We’ve had a number of recent posts on what it takes to survive as a manufacturer in the United States (see, for example, this one and that one). Now the Globe and Mail has a series of articles on the state of manufacturing in Canada (Canadian factories find a new way to make it and A niche manufacturer motors to success, Jun 11). Here’s the video overview:
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So making it in Canada is a lot liking making it in manufacturing the US: You need to find something that separates you from what they do in Asia.
For Belletile (the maker of carpet tile discussed in the video) that means meeting tough requirements.
Mr. Marikkar has found a sweet spot: a high-value product that low-cost producers in Asia have yet to figure out how to make. His carpet tiles are designed to meet stringent North American requirements for high-traffic offices and are made through a process that requires engineering know-how. …
To meet stringent North American smoke and fire regulations and to inhibit the buildup of static electricity, Belletile makes the tiles out of nylon fibres. This material is more readily available in North America than in developing parts of the world.
Belleville’s location near the eastern end of Lake Ontario and proximity to the big commercial real estate markets of Montreal and Toronto gives it an edge against bigger rivals farther away that face higher transportation costs. The list of competitors includes Interface, which now supplies Canada out of its U.S. plants.
Shortening the distance to customers is critical to Belletile’s bid to capitalize on the growing trend of developers putting up commercial buildings that meet the criteria for LEED (Leadership in Energy and Environmental Design) certification, which include reducing energy use for transportation.
Some of these advantages may be sustainable (e.g., location). Some may be fleeting (e.g., access to nylon). At least for now, Belletile has enough going for it that it can build a business.
Another business featured in the articles is Elettra Technology, a maker of specialty electric motors. How special? They, among other things, make motors to power fans in wind tunnels for test racing cars. Obviously, they are not a high volume business.
One of the lessons Mr. Aiello has learned is that trying to compete with motor makers in China and elsewhere that can mass produce them at a low cost makes little sense.
“Would the Taiwanese or the Koreans care to make a motor that’s one of kind? Not likely.”
That’s why, out in the shop, workers attach electric coils by hand to the guts of the electric motors ETI assembles, some of which take up to six months to complete.
“We’re not interested in mass production,” he says. “We’re not in the right country to do that. We could not even purchase the materials that go into these machines for the price that Taiwan or China sells them.”
So Elettra truly has a unique position. They are in markets that can only support a limited number of firms and probably doesn’t offer significant enough returns for volume producers to invest the engineering time to enter that space. Elettra can then get by on its unique capabilities.
There are some interesting points to these examples. First, as I hinted at above, it is hard to see Belletile as a long-run winner. Making carpet for office buildings is a big market and that should attract big firms with lots of resources. Unless LEED certification and other concerns create real needs for local production, it is hard to see how this firm does more than just get by.
Elettra is a different beast with unique skills and offerings. However, it doesn’t have to be any particular place. They play in a global market and could just as easily have started in Cleveland, Munich or Sao Paulo. That is, while Belletile counts on being local, Elettra doesn’t have to be.
The last point is that these are both small firms. Belletile is a start up with just 17 employees. Elettra has been around for more than 15 years but still has only 38 employees. Policy makers like to talk about a rebirth of manufacturing as a driver of employment growth, but if successful North American manufacturing means focusing on niche markets, creating a large number of jobs will be a slow, slow process.