately, it will include comprehensive information on every part in the entire facility. Smaller facilities with just one or two simple value streams can develop and fill the PFEP from the outset with parts information for the entire plant. Larger facilities should begin with a manageable scope. If you add many value streams all at once you risk not getting the project finished. Or worse, you’ll be tempted to take shortcuts that compromise the quality of the data. It’s much easier to start small and expand on your initial successes. Establish the PFEP with an eye to the future. Other cells and value streams will need to use the same fields and format, and they’ll want to avoid any significant rework as the implementation branches out. You’ll also want to use the PFEP when developing new products, but ruling that no new product can be moved to the production preparation stage without complete data. An accurate PFEP, developed and tested well before the beginning of production, will be a powerful tool for the development team in guaranteeing trouble-free launches at target cost. Maintenance, once you get all this information – and it probably will take more than one person to gather it all – isn’t that time consuming. But you have to appoint a PFEP manager, the only person in the plant who can change and update the document. Information suffers when there are too many people changing one document. Managing the PFEP normally takes 10 to 30 minutes daily depending on the size of your plant. While smaller facilities can appoint one manager to handle all the value streams in the plant, large facilities may need more than one manager, each assigned to different product-family value streams. However, fewer managers usually mean a more accurate PFEP. You should also institute a guideline that requires every part to be documented in the PFEP and approved by the manager before it appears on Continued on page 14
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Management
>> Exporting
How are we doing? Canada’s annual report card
Appoint a PFEP manager Continued from page 12
the shop floor. This is aided by a PFEP Change/Add Request Form. By establishing a manager and developing precise guidelines for changes in the PFEP, you ensure it’s always up-todate and accompanied by a paper trail of changes. If done properly, this also makes it impossible to change a part on the floor without communicating that change to all affected departments. For example, during routine operations your production control department may use the PFEP as a quick reference to identify which company supplies a part, its location and how long it takes to get the part. Developing and updating the PFEP is not a value-creating process because it does not do so directly from the standpoint of the customer, but it’s important incidental work that will significantly increase the percentage of value-creating activities occurring throughout your plant. Many firms believe they have the functional equivalent of a PFEP “somewhere in the system” and wonder if creating and continually updating one as a distinct data set really creates value. The answer is that when information is in many places and hard for everyone to see, value-creating activities throughout the plant can’t be supported with accurate and timely information. Waste of all kinds becomes unavoidable. Richard Kunst is president and CEO of Kunst Solutions Corp., which publishes the “Lean Thoughts” e-newsletter. Email rkunst@kunstartofsolutions.com.
>> Tech Tip
How not to tension motor belts
T
ensioning motor belts by ampere draw can be misleading. Doing so on a motor/ fan combination until the current matches the nameplate seems to make sense until you realize that most belt systems are only about 50% loaded. The result is lots of bad bearings and machining and motors lasting days instead of years. Belt tensioning, in fact, has a definite impact on system efficiency. Even slight over or under tension will reduce system efficiency by more than 2%. Looking at energy consumption also provides immediate and measurable data that demonstrates the impact. The loss in efficiency is an increase in friction that directly relates to unnecessary wear on components, including bearings, belts and sheaves. A more accurate measurement of condition can be made by using electrical signature analysis equipment to record kilowatts before and after adjustments. This takes the place of calculating the demand and makes the measurements far more accurate. Gleaned from MotorDoc newsletters with permission from Dr. Howard Penrose, CMRP, Success by Design.
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By Mark Drake
E
veryone needs feedback. It either confirms we’re on the right track or acts as an incentive for change and improvement. Foreign Affairs and International Trade (DFAIT) recently published Canada’s “State of Trade” report card, and the Canadian Chamber of Commerce held its annual trade day in Ottawa to coincide with the launch. Government and private sector speakers focused on Canada’s two largest international markets, the US and the European Union. Here are some of their key points: • US challenges. The US market remains “job one” although it has declined from a peak of 87% of total Canadian exports to around 75% in 2010 (at $334 billion). Much of the decline has been in manufacturing, which has been partly compensated by the energy sector. Gains resulting from NAFTA have been eroded somewhat by US bilateral agreements, and by current US challenges related to debt, unemployment and tightened border security. Many non-tariff barriers remain due to discriminative regulation, delays obtaining approvals and standardization issues. However massive opportunities remain, particularly in the energy sector where the US is increasingly anxious to escape its dependence on politically unstable countries for supplies. Canadian oil and gas are vital imports for the US, and that helps to explain why around 50% of investment in the Alberta oil patch is from US-based companies. The thickening of the Canada/US border due to security issues is a concern. Delays are costing billions of dollars every year. Last February Prime Minster Harper and President Barack Obama declared their shared vision for “perimeter security,” although details are sketchy.
DFAIT reports that Canada’s overall economic activity “rebounded in 2010 by 3.1%... ” Supply chain security will be important, with inspectors working as much as possible away from the border, easier crossings for low-risk travellers, and above all, an improvement in the physical, electronic and bureaucratic infrastructure. Regulations need to be simplified and standardized (without risk to sovereignty or compromising health and safety concerns), and security programs made more user-friendly. One speaker suggested Canada needs to improve its lax intellectual property (IP) laws. Fifty per cent of exports to the US are IP related, and a tightening of legislation will help create more inward investment (and jobs), making the country more competitive.
Trade challenges • European Union. Although the EU is Canada’s second biggest market, at around $49 billion it accounts for only 10% of total exports. The negotiation of a free trade agreement with the EU is making some progress. The fact that only eight out of 22 chapters have been settled underlines the complexity of the discussions. However, success will be important for Canada, as the World Trade Organization’s Doha Round would appear to be dead in the water, and the EU is the largest single market in the world, with government procurement alone reaching $2.3 trillion. The target is to finish negotiations by the end of 2011. Remaining challenges include rules of origin for the auto sector, government procurement at the sub-national level, IP, non-tariff barriers and agriculture. Speakers argued for freer labour mobility in Canada, readier recognition of non-
Canadian professional qualifications and above all the removal of the remaining barriers to internal trade. How can we genuinely claim to be a free trade nation while our inter-provincial barriers and supply management restrictions hold back trade and investment? Change is in part a question of political courage, but current arrangements do not make any sense in a genuine free trade environment, and that’s what we need in Canada to maximize long term economic growth. • The 2010 report card. DFAIT reports that Canada’s overall economic activity rebounded in 2010 by 3.1%, after a 2.5% decline a year earlier. Unemployment was down from 8.3% to 7.6% and based on one of the best economic performances among the G7, our dollar rose to parity and higher against the greenback. In Canadian dollar terms, the export of goods and services rebounded by 8.7%, and these gains were spread over most markets, especially by exports to Japan and the EU. Industrial goods and materials, automobiles and energy products performed well, while exports of consumer goods, agricultural and fish products struggled. What might our report card conclude? A satisfactory performance, bearing in mind the difficult worldwide conditions but with some challenges and many exciting opportunities remaining. Mark Drake is former president of Electrovert Ltd. and the Canadian Exporters’ Association. E-mail corsley@ videotron.ca. Comments? E-mail JTerrett@plant. com.
>> Productivity
You’re $7,500 behind US income Conference Board report tracks 20 years of trailing the US
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wo decades of sluggish productivity growth have left Canadians, businesses and governments a little lighter in the wallet, according to a Conference Board of Canada study. If Canada’s productivity had matched that of the US between 1988 and 2008, real GDP per capita would have been $8,500 higher in 2008, personal disposable income would have been $7,500 higher, corporate profits would have been 40% higher, and federal government revenues would have been 31% higher. “These results should impress upon policymakers, as well as average Canadians, just how vital it is for Canada to improve its productivity performance,” said Mario Lefebvre, Director, Centre for Municipal Studies. The report shows that based on 2008 figures, Americans were $13,000 richer than Canadians when measured in purchasing power parity.
Under a scenario in which Canada’s productivity growth matched that of the US, the gap would have been less than $7,000. The Ottawa-based research firm used a simulation boosting Canadian labour productivity growth by 0.8% per year from 1988 to 2008, the same increase as the difference between annual labour productivity growth in the US (2.2%) and Canada (1.4%) over the 20-year period. The Conference Board notes that since the 1980s, Canada’s performance has been sluggish in multi-factor productivity (or innovation) and capital intensity, while labour quality has been relatively stable. Previous Conference Board research found that Canada’s relatively well-educated workforce does not have the physical capital required to maximize productivity performance. Visit www.conferenceboard.ca/documents.aspx?did=4486 for a copy of the report.
November/December 2011
11-11-22 4:04 PM
SAVING energy makes sense —business sense. You’re always looking for new ways to control your operating costs. Energy use is no exception. Your local electric utility has a range of energy-efficient solutions tailored to businesses. Small businesses may be eligible for incentives to upgrade their lighting. Commercial, agricultural and industrial operations can tap into funding for lighting, process and equipment upgrades, as well as for energy audits and shifting energy usage away from peak demand times. Big or small, every Ontario business can benefit.
Find out more by contacting your local electric utility or visit saveonenergy.ca/business
Your local electric utility offers incentives for: • • • •
Energy-efficient lighting Shifting energy use Equipment upgrades Energy audits
Subject to additional terms and conditions found at saveonenergy.ca. Subject to change without notice. A mark of the Province of Ontario protected under Canadian trade-mark law. Used under licence. OM Official Marks of the Ontario Power Authority.
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11-11-22 3:31 PM
Management
>> Insurance
Business interrupted IS YOUR COMPANY COVERED? Protect yourself with insurance that shields revenue streams ordinarily used to pay fixed costs. BY JEFFREY SMITH AND JOSEPH GIPP
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t will take three weeks for the replacement parts to arrive from Germany.” Not the best news when customer orders must be filled within days and portions of the manufacturing operation will be idle for weeks until equipment or parts arrive. Of course, this is one of the reasons why manufacturers have business interruption insurance. But to ensure full recovery in the event of a loss, be aware of certain facts related to purchasing coverage and filing a claim. Equipment failure, fire and water damage, or the theft of inventory and equipment, all lead to revenue losses. Business interruption insurance protects revenue streams that would ordinarily be used to pay fixed costs such as loan obligations, rent expense, property taxes and employee salaries, plus generate shareholder profits. Fundamentally, it insures loss of net income plus necessary continuing expenses. However, not purchasing enough coverage will stick you with a portion of any loss – in effect, making your company a co-insurer. A company that acquires $40 million in coverage and has $80 million in exposure may only have insured 50% of any business interruption loss from the first dollar of loss. In such a situation, a $6 million loss might only result in $3 million in insurance recovery because the business has co-insured half the loss. While there are various types of this insurance, most are broadly based on profits or gross earnings. The most significant differences between the two
relate to the period over which losses are recoverable and how payroll is insured. Gross earnings forms generally indemnify losses only until the lost or damaged property can be re-built, repaired or replaced, whether or not the business has reached its previous level of sales. Profits forms continue to provide loss coverage until the business resumes its normal level of sales, subject to a maximum period of indemnity. To highlight the differences between the two, consider a food manufacturer that experiences the breakdown of a key piece of equipment. The business is unable to manufacture a range of its products for 30 days and thus loses a number of customers to a competitor who can supply the required products. Under a policy with a gross earnings wording, the loss indemnity period would be limited to the 30 days required to replace the damaged equipment. Under a policy with a profits wording, the period would continue until the business achieves the volume of sales it would ordinarily have had – subject to the maximum indemnity period in the insurance contract. Typically the period is 12 months, which can be reduced or extended. Manufacturers need to consider whether gross earnings coverage would be adequate in the event of a significant business interruption or whether it’s worth paying higher premiums for profits coverage. In some instances, this may not be an option. For companies involved in just-in-time production, insurers may not want to provide coverage under a profits wording because the risk of customer losses is simply too high.
Don’t let a business interruption idle your operation’s cash flow.
Gross earnings and profits forms treat ordinary payroll expense differently. This expense is the wages of hourly paid employees and non-management salaried employees who are not essential to the company’s continuing operations. Management should consider the pros and cons of insuring this expense. Sometimes payroll costs can be avoided through layoffs; other times layoffs are impractical or impossible, when, for instance, union contracts prevent them.
Consider payroll costs Ordinary payroll costs are insured under gross earnings wordings, unless there is a specific exclusion or limitation endorsement. Such endorsements can be useful to avoid spending money to purchase coverage that may not be required. However, under a profits form,
>>Marketing
Strategies for success DOES YOUR COMPANY HAVE A CLEAR SENSE OF PURPOSE? BY ANDREW SHEDDEN
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ith 2012 almost upon us, many of you are patting yourselves on the back for meeting or exceeding your 2011 objectives. Companies that enjoy consistent growth operate with a clear sense of purpose. Many hard-charging CEOs are obsessed with marketing tactics but show no more than a nominal interest in competitive strategy, which is the foundation of industrial marketing success. Savvy senior executives understand that creating a clearly defined competitive strategy makes their marketing tactics much more effective. These four points will help you formulate an effective strategy. 1. Understand your motive force. Consider what drives your company. This determines your choice of markets and products, thereby shaping strategy and operations. Your company may only have one motive force, such as meeting the needs of a specific market through a process of developing new and innovative products. Obviously this means your competitive strategy will be considerably different than if your motive force is
based on being the technology leader in all markets. 2. Define a workable competitive strategy. A simple and unequivocal definition could be, “Strategy is the framework that guides culture, direction, and decision-making within an organization.” 3. Validate. Seek input from a cross-section of staff and carefully weigh what they say as you formalize a strategy. The goal is gain internal buy-in and commitment. 4. Clearly communicate. Create a crystal-clear strategy statement and make it part of the company culture. This establishes a coherent direction and common purpose, while simplifying operational decisions and aligning all activities. If a proposed initiative doesn’t fit in or contribute to the strategy, pass on it. Andrew Shedden is the president of Broadfield Consulting, an industrial marketing consulting firm. Call (800) 353-4447. Visit www.broadfieldconsulting.com for more than 80 blog posts and free reports to help improve your marketing efforts.
PHOTO: THINKSTOCK
ordinary payroll costs are not generally insured unless a company purchases an additional coverage endorsement (for a specific period of time that is not the normal loss indemnity period). Weigh the advantages and disadvantages. Is ordinary payroll coverage necessary to retain employees and avoid the time and expense of hiring and training new staff? Or would it be better to save on the premium and lay off employees in the event the business is temporarily shut down, then replace them when the company is back in business? Professional fees coverage is one other important provision to include in an insurance contract. If one day your company experiences a serious loss from a business interruption, you’ll expect a fair calculation of this loss. Quantifying a business interruption loss is complex and can also be subjective, involving the use of assumptions. You’ll want a knowledgeable forensic accountant to document and quantify this loss and look out for the financial interests of your business. Manufacturing revenue losses occur from property damage, or theft of inventory and equipment, but often they arise as a result of equipment failure. Capitalintensive manufacturing operations are dependent on sophisticated equipment. All the more reason for adequate, appropriate business interruption insurance. One day, the life of your business may depend on it. Jeffrey Smith is a partner in the Financial Advisory Services practice of BDO Canada LLP (www.bdo.ca). Contact him at (416) 775-7801 or JSmith@bdo. ca. Joseph Gipp is a partner and national leader of BDO’s manufacturing industry practice. Contact him at (416) 369-3091 or JGipp@bdo.ca. Comments? E-mail JTerrett@plant.ca.
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November/December 2011
11-11-22 4:29 PM
Advertorial
Good Stuff: Engineered Lifting Systems Unveils a Line of ‘Destuffing Platforms’
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Engineered Lifting Systems & Equipment Inc.
lifting
systems
ELS
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ineer
Engineered Lifting Systems & Equipment (ELS) of Elmira, Ontario has developed an ingenious mechanical lifting solution for workers tasked with unloading (i.e. “destuffing”) unpalletized boxes and bags. Workers who move goods from containers to conveyors by hand have to bend, twist, lift and generally exert themselves, which can lead to muscle strain. Muscle strain in turn can lead to injuries, which leads to disgruntled employees and an unproductive workplace. To address this issue, ELS has created a new product line called “destuffing platforms.” The line is intended to make unloading containers a more efficient, productive and ergonomically friendly experience. “There are two different versions of the destuffing platforms. One has a pivoting belt conveyor for boxed products, where the operator takes a box and slides it onto a conveyor. The other version has a lift assist incorporated with it. A typical application for this version would be lifting bags,” explains Richard Kat, vice-president at ELS. The destuffing platforms come in driven and non-driven varieties, adds Kat. Designed in-house, these destuffing platforms are going to be marketed specifically to distribution centres. Demand might be fierce, given that “thousands of transportation containers arrive in North America daily, and often the contents aren’t palletized,” notes Kat. Destuffing platforms are an innovative concept from a company that celebrated its 40th anniversary this year. Originally founded under the name Mentor Dynamics, the firm initially served as a structural steel fabricator. In the 1970s, Mentor Dynamics developed a low-friction lining system to facilitate the movement of bulk materials in the holds of self-unloading ships. In the 1980s, the firm moved ELS destuffing platforms make uploading containers more efficient and ergonomic. into the crane business and began developing overhead cranes, jib cranes, monorails and wide span double girder cranes, among other products. Atlanta, Georgia, in February 2012. Mentor Dynamics was purchased by Engineered Lifting Systems & While higher efficiency at the loading dock is the goal, distribution centres that Equipment in 1998. In 2008, the company relocated to a new facility in Elmira. buy a destuffing platform might find themselves with a more cheerful workforce as In the summer of 2011, ELS underwent a large expansion, adding 8,100 square an added bonus. feet of space to its warehouse and production area. The addition now gives ELS a “The main benefits of the destuffing platforms are improved ergonomics and prototal of 45,700 square feet at its Elmira plant. At the same time the expansion took ductivity gains. Operators who use a destuffing platform go home feeling less tired, place, the company constructed a 173’ x 78’ outdoor crane to better facilitate the with fewer repetitive strain injuries,” says Kat. handling of structural steel in the material yard. (For more information, see: www.engliftsystems.com) ELS offers a wide variety of products and services. Products include transfer carts, bridge cranes, work stations cranes, hoist-based lift-assists, etc. Available services include design, structural analysis, load testing, structural blasting, electrical and pneumatic assembly and equipment certification. For now, however, it’s the destuffing platforms that ELS is particularly proud of. The pivoting conveyor belt platform is set to be unveiled at the Modex show in
1-800-263-9823
New Product - Destuffing Platforms For Ergonomic Container Unloading
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Engineered Solutions For Overhead Material Handling Bridge Cranes
Work Station Cranes
Transfer Carts
Lift Assists
Tooling Integration
www.engliftsystems.com Serving customers for over 40 years. We make difficult jobs seem easy!
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11-11-22 3:31 PM
Innovation
>> Skills
>> Intellectual Property
World IP market accelerates
China is the second largest R&D spender
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Interns working with mentors help companies retain experience.
Intern strategy
PHOTO: THINKSTOCK
Build expertise from the inside Develop partnerships with colleges and universities to train candidates and hire the best ones to fill skill gaps. By Giulio Desando
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anufacturers eager to develop new products face significant human resource challenges, chief among them hiring people who possess hard-to-find or new skills. A lack of available jobs over the last three years has driven a lot of technical talent from the manufacturing sector, so it’s not surprising a 2010 global survey conducted by the Manpower Group found one in three companies experienced difficulty filling positions. And demand continues to rise. Finding (or headhunting) qualified people from other companies is a traditional recruitment method that’s really a short-term – and not particularly cost-effective – fix. Experience can be expensive when companies compete for talent. A more effective plan is to focus on the longer term and develop in-house capabilities that address skills shortages. A good way to start is through campus recruitment and partnerships that allow you to bring in and train candidates, then eventually hire
RIM: Top R&D spender
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esearch in Motion (RIM), BCE and IBM have been named Canada’s leaders in R&D spending this year by Research Infosource. Canada’s Top 100 R&D corporations generated income of $9.4 billion in 2010, down from $10.4 billion in 2009, continuing a negative trend in R&D spending for the fifth consecutive year. But revenues for 92 companies increased by 4.7%. Despite recent turmoil surrounding the Waterloo, Ont.based tech-giant, RIM remains Canada’s biggest spender at more than $1.4 billion, an increase of 26.3% over 2009. BCE was second at $821 million. More big names rounded out the top 10, including engineering firm Atomic Energy ($476 million), automotive giant Magna ($463.5 million) and Bombardier ($198.7 million). CanadianManufacturing.com
them. Internships extend the job interview process with no commitment to hire should staffing requirements change. Deployed properly, they address, as needed, internal shortages department by department. Start with a needs analysis for short- and long-term staffing, taking into account the age demographics and the sustainability of positions within departments. For instance, if an employee were to retire or leave the company, what would the replacement cost be from financial and knowledge perspectives? Such positions should be given priority for long-term staffing development strategies. Developing partnerships with university co-ops and career services institutions provides the added benefit of tax incentives offered by federal and provincial governments for hiring co-op and graduate students. Programs such as Connect Canada, a national, federally supported internship program, bring together companies with graduate students and their professors who are conducting leading edge research to direct shortterm intern placements that focus on real R&D needs. Companies gain the skills of a graduate-level student/ academic professor team, while reaping the end results of the R&D through negotiated intellectual property. Put a formal program in place that outlines the intern’s intended growth and development, but ultimately engages the candidate’s interest in the company just prior to graduation. Details should be worked out with all the company’s departments before the interns arrive. Establish evaluation processes modeled after career development programs already in place to select the best candidates for return engagements and promote the best ones to the next level. It’s critical mentors help interns learn skills and organizational culture. This “brand building” promotes the company’s benefits, culture and potential career development paths to ensure interns stay engaged. Developing expertise from the ground up builds a more technical and engaged workforce that will add exponential financial value over the long term. Giulio Desando is the director of business development for Connect Canada, a national R&D internship program managed by AUTO21 Inc. Visit www.connectcanadainternships.ca.
ompanies worldwide have significantly accelerated the trading and licensing of intellectual property (IP) rights, placing them at the forefront at of innovation policy, according to a new report from a special agency of the United Nations. The World Intellectual Property Organization (WIPO) says royalty and licensing fee revenues has exploded from $2.8 billion in 1970 to $10 billion in 2009 and have created knowledge markets with IP clearing houses and brokerages that are enabling firms to be more innovative and efficient. The Changing Face of Innovation reports growing investments in innovation and the globalization of economic activities are key drivers of global demand for patents, which have risen from 800,000 applications in the early 1980s to 1.8 million in 2009. Most R&D spending still takes place in high-income countries such as the US, much of western Europe and Japan, accounting for 70% of the global total: that’s about 2.5% of their GDP. Middle-income countries such as China, Russia and Brazil have raised their investment levels by 13% between 1993 and 2009, with China accounting for most of the increase at 10%, making it the world’s second largest R&D spender in 2009. Meanwhile, investment from high-income countries is on the decline. In 1993, the report notes US companies accounted for 36.8% of global R&D, followed by Japan (16.5%), Germany (8.6%), France (5.9%) and the UK (4.8%). Canada was level with China at 2.2%. In 2009, the US share was 33.4%, Japan 11.5%, Germany 6.7%, France 3.8% and the UK 3.3%, while China’s spending reached 12.8%. Canada slipped to 2%. (A Conference Board of Canada innovation report card gives Canada a D for innovation compared t the 17 OECD countries. While the number of patents filed has risen it’s not rising in proportion to peer countries. In trademarks, Canada ranks 16 out of 17.) Here are some key findings from the WIPO report: • Knowledge markets allow firms to control which knowledge to guard and share to maximize learning – a key element of modern open innovation strategies. • Patenting has grown especially fast for complex technologies (many separately patentable inventions where patent ownership is often widespread). • Some complex technology industries such as telecommunications, software, audiovisual technology, optics and smartphones/tablet computers have seen firms strategically build up large patent portfolios. Increasingly dense webs of overlapping patent rights can slow cumulative innovation processes but collaborative approaches, such as patent pools, to some extent address such concerns. • Many patent offices have seen growing backlogs of pending applications. In 2010, the number of unprocessed applications worldwide stood at 5.17 million. • Many countries have put in place policies to harness public research for innovation, such as incentives for partnering between university and public research organizations (PRO) leading to the commercial development of their inventions. University and PRO filings have grown from close to zero in the 1980s to more than 15,000 in 2010. High-income economies account for most of this growth. • There is clear evidence innovation is increasingly international with a sharp increase in the share of peer-reviewed science and engineering articles with international coauthorship and a rising share of patents which list inventors from more than one country. In addition, more multinational firms are locating their R&D facilities in a variety of countries, with certain middle-income economies seeing particularly fast growth. • Some evidence exists that innovation has become more collaborative and open. Joint IP production occurs through R&D alliances, in particular contractual partnerships and equity-based joint ventures. Data suggests firms in the ICT, biotechnology and chemical industries most frequently enter into these alliances.
Comments? E-mail JTerrett@plant.ca.
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November/December 2011
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Solar << Sustainability
Heating with
Top to bottom: RTSI workers install the Lubi system; sunlight radiates through the glazing; a thermal view of the panels at work. PHOTOS: ENERCONCEPT
solar
It saves Plastech $6,000 a year
Perforated glazing on solar panels ups the collection efficiency of energy, even on white walls.
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lastech Inc. decided it had to do something about the $6,000 a year it was paying to heat its shipping area using natural gas. The thermoplastic parts manufacturer, a division of the MI Integration Group with a 26,000 square-foot plant in Sherbrooke, Que., wanted to do the job using solar technology without altering the ivory coloured building’s exteriors with a darker, more absorptive tone. But light colours, such as white or ivory, aren’t generally recommended for most solar collector absorbers. Enerconcept Technologies, a Magog, Que. manufacturer of solar collectors, had the solution. There would be no dark paint costs or changing of the exterior building’s aesthetics with the company’s recently developed solar technology using patented perforated glazing on a wall-mounted solar air heater. The Lubi installation looks more like a wall of windows than solar panels and is rated at 80.7 efficiency by the Canadian Standards Association (CSA-International). On a black surface, the Lubi is 20% more efficient than any other wallmounted solar glazing or metal collectors. On a white wall such as Plastech’s, efficiency is up 58%. With darker colours, the collector provides air temperatures of up to 45 degrees C above ambient outdoor temperatures and maximum outputs of 254-btu per hour per square feet (800-watts per square metre). Since 2010, temperature was measured at 25 degrees C on sunny days. This extraordinary performance was certified by the National Solar Test Facility (NSTF), a Mississauga, Ont.based, third-party laboratory that tests and rates solar technologies under controlled temperature, sunlight and wind, and is sanctioned by the Solar Rating and Certification Corp. (SRCC) in Cocoa, Fla. “Solar air heating has been a good method of reducing energy costs and CO2 emissions, preserving the environment and maintaining a comfortable workplace for our employees,” says Stephane Tremblay, general manager at Plastech. Using dark walls as an absorber is recommended for optimum solar performance efficiency; however, the inherent performance disadvantages of Plastech’s light coloured wall were offset with a 40% larger collector. The company received incentives from
www.plant.ca
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Natural Resources Canada and a rebate from the Energy Efficiency Fund (EEF) of natural gas utility, Gaz Metro. The payback on the project is four years and in addition to the $6,000 in annual savings, the collector reduces CO2 emissions by 15 tons per year. Installed by Sherbrooke-based metal contractor RTSI, the 90-by-24-foot-high wall-mounted solar collector has clear glazing that from a distance appears to be windows. Here’s how it works: sunlight radiates through the glazing where it’s absorbed by the building’s corrugated steel wall. The Lubi’s efficiency comes from its patented design featuring 906 perforations per three-by-one-foot panel. As the indoor ventilation fan draws collected warm air through the six-inch-deep collector, ambient air draws through the perforations and cools the panels. Some wall-mounted solar collectors suffer significant heat loss through the glazing or metal façade. The Lubi panel minimizes heat loss and increases efficiency.
Heating the shipping area When Plastech’s 5,500-square-foot, three-door shipping area calls for heat, the plant’s indoor mixing plenum box’s motorized damper opens and its 7,000cfm fan draws solar collector heat to the area through ductwork. Heated air is distributed via 36-inch-diameter DuraTex, a non-porous fabric air dispersion system manufactured by DuctSox in Peosta, Iowa. The lightweight duct has no diffusion through the plant until it enters the shipping area where linear diffusion orifices disperse the air evenly. The fabric ductwork is hung with a cable suspension system approximately two feet below the 24-foot-ceiling. If the shipping area doesn’t reach its set point temperature of 21 degrees C from solar collector heat, a second motorized damper opens to add recovered ambient production floor machinery heat through the same duct system. Heat from the injection moulding process is enough that Plastech exhausts surpluses and doesn’t need a dedicated heat source for the production area during winter. If the combination of solar and heat recovery still can’t satisfy the shipping area’s set point temperatures, a propane gas-fired heater from Reznor (Memphis, Tenn.) acts as a back-up source.
Typically the solar collector and heat recovery supplies all the shipping area heating needs and reduces the Plastech’s future gas-fired heating consumption to near zero. A direct digital controller from Johnson Controls (Milwaukee, Wis.) monitors the heating process and controls the dampers from Belimo Aircontrols USA (Danbury, Conn.) and the mixing box’s 7,000-cfm fan manufactured by the LFI division of Canarm, in Brockville, Ont. Leprohon, a Sherbrooke-based mechanical contractor that offers design,
installation and service to its industrial, commercial and residential customers, solved several challenges as the project HVAC contractor. It’s custom-fabricated sheet metal ductwork circumvents a machinery crane that shares a common surrounding wall area with the solar collector. Plus, the north side shipping area required fabric ductwork installation traversing the entire building’s width to the collector’s optimum south-side solar exposure location. The shipping area’s indoor air quality now receives a minimum of two air changes per hour, twice what the local code requires, but at no fossil fuel expense to Plastech. The addition of wall-mounted solar heating offers multiple advantages to Plastech. Throughout its minimum 15year lifecycle, it will tally at least $90,000 (based on 2011 energy prices) in projected annual energy savings and eliminate more than 300-tons of CO2 emissions, while providing employees with better indoor air comfort. Information provided in this application feature was supplied by Enerconcept Technologies. Visit www.enerconcept.com. Comments? E-mail JTerrett@plant.ca.
>> Green Manufacturing
Deploy green teams They’ll focus on driving out waste
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everaging the power of teams drives organizational change. Many companies have established lean or continuous improvement teams as a means of eliminating waste and to support organizational transformation: green is simply an expanded focus on waste. A common trait of successful teams is proper deployment. Putting structure behind green teams with a “Charter” ensures they stay focused. Create your green charter by following these steps: 1. Vision. Develop a common focus that will guide all team activities. An example: the reduction of the company’s carbon footprint versus the reduction of energy consumption. And decide on two key metrics that will measure progress towards fulfilling the vision. 2. Secure sponsors. Include a senior executive such as a vice-president or director in addition to the immediate supervisors or managers. The sponsor’s role is multi-faceted, first to grant permission for team members to devote time and effort to the team, and to provide resources, coaching support and tools. 3. Objectives. Based on the group’s focus, develop a list of three to five key objectives that will drive progress. Develop two key metrics to gauge the progress of each objective. 4. Meetings. Pre-schedule meetings for the quarter or even the year to ensure schedules are cleared ahead of time to maximize attendance at meetings. 5. Roles. What supports the team’s efforts? Common roles are team leader, secretary, sales, marketing, technical and finance. 6. Commitment. Secure one from the team members, signed or verbal. Ideally the charter will be a one-page document containing each of the components. Re-visiting it at each meeting helps to keep the team focused and progressing towards the vision. Brett Wills is the director of the Green Enterprise Movement and a senior consultant with High Performance Solutions in Cambridge, Ont. E-mail bwills@hpsinc.ca. Comments? E-mail JTerrett@plant.ca.
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11-11-22 4:32 PM
Technologhy
>> IT for Industry
By Michael Ianni-Palarchio
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loud or “adaptive” computing is one of several emerging technologies that offers strategic advantages relevant to companies across many industries. Manufacturers leveraging this new technology will enjoy greater flexibility in the way they procure and operate technology, which will lead to cost savings and growth. Here’s a real world example: A 90-employee manufacturer needed to implement a single e-mail system across a number of plant locations. The usual approach is to deploy an internal solution that requires an internal server and software licensing for it and the desktop computers. Added costs include backup systems in the event of a disaster and a labour component for set-up and deployment. With adaptive computing, companies such as Microsoft and Google provide cloud-based offerings for e-mail. Servers, licensed software, backup infrastructure and labour all reside “in the cloud,” which is to say, it’s all managed by the host company on a monthly, per-user fee.
Get your head in
the cloud Why adaptive computing may be your best bet
Adaptive flexibility The manufacturer’s employees had different needs for e-mail access. Those who worked on the plant floor needed occasional access to e-mail, people in offices carrying out administrative funcFlexible licensing of services allow you to adapt e-mail to users’ needs. tions required continuous access and the small sales team needed mobile service. increased demand from businesses looking to improve The adaptive model allowed for flexible licensing of sertheir bottom lines. Adaptive computing is also scalable vices. Plant-floor workers accessed a special web-based and allows manufacturers to leverage best-in-class soluservice from kiosks, while the sales force easily and setions while focusing on their core businesses. curely accessed e-mail from a variety of mobile devices. But there are a number of factors to consider: The benefits go beyond the technical. Rather than investing $25,000 to $30,000 upfront for a solution, the manufacturer turned the cost into a $1,000 per month operating expense. Adaptive computing also spans an array of IT serLightening up with MuCell vices such as storage, backup, CRM, collaboration and security. During the recession, service providers saw ord has reduced the weight of the instrument panel (IP)
PHOTO: THINKSTOCK
• Location of data. When your company decides to leverage the cloud, data will reside outside your organization. Consider any potential restrictions that might exist. For example, manufacturers may have agreements with customers that stipulate data must reside in the country of origin. • Security. Thorough due diligence is critical. Many service providers offer security that far exceeds your company’s measures, but some don’t. Ensure the provider offers best-in-class security. • Exit strategy. Have an exit strategy in the event you want to move to another provider or bring the service inside. Avoid services that lock you into proprietary solutions that make it hard to reclaim your data. There are three key steps to take when moving to an adaptive solution: • Inventory all IT systems and upcoming initiatives to identify what could be migrated to an adaptive environment. • Start with something less critical to gain some experience. Compare your outcomes with other companies. • Understand your current technology environment to ensure there are no potential barriers, such as insufficient internet bandwidth, lack of connectivity redundancy or other system dependencies. Ultimately, adaptive computing (or getting your head in the clouds) unlocks an enormous amount of value for your organization.
Michael Ianni-Palarchio is the director of systems and technology at consulting firm RSM Richter in Toronto. E-mail mip@rsmrichter.com. Comments? E-mail JTerrett@plant.ca.
>> Injection Moulding
Creating the instrument panel structure in microcellular foam versus solid injection moulding saves an estimated $3 per vehicle and more than 0.5 kilograms, moulding cycle time is reduced 15% and moulding clamp tonnage is reduced 45%. Ford notes the weight saving doesn’t seem like much, but in its all-new Escape using for the first time a special the plastic parts are in an area where it’s injection-moulding process that creates particularly challenging to save weight micron-sized cells. without sacrificing strength, durability or Invented by MIT, and subsequently function. acquired by Trexel in 1995, the MuCell The MuCell process, also used sucprocess involves the highly controlled use cessfully by Ford in Europe for valve of a gas such as CO2 or nitrogen, which covers and HVAC systems, will see wider creates millions of uniformly configured tiny Lighter weight with micron-sized bubbles. bubbles that lower the plastic part’s weight. PHOTO: FORD use next year.
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Product Showcase >> Technology
Test and measurement
>> Plantware
Vacuum measurement
XacTorr digital capacitance manometer.
XacTorr digital capacitance manometers from Brooks Instrument minimize drift, resist diaphragm contamination and minimize thermal effects in vacuum measurement applications. They use patented dual-zone heating to ensure 0.1 degree C temperature uniformity. Mark-IV shielded sensor technology combines with patent pending digital temperature control, which reduce the build up of condensable products that lead to process drift and premature gauge failure. The instruments come in 45, 100 and 160 degrees C digital temperature control with full-scale measurement ranges from 100 milliTorr to 1,000 Torr. And they include an RS-485 dataport, enabling in-situ monitoring and troubleshooting without disturbing communication with the vacuum chamber control system. They also offer RS-485, DeviceNet or analogue 0 to 10 VDC communications. Brooks Instrument LLC, based in Hatfield, Pa., is a manufacturer of flow meters. www.brooksinstrument.com
Go with the flow
Long-distance temperature points
Operators of process plants measure electrically conductive liquids remotely and in realtime with Endress+Hauser’s Promag 53 electromagnetic flow meter. It’s EtherNet/IP connectivity integrates with Rockwell Automation’s PlantPAx process automation system via a web server to view flow Promag 53 electromagnetic data, conduct diagnostics, flow meter. configure the flow meter or perform process optimization. Configure up to 10 variables including volume flow, calculated mass flow and totalized flow. It has built-in connectivity to Foundation Fieldbus, Profibus, Modbus and HART and measures most liquids with a minimum conductivity of 5 µS/ cm, with flow rates up to 1,250 gpm. A minimum conductivity of 20 µS/cm is required for measuring demineralized water. Measuring accuracy is ±0.2% or ±2 mm per second, and repeatability is ±0.1% or ± 0.5 mm per second. The flow meter operates at - 20 to 60 degrees C and pressures up to 580 psi. www.us.endress.com
Measure multiple temperature points in distant plant locations with the YTMX580, a wireless multi-input temperature transmitter from Yokogawa Corp. The battery powered instrument is built on the on ISA100.11a, an industrial YTMX580 wireless temperature automation wireless comtransmitter. munication standard and has eight analogue input channels, each configurable for thermocouple, RTD, DCV and 4-20mA measurement. The YTMX580 measures temperature points in plants where there’s no signal cabling or power available for traditional wired instrumentation and the input channels reduce installation time and maintenance costs by combining multiple inputs into a single transmitter. Temperature data is sent via a secure wireless link to an ISA100.11a gateway receiver, making data available to a wide range of plant instruments and data acquisition and control systems. Yokogam, a Sugar Land, Tex. manufacturer of instrumentation, is promoting the standard and proposing the use of field digital networks that help companies achieve an ideal plant configuration by organically integrating wireless technology with existing wired communications networks. www.yokogawa.com
Thermocouple calibration Omega’s CL540ZA simulators check and calibrate all thermocouple instruments. The backlight display is easy to read even in the darkest areas of a plant and works with 14 thermocouple types: J, K, T, E, R, S, B, N, G, C, D, L (J-DIN), U (T-DIN) and P (Platinel II). Set any value quickly to within 0.1 degrees with the adjustable digital potentiometer DIAL plus store any three temperatures for instant recall with the selector switch. You White can also calibrate from -13.000 to +80.000 mV. Connect directly to the thermocouple inputs of smart transmitters, PLCs, controllers and multichannel recorders and verify their outputs or displays. Omega is a Laval, Que.-based supplier of industrial instrumentation. www.omega.ca CL540ZA thermocouple simulator.
Dream Report displaying product architecture.
Easy automation reporting Looking for a simple way to extract information from your plant’s industrial automation systems with no-fuss reports you can send automatically to anyone, anywhere? Dream Report, developed by Ocean Data Systems Ltd. and supplied by Charlotte, NC supplier Software Toolbox, is a real-time reporting generator you can use out of the box but works effectively with professional databases, such as SQL Server 2005/2008 and Oracle. Combined with data acquisition solutions such as TOP Server, OmniServer and Cogent DataHub, it accesses a diverse selection of automation information. Dream Report covers five key functions: data collection; data logging; data extraction and analysis; report design; and report generation and distribution via its integrated web functionality. Use Dream Report for performance, batch and factory site reporting; and when required, it combines information from multiple databases into one consolidated site reporting system without duplicating the source data locally. www.softwaretoolbox.com
Automate pressure calibration Version 4.0 of COMPASS for Pressure software from Fluke Calibration advances from piston gauges calibrating individual devices to transfer standards characterizing racks of sensors in production quickly without consuming internal engineering resources. Calibration functions are integrated with pressure-specific dependencies missing from more generic software. Users export test data directly to the MET/CAL Plus Calibration Management System to easily manage inventory, calibration locations, maintenance and customers while an improved interface allows easy use of customized fields. Fluke Calibration is an Everett, Wash. manufacturer of measurement software and instruments. www.flukecal.com
1-800-561-8187 www.itm.com information@itm.com
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Gas and liquid control Parker Hannifin’s Porter Instrument Division has expanded its P-Series area flow meter line to accommodate greater flow rates, temperatures and environmental conditions for oil and gas production, food manufacturing, power generation, chemical and petrochemical and pharmaceutical manufacturing. The new line expands the flow meter range to include: • Gas flows up to 350 sft3/m (9,910 slpm) of air. • Liquid flows up to 450 gpm (1,700 lpm) of water. • Pressures up to 4,000 psig (275 Bar) and higher. • Temperatures up to 300 degrees C and higher.
www.plant.ca
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Expanded P-Series flow meters.
• NEMA and IP enclosures for weatherproof applications. • Intrinsically safe transmitter and alarm options. • Certified calibrations conforming to ISA RP 16.6, NIST traceable. • An extensive selection of construction and elastomeric seals. • High accuracy and repeatability. The Porter Instrument Division, based in Hatfield, Pa., makes precision instruments for the measurement and control of gases and liquids. www.parker.com
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>> Postscript
Prosperity and free-market capitalism By Gwyn Morgan
A
recent week began with a speech at a major Western Canadian university, followed by business meetings in Montreal where I walked past an “Occupy” protestor encampment. Meanwhile, the Greek disease threatened to spread from Athens to Rome, bringing economic Armageddon to the entire Eurozone. It struck me that these seemingly disconnected events are intrinsically related. Here’s how: At the invitation of the university presi-
Big spending governments are collapsing under a mountain of “debt leading to decades-long economic stagnation... ” Second, universities continue to churn out large numbers of teachers even as schools close due to lower birth rates, driving the unemployment rate for graduates to 66%. Yet large numbers of academically qualified applicants are turned away from medical schools due to “lack of capacity,” while millions of Canadians can’t find a family doctor. In response to statistics showing the majority of arts graduates end up in “low
dent, I spoke to the 158-member General Faculties Council, which includes vice-presidents, deans, professors and student union representatives. My theme was two-fold. First, undergraduate teaching quality is dismal; an inevitable result of a systemic misalignment wherein professor recruitment, tenure and compensation decisions are dominated by research credentials rather than teaching performance.
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skill level” jobs, I was told, “there’s more to getting an education than turning out workers for corporations,” as if my advocacy of focusing university programs on where the jobs are was some sort of a capitalist plot. A few days later, I walked by Montreal’s expansive Victoria Square that was taken over by “Occupy Montreal” protestors. TV reports carried protester interviews, including a McGill University philosophy graduate who blamed the “system” for her inability to find a job. Another protestor railed against the “capitalist predators” driving the poor Greeks into bankruptcy. Both called on governments to fix things by “changing the system.” Well, governments have indeed changed “the system” with disastrous consequences. Greece has built a bloated, overpaid, under worked public service. Unless palms of public servants are “Greece’d,” it can take years to start a new business. This has not only crippled private sector job creation, it has resulted in countless unregistered businesses that pay no taxes. Eurozone leaders decided to pour billions into this dysfunctional state. Now the entire Eurozone’s financial stability is crumbling.
Lethal delusions But the Greek tragedy is only a symptom of the lethal delusion shared by Europe and the US that governments are able to counter the forces of economic reality by simply pouring in borrowed cash. Every euro and every dollar of government debt must be borrowed from another person or another country. And now, for the first time in modern history, the sovereign debt ratings of several large Western-developed countries teeter on the edge of an abyss. Big spending governments are collapsing under a mountain of debt that is leading to decades of economic stagnation, ravaged social programs and civil unrest. Yet the key to harnessing the natural potential of people to create prosperity was stated succinctly more than two centuries ago in a lecture by Adam Smith. In his work, The Wealth of Nations, he said, “Little else is required to carry a state to the highest degree of affluence but peace, easy taxes and a tolerable system of justice.” History clearly shows free market capitalism is the only system that has ever created prosperity. But you’d have a hard time finding that fact mentioned in any of our academic ivory towers. No wonder students believe bigger government is the answer to every problem. Gwyn Morgan is the retired founding CEO of EnCana Corp., a Canadian business leader and director of two global corporations. This column is distributed by Calgary-based Troy Media. Comments? E-mail JTerrett@plant.ca.
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