It used to be that everything was custom made. There was good money in making custom furniture. Work was done by hand and skill was important. Back then all you needed was a storefront or a showroom, or at least a catalogue. You could start a wood manufacturing business from a small garage with a few tools and lots of goodwill. The Canadian dollar was low and life was good.
Those days are gone. All of a sudden it isn’t that easy to make a living that way anymore. The Canadian dollar reached parity with the US dollar in 2007, which was more than five years ago. We haven't seen a 68-cent dollar in 10 years. The old excuses for why business isn’t as easy aren’t valid any more.
LOOMING LABOUR SHORTAGE
This summer, in his weekly address, Peter Hall, VP and Chief Economist at EDC talked about how Canada is experiencing a shortage of skilled workers. What's more, he says the looming labour shortage is not expected to peak until 2016, meaning we're not out of the woods yet. He goes on to say that immigration is one of the only strategies the Canadian government is taking right now to correct this shortfall. He also suggests that manufacturing businesses should think of investing in leading-edge plant and equipment as a possible strategy.
DROPPING THE BALL ON PRODUCTIVITY
In another report published by Deloitte, Bill Curry, vice chair and America's Managing Director, highlights the fact that Canada's manufacturing sector has dropped the ball on productivity. We only rank 12th compared to other G-20 nations. Among the reasons cited are that there is less risk capital available to Canadian companies and that our entrepreneurs are more risk-averse and that they under-invest in equipment and machinery. To measure labour productivity, you simply divide overall sales by the number of workers and you get the output-per-worker for that period of time. The low end in wood manufacturing labour productivity is around $75,000 to $100,000 per worker per year; that number should be between $250,000 and $300,000 or higher instead.
Another sign that the business landscape is changing is that we now face worldwide competition. In the global marketplace, we are not only competing against the guy down the street anymore; our competition is the rest of the world.
TRADITIONAL VS. NEW
The traditional manufacturing model is a linear process. It starts with a manufacturer deciding on the product that they will make. They design it, engineer it and then build it to sell to customers. The new manufacturing model turns that on its head. Customers are demanding more control and input and they will increasingly tell the manufacturers what products they want.
RECIPE FOR CHANGE
In order to adapt, we'll have to make better use of industrial design because it's going to be all about style and differentiation, not features and price. Our job is going to be to create our customers’ vision.
We have to take advantage of the Internet. Customers are going to go online before they ever set foot in our showrooms. That means our best marketing efforts will come through our websites and our social media efforts. We will have to offer mass customization, which is the process of enabling customers to formulate their own products through a configurator. It doesn't take a huge leap of faith to think that if you can customize a snowboard or purchase custom sneakers online for roughly the same price as what you would pay in a store, consumers should be able to design their own furniture or cabinets.
Tomorrow's manufacturer will have to be lean as well. Every magazine and trade website has been talking about Lean Manufacturing for the last decade. There is no reason for today's manufacturers not to have a continuous improvement process in place in their plants. Besides, every waste that you reduce improves your productivity.
THE CASE FOR AUTOMATION
If we agree that we can't compete by lowering workers’ wages and that what's important today is that we improve the output-per-worker in our factories, it only makes sense that we turn to automated equipment to perform some of the more mundane tasks in our factories. Let's have humans do the more creative work, something that they are good at.
We have to start by making a distinction between mechanization and automation. Mechanization is enhancing human labour with machinery, such as an excavator, which is more efficient at digging holes than men with shovels. Automation is using machines and information technologies to create a process that happens by itself. A good example of this comes from the 1980’s, when banks installed automatic bank tellers, which greatly improved the banks’ productivity and also made their customers’ lives much better.
There are many options to introduce automation into your business. From 3-D laser scanning, parametric software (specialized manufacturing programs that design and pre-engineer products), to e-commerce (which can replace order entry and a good part of our traditional sales effort).
CNC routers have been around for approximately 30 years, but we're still not using them to their full potential. We are still cutting objects that we used to cut on a table saw only we’re using CNC routers. What we have been seeing only recently are product designs that could never have been done by hand without using computerized machining. Most routers can now cut parts that include all the connections and hardware mounting holes, all in one operation. It’s a wonder not every shop has one.
And what about robotics? Industrial robots used to be expensive, imprecise and hard to program. That has changed drastically and we can see more and more applications where robots are used for carving, drilling, cutting and sanding parts as well as for finishing.
THE NEW CHAPTER
In conclusion, we know we're never going to compete in the world marketplace by standing still and doing things the way we did 30 years ago. Our competitive advantage remains that our customers are right here in our backyard. All we have to do is give them what they want quickly and in an efficient manner. By using automation, we can write a new chapter in the story of manufacturing in North America.
If you have a comment, or for more information, email: Alain. Albert@fpinnovations.ca
Alain Albert, Industry Advisor Product Development and CNC Specialist; FPInnovations - Wood Products Division