“ “ Challenges Facing Challenges Facing Manitoba Manitoba Manufacturers Manufacturers ” ” Presented by: CME – Manitoba Division Tony van Rosmalen, Vice-President October 6, 2006 APEGM Professional Development
““Challenges Facing Challenges Facing Manitoba Manitoba
ManufacturersManufacturers””
Presented by:CME – Manitoba DivisionTony van Rosmalen, Vice-PresidentOctober 6, 2006APEGM Professional Development
We cannot afford to We cannot afford to be complacent about be complacent about manufacturing in manufacturing in CanadaCanada
Some Scary Thoughts Some Scary Thoughts ……The Canadian dollar has appreciated in value by 50% over the past three years.
Canadian manufacturers have lost 15% of US market share since 2003 – mainly to China.
Canadian manufacturers export less than 5 days production a year to China and our manufactured exports to China fell last year by 20%.
Manufacturing productivity in Canada is 20% lower than in the United States.
The value of technology in place across Canada’s manufacturing sector has dropped by 5% since 2000.
Over 700 manufacturing firms closed in 2005.
Employment in Canadian manufacturing has dropped by 200,000 overthe past two years – and will fall by at least 100,000 in 2006 – but labour shortages are blocking growth in Western Canada.
Your competitor is only a mouse-click away on your customer’s computer.
TodayToday’’s Presentation:s Presentation:
An overview of CMEManufacturing in Canada and in ManitobaThe Issues and ChallengesActions & OpportunitiesRecommendations - Call to Action
Canadian Manufacturers & ExportersCanadian Manufacturers & Exporters
Represents the interests of Canadian business, at both the national and provincial levels
First established more than 130 years ago
Members include Canada's leading businesses engaged in manufacturing and in the export of goods and services.
Members represent 75% of the country's manufacturing output and 90% of exports.
80% of members are small and mid-sized
Canadian Manufacturers & ExportersCanadian Manufacturers & Exporters
CME’s Mission:To continuously improve the competitiveness of Canadian industry and to expand export business.
Achieved through:Effective advocacy Information, programs and support Opportunities for networking and professional growth.Promoting advanced technology.
The Importance The Importance of Manufacturing in Canadaof Manufacturing in Canada
Single largest business sector in Canada
Directly accounts for 18% of Canada’s GDP
Every $1 of manufacturing output generates $3.05 in total economic activity – largest economic multiplier
Approximately $612 billion in annual shipments (2005)
2.1 million Canadians employed in manufacturing
Wage levels 22% above national average
Accounts for 2/3 of Canada’s goods & services exports = $450 billion (2005)
Accounts for 2/3 of private sector R&D in Canada
Has reduced GHG emissions 7.4% below 1990 levels
Canada: Manufacturing ShipmentsCanada: Manufacturing Shipments
250
300
350
400
450
500
550
600
650
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
BIL
LIO
NS
OF
DO
LL
AR
S A
NN
UA
LIZ
ED
Manufacturing in ManitobaManufacturing in Manitoba
Manitoba’s largest industrial sector –13% of GDPManufacturing’s multiplier provincially -$2.70:$1:00Employ 12% of Manitoba’s workforce68,000 direct jobsAccount for 54% of Province’s exportsApproximately 2000 firms
Manufacturing in ManitobaManufacturing in Manitoba
FURNITURE5%
OTHER MANUFACTURING
20%
MACHINERY7%
ELECTRICAL EQUIPMENT
1%
FABRICATED METAL PRODUCTS
5%
PLASTIC & RUBBER PRODUCTS
5%
CHEMICAL PRODUCTS7%
TRANSPORTATION EQUIPMENT
15%
FOOD PRODUCTS23%
TEXTILES & CLOTHING
2%
PRINTING4%
WOOD PRODUCTS6%
Manitoba: Manufacturing ShipmentsManitoba: Manufacturing Shipments
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Shipments Performance Shipments Performance June 2005 June 2005 –– June 2006June 2006
0.8
6.6 7.9
13.2
-3.6 -3.6
6.9
1.0
-8.1
-12.3
-28.8
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
CANADA BC ALTA SASK MAN ONT QUE NB NS PEI NL
YE
AR
-OV
ER
-YE
AR
PE
RC
EN
T C
HA
NG
E
Manufacturing ProductivityManufacturing Productivity
85
90
95
100
105
110
115
120
125
130
2000 2001 2002 2003 2004 2005 2006
IND
EX
(JA
N 2
000
= 1
00)
CANADIAN DOLLAR IN U.S. FUNDS
MANUFACTURING PRODUCTIVITY (Shipments Volume Per Worker)
Manufacturing EmploymentManufacturing Employment
90
95
100
105
110
115
120
125
130
2000 2001 2002 2003 2004 2005 2006
IND
EX
(19
89 =
100
)
CANADIAN DOLLAR IN U.S. FUNDS MANUFACTURING EMPLOYMENT
2004 = 2,275,200 (peak)2005 = 2,207,400
August 2005 = 2,182,200August 2006 = 2,086,100
Work in Progress to ShipmentsWork in Progress to Shipments
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
2000 2001 2002 2003 2004 2005 2006 2007
PE
RC
EN
T O
F F
INA
L S
HIP
ME
NT
S V
AL
UE
ManufacturersManufacturers’’ Cost SqueezeCost Squeeze(1(1stst Qtr 2000 Qtr 2000 –– 11stst Qtr 2006)Qtr 2006)
-6.4
-2.3
-1.2
1.6
3.6
14.3
6.1
19.5
36.4
65.4
126.4
-20 0 20 40 60 80 100 120 140
PRICES FOR EQUIPMENT
PRICES FOR CONSUMER PRODUCTS
PRICES FOR ALL FINISHED PRODUCTS
AVERAGE MANUFACTURERS' SELLING PRICE
PRICES FOR SECOND STAGE INTERMEDIATE GOODS
PRICES FOR FIRST STAGE INTERMEDIATE GOODS
PRICES FOR FOOD PRODUCTS
HOURLY LABOUR COSTS
TRANSPORTATION COSTS
COST OF RAW MATERIALS
ENERGY COSTS
PERCENT CHANGE
Breakeven TimeBreakeven Time
7:10
7:17
7:24
7:32
7:39
7:46
7:53
8:00
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Strategic ChallengesStrategic ChallengesHigher dollar – falling pricesRising business costsGlobal competition – commoditizationGlobal sourcingChanging patterns of customer demandAvailability of skilled & experienced personnelRapid pace of technological changeInvestment
Innovation & technologyAssetsPeople
Business opportunities in other countriesManaging change
Hourly Labour Compensation Hourly Labour Compensation Rates in ManufacturingRates in Manufacturing
32.53
24.7122.87 21.90 21.42
5.72
3.03 2.500.54 0.36
0
5
10
15
20
25
30
35
GERM
ANYUNIT
ED KIN
GDO
MUNIT
ED STATES
JAPAN
CANADA
HUNGARY
BRAZIL
MEXIC
O
CHINA
INDIA
US
DO
LL
AR
S
ManufacturersManufacturers’’ Excellence GapExcellence GapGROWTH IN MANUFACTURING
PRODUCTION
GROWTH IN MANUFACTURINGEXPORTS
LABOUR PRODUCTIVITYIMPROVEMENT
CHANGE IN UNIT LABOUR COSTS
INVESTMENT IN R&D
INVESTMENT IN NEW TECHNOLOGY
BEST OF G7 (100%) CANADA CHINA
How do we measure Up? How do we measure Up? G7 & China Competitiveness RankingG7 & China Competitiveness Ranking
7971
6758
49
38
194
52
0
20
40
60
80
100
120
140
160
180
200
UNIT
ED S
TATE
S
FRAN
CE
JAPAN
CAN
ADA
GER
MANY
UNIT
ED K
INGDO
M
ITALY
CHIN
A
OVER
ALL P
ER
CEN
TA
GE S
CO
RE
Manufacturing is ChangingManufacturing is ChangingOld Paradigm
Linear production systems.Domestic/North American markets & competition.Companies compete.Integrated businesses.Local sourcing.Mass production.Manual & technical skills.Stand-alone equipment.Value based on functionality.Compete on production costs.Products define market.
New ParadigmGlobal business systems.Global markets & competition.Value chains compete.Modular businesses & outsourcing.Global sourcing.Mass customization.Knowledge skills.Integrated automation systems.Value based on customer solutions/service.Compete on time & total delivered cost to customer.Customers define market.
The Business of ManufacturingThe Business of ManufacturingThe business of creating & delivering customer solutions (value)via tangible goodsManufacturing is not just about producing things – It is about capturing the value in the knowledge inherent in customer solutions (“Intellefacturing”?)It includes:
Product Research and DevelopmentMarketing, Design, EngineeringValue Chain & Logistics ManagementProduction Systems & MaintenanceInnovation, Continuous Improvement & Quality ControlInformation ManagementMarket Development, Distribution, Sales & ServiceBusiness & Customer FinancingLife Cycle Management
A system of global business networks – competing value chainsGlobal knowledge, product, service, and logistics management
Business Business Strategies Have to ChangeStrategies Have to Change
“It’s never easy to climb into the crow’s nest in the midst of a storm…”
Focus on Customer & Supplier Success
Focus on Solutions not Products
Focus on new Global Opportunities
Focus on Internal ExcellenceProcess Perfection
Elimination of Waste Everywhere
Bottom Line Results
Focus on Achieving Results through People
Threat or OpportunityThreat or Opportunity
Automobiles Growth Automobiles Growth
Source: Canada China Business Council
Growth in Iron and SteelGrowth in Iron and Steel
Source: Canada China Business Council
WorldWorld’’s Top 10 Container Ports in 2004s Top 10 Container Ports in 2004((‘‘000 TEU000 TEU’’s)s)
Hong Kong
5,000 10,000 15,000 20,000 25,000
Singapore
Shanghai
ShenzhenPushan
Kaohsiung
Rotterdam
Los Angeles
Hamburg
Antwerp BC
Rapidly Escalating Vessel SizeRapidly Escalating Vessel Size
Future Coastal Freighters
Current 7-9,000 TEU
Future 12-15,000 TEU
Picture Courtesy of Prince Rupert Port Authority
Vancouver
Seattle
Los AngelesDistance to Hong Kong (Nautical Miles) 5,286
5,777
5,7686,380
Prince Rupert
THE PRINCE RUPERT THE PRINCE RUPERT ADVANTAGEADVANTAGE
Courtesy of Prince Rupert Port Authority
Rail Connection to Rail Connection to Continental North AmericaContinental North AmericaPrince Rupert
Courtesy of Prince Rupert Port Authority
Opportunities for Western Opportunities for Western Canada Canada
Returning empty containers will telescope Prairie provinces to the Pacific coast at minimal costsForest Products, e.g. furniture, log homes, bio-fuels, doors and window framesAgri-food products, e.g. hay, grains, processed food, aquaculture, biomassOil field services equipment, auto parts, robotics assembly and petrochemicals
32
Manufacturing 20/20Manufacturing 20/20Challenges & changes affecting manufacturingFuture of manufacturing in Canada?98 meetings involving more than 3,500 manufacturers and stakeholders – 50 meetings in OntarioInput from 15 industry associationsSurvey of 942 manufacturers in 2005National Manufacturing Summit (Feb. 2005)Reports on Innovation, Workforce Capabilities, &International BusinessWeb www.cme-mec.ca
Provincial ProductivityProvincial ProductivityTable 3 Value Added Productivity by Province
66.2
56.354.1
51.8 51.3
44.141.7
0
10
20
30
40
50
60
70
Alberta Ontario Sask Quebec BC Manitoba Atlantic
$0
00
pe
r va
lue
ad
de
d j
ob
The Advanced Manufacturing The Advanced Manufacturing Initiative (AMI)Initiative (AMI)
Launched in February of 2005
To assist Manitoba’s manufacturers and exporters to achieve significant gains in productivity and organizational effectiveness
To enhance our global competitiveness
AMI Operational VisionAMI Operational VisionLeveraged Learning
Networks
Training in Lean Thinking, Lean Leadership and Lean Tools
LeadershipLean Vision and Plans
KaizenEvents
Best Practices
Positive HR Practices
LeanAwareness
EducationalLinkages
ProcessOwnership
Capable, FlexibleAvailable Equipment
StandardizedWork
ContinuousImprovement
Responsive Supply Base
Flow
‘No Blame’Environment
TeamworkLean, Stable, Agile
Supply Chain
Capable, Empowered, Motivated People
Customer Success
PromotingManufacturing
The AMIThe AMI
A “virtual centre”Working with other associations and organizations to minimize duplication of efforts and maximize the impact of programs
Providing linkages to relevant programs and information outside of our province
Linking “problems” to “solutions” within our community
Benefits of LeanBenefits of Lean
63%
63%
51%
50%
44%
42%
41%
31%
29%
27%
0% 10% 20% 30% 40% 50% 60% 70%
WASTE REDUCTION
IMPROVED PROCESS EFFICIENCY
FASTER PRODUCTION LEAD TIMES
INVENTORY TURNOVER
ON-TIME DELIVERY
REDUCTION IN PLANT SPACE
IMPROVED PRODUCT QUALITY
IMPROVED PURCHASING MANAGEMENT
IMPROVED CUSTOMER SERVICE
INCREASE IN OPERATING PROFITS
PERCENTAGE OF COMPANIES
Batch to single piece flowBatch to single piece flow
Competing & winning in 2004…Making World Class make sense
A “Before & After” Blitz Example
ManufacturingManufacturingSimulationSimulation
Measure “As Is” “Future State”
Throughput TimeWIPMax Queue before PaintSchedule Adherence
2 – 5 days26-27 parts13 parts82%
1 day9 parts3 parts100%
AMI Success StoriesAMI Success StoriesSME ExamplesSME Examples
Paint manufacturer:30% increase in productivity
Window and door parts manufacturer:79% reduction in inventory
Envelope manufacturer:125% increase in productivity
Plastic parts manufacturer:70% reduction in machine set-up time
Commercial building manufacturer:50% space reduction
AMI Success StoriesAMI Success Stories
Business - Metal FabricationFocus – Machine Set-up ReductionApproach – Kaizen BlitzTime frame – 4 days +Results:
Kaizen 142% set-up time reduction15% increased capacity
Kaizen 255% set-up time reduction$500,000 inventory reduction
Coil loading
Label Organization
AMI Success StoriesAMI Success StoriesBusiness – Fence ManufactureFocus – Waste EliminationApproach – Kaizen BlitzTimeframe – 3 days +Results:
Kaizen 186% set-up time reduction$20,000 cost saving
Kaizen 250% cycle time reduction$25,000 short-term cost saving$300,000 long-term cost saving
Slide for quick adjustment
Current state process map
AMI Success StoriesAMI Success Stories
Business – Trailer ManufactureFocus – Capacity and GrowthApproach – Kaizen BlitzTimeframe – 9 monthsResults:
50% cycle time reduction10 weeks to 5 weeks lead time$1 M work-in-progress reduction20% productivity improvement50 to 60 trailers per month
6,000 Ft Expansion
MCME AccomplishmentsMCME Accomplishments
• 50 % percent reduction in warehouse space• 50 % reduction in plant space with the same output• 70 % increase in machining productivity• On time delivery increased to 98% from 85%• Inventory turns from 4 to 18• 66% reduction in suppliers
• Year on year reduction in working capital of 5%• 75% reduction in Warranty Claims
• Reduction in casual Absenteeism 66%• 2 weeks per year of training per employee
MCCI AccomplishmentsMCCI Accomplishments
•Productivity increase of 24% •Space reduction of 30%•Products return reduction of 37%•WIP reduced from 4-6 days down to 0•Inventory reduction of 30% = $1,000,000
•5S Program resulted in $50,000/yr savings from $25,000 one-time cost •6% reduction in selling price to customer while profit stayed steady and CDN $ increased.
•Reduced scrap rate from 7-8% down to <4% -- World Class is 1%•$2,000 Energy Audit resulted in $13,000/month saving.
CMECME’’s Key initiativess Key initiatives
MSEDPAMIManufacturing Week
Manufacturing & Trade Summit (Feb 22)Manufacturers Hall of FameManitoba Export Award
ICOSMO
Strategic Partners:
Innovative Canadian Oil Sands ManufacturingOpportunities Portal Overview
Strategic Partners:
– SELLERS
Sellers : Canadian companies who wish to get involved with oil sands opportunities
• Create, source and receive Oil Sands opportunities
• Hi-lite and showcase goods and/or service offerings
• Expand and customize products/processes to meet Oil Sands industry needs
• Forge relationships and secure Oil Sands businessopportunities
Concluding Comments:Concluding Comments:
The focus must be on competitiveness, not just productivity.
The challenges need to be given priority by all stakeholders
Manitoba and Manitoba’s businesses must become globally competitive – now!
Concluding Comments:Concluding Comments:
For our Government, that means;A competitive and supportive tax environment
A competitive, progressive and business-friendly regulatory environment
A clear vision and leadership
A Call to ActionA Call to ActionManufacturersWorkers and labour groupsBusiness & Professional groupsEducation systemsResearch centers Business and financial services sectorCommunity leaders and economic development agenciesLocal, Provincial and Federal Governments
A Future for Manufacturing?A Future for Manufacturing?
ItIt’’s All About s All About Competing & Winning Competing & Winning
in the Global Marketplacein the Global Marketplace
“Where your competitor is only one mouse click away on your
customer’s computer”
Manufacturing 20/20:
www.cme-mec.ca/mfg2020/index.asp