Taking Advantage of the Powerful Dollar

The latest news is full of speculation and predictions about what the high Canadian dollar versus the U.S. dollar will do to Canada’s manufacturing sector. Just a short while ago, a 62-cent Canadian dollar was a reality. It gave products manufactured in Canada a price advantage in the U.S. marketplace. However, during the past several months, it has been rising steadily. At press time, it had reached $1.10. Some economists are saying it may go as high as $1.25, while others predict it will go back below par. Nobody knows for sure.

In order to stay competitive, the high dollar here means Canadian manufacturers must improve productivity in their plants to compensate. So what do we need to do to make our plants more productive and what can maintenance professionals do to facilitate this process?

First, some background. The process of this restructuring actually began several years ago. After three years of poor growth — averaging 0.1% per year and even a decline in some years — labour productivity grew by 3.5% and 5.7% in 2004 and 2005, respectively. Indeed, because of considerable industrial restructuring that included plant closures and employee layoffs, the manufacturing sector outperformed the larger business sector in the past two years.

Labour productivity growth in the Canadian manufacturing sector has been three times that of Canada’s business sector since 2004. However, the plant closures came at a huge price. In the past five years, 300,000 jobs have been lost in the manufacturing sector, including 44,000 in 2007 so far, according to CIBC World Markets. Worse still, CIBC is forecasting another 200,000 job losses in the manufacturing industry, which is concentrated in the province of Ontario, by the end of the decade.

Restructuring is absolutely necessary; however productivity gains could be achieved through purchasing of new key pieces of equipment and retrofitting existing equipment to make it more efficient and safe at the same time.

Let’s look at purchasing and retrofitting more closely.

Purchasing new equipment

Since most machinery is priced in U.S. currency, firms can take advantage of the strong Canadian dollar now to invest in machinery and equipment in order to improve their productivity. Since 2003, the Canadian business sector’s investment in machinery and equipment has rebounded, with an annual growth approaching 8%. In this case, the powerful Canadian dollar presents us with an opportunity to save money on new equipment.

However, there’s more to consider than price when shopping for new machinery. While preparing specifications for the new equipment, the purchaser should be aware of the liabilities associated with the process.

In Ontario, the owner, lessee or employer must ensure that a PSR report (Pre-Start Health and Safety Review) is issued to a joint health and safety committee before the machine or process becomes operational. S.A.F.E. Engineering Inc. pioneered a purchasing specification approach by which purchasers can pass on the responsibility for PSRs to their suppliers through S.A.F.E. Engineering before a shipment is accepted.

The company’s professionals work with suppliers and end users during the manufacture of the equipment, advise the supplier about the local compliance requirements, and co-ordinate any potential issues with the end users. This approach ensures that when the equipment arrives at its final destination, it is ready to be immediately operational. The PSR will come with the equipment. S.A.F.E. Engineering assumes the liability associated with this process.

Retrofitting existing equipment

The majority of Canada’s industrial infrastructure is between 20 and 30 years old. The most economical way to increase productivity is through equipment upgrades. Machine safety upgrades and improved productivity are two sides of the same coin.

Can you imagine two machines that are exactly the same, except that one is unguarded and open while the other is well-guarded with a solution that was developed with the collective involvement of maintenance, operations and engineering professionals?

The open machine can be run, set up and adjusted many different ways, any time during its operation, whereas the guarded machine can only be run, set up and adjusted one way, only at setup. This process is called Standard Work. Standard work is a lean term. Lean principles are used here on a micro level. The operation of the machine is dictated by guarding. It’s just like a straight line going from point A to point B. This path has no unnecessary twists or turns.

Obviously, the properly guarded machine will produce the most consistent product, and will last longer. (As an analogy, car rental agencies in North America generally do not rent manual transmission models because the different usage patterns would damage the transmissions.)

Scrap, equipment downtime, damage and personal injury are directly related to the number of procedural mistakes made and the amount of variability. It is human activity that drives operational efficiency.

In one of several large studies, the productivity from enhanced machine guarding alone increased employee productivity by 25% over a five-year period, while associated indirect operating costs were reduced by 20%. It has even been proven that the human mind will alter work in such a way as to increase our chance of survival. In other words, in an environment where we perceive risk, we work more slowly and cautiously. When we feel safe we work faster, we are more at ease and we are more efficient.

In order to succeed with the retrofitting approach, maintenance professionals should assume a leading role. You are the people who know the machine the best and therefore your contribution to the retrofitting process is invaluable.

Simon Fridlyand, P.Eng., is president of S.A.F.E. Engineering Inc., a Toronto-based company specializing in industrial health and safety issues and PSR compliance. He can be reached 416-447-9757 or simonf@safeengineering.ca. For more information, visit www.safeengineering.ca.