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Issue 3, Volume 3 â€˘ Winter 2018

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In this issue New year, same game

It’s that time of year again: When economists and pundits alike dust off the ol’ crystal ball and share their sage projections for what’s on the horizon. Editor Derek Lothian gives his take on why 2019 will be more of the same for manufacturers.

Agri-food economy can thrive despite headwinds

The agribusiness sector recorded strong growth in 2018; and while the New Year is peppered with challenges, according to Farm Credit Canada Chief Agricultural Economist, J.P. Gervais, there is also good reason for optimism.

Just ask...

Conversation is a powerful tool. It has the potential to break down barriers, dispel stereotypes, build understanding, and strengthen relationships. Kimberley Puhach tackles the topic of diversity and inclusion, and the terms we use in our everyday lives.

Drilling at a discount

Canadian oil continues to trade at half the price of American crude. Prairie Manufacturer Magazine’s Joanne Paulson explores the dynamics at play and the impact they are having on both private and public sector finances.

We can do it!

At its AGM in November, Canadian Manufacturers & Exporters, along with four scholarship recipients, unveiled a new national campaign to add 100,000 women to the manufacturing workforce by 2023.

Onto the next chapter

With NAFTA in the rear-view mirror and USMCA negotiations in the books, manufacturers are asking ‘What’s next?’ for the Canada-U.S. trade relationship. Hint: There’s still much more work to do.

Next issue Spotlight: We often speak of the Fourth Industrial Revolution as something that is coming — that the systems, technologies, and processes powering it are still just too advanced and are too far out of reach. As you will see in our next issue, however, the future is here. Right now. Welcome to the age of disruption. Regional feature: Manitoba. Manufactured. When you think of North American hotbeds for modern manufacturing, seldom does Winnipeg or Winkler make the list. Well, maybe your list is outdated. It’s time to take another look. Booking deadline: February 8, 2019 Material due: February 15, 2019

Editor Derek Lothian editor@prairiemanufacturer.ca 306.380.3765 Special thank you to our editorial advisory committee. Creative Director Dana Jensen Sales info@prairiemanufacturer.ca © Copyright 2018 Prairie Manufacturer MagazineTM All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without prior written consent of the publisher. Publications mail agreement #43155015 Return undeliverable Canadian addresses to: Prairie Manufacturer Magazine 207 Hugo St. North, Suite 3 Winnipeg, MB R3M 2N1 To change your address, or to be removed from the mail list, e-mail info@prairiemanufacturer.ca. While every effort has been made to ensure the accuracy of the information contained in and the reliability of the source, the publisher in no way guarantees nor warrants the information and is not responsible for errors, omissions or statements made by advertisers. Opinions and recommendations made by contributors or advertisers are not necessarily those of the publisher, its directors, officers or employees.

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Editor’s Notebook

New year, same game By Derek Lothian

t’s that time of year again: When economists and pundits alike dust off the ol’ crystal ball and share their sage projections for what’s on the horizon in the coming months. While the specific rationales may vary depending on the crisis of the day or the political affiliation of those with an opinion, the narrative — somewhat ironically — doesn’t change: There is risk, and there is opportunity. Thanks, Gandalf. In that case, take all my money. If I am being completely honest, however, I will admit I have used that line myself. In fact, I use it almost weekly — because, as with anyone who is paid to read tea leaves, I enjoy making ‘bold’ predictions that

have zero chance of being wrong (don’t tell my boss). Plus, there is an undeniable element of truth to it. There is risk, and there is opportunity. How manufacturers understand and manage these principles and the relationship between them is the meagre difference between prosperity and financial ruin. Since launching Prairie Manufacturer Magazine going on three years ago, our ‘true north’ has been to help you in that pursuit. Not every risk and not every opportunity looks the same. Some appear to be both at the same time, and others are disguised altogether. But, as you will see throughout this issue, they are littered across the spectrum of business operations. There’s the ongoing fight over pipeline

expansion (Page 22), implications of the looming federal carbon tax (Page 26), our enduring trade dependency on the United States (Page 38), and a litany of market pressures that are dramatically impacting the future of innovation, skills, and investment. Our job is to lift the veil on these issues, and connect you with the insight you need to address them. One of the best tools we have available to do just that is peersourced data. Knowing what other manufacturing leaders are feeling can be a powerful advantage in validating strategies and preparing for growth. This past November, Canadian Manufacturers & Exporters (CME) released the results of its 2018

“Innovation, commercialization, and technology adoption is, in my oh-so-humble opinion, the topic that looms largest for Canadian manufacturers. It is, after all, the value proposition of the modern age — the disruptor that has the potential to transform entire business models and put more rigid, less adaptable manufacturers out of business. “

Prairie Manufacturer Magazine • Winter 2018

Management Issues Survey — a biannual, national study that does a phenomenal job benchmarking sentiment and quantifying the priorities of industry executives. To save you some reading, I thought I would take this edition of the Editor’s Notebook to boil down the key points that will weigh heaviest on the decision making in 2019:

demand as a catalyst — in part, from surging exports to the U.S. despite recent trade woes. Slightly more than half of companies, meanwhile, are forecasting business growth over the next three years. On the flip side, 27 per cent said conditions have deteriorated, and only one in three respondents are optimistic about the global economy through 2021.

It’s the economy, stupid

The elephant in the room

Manufacturers coast-to-coast had mixed views on whether business conditions have improved or soured over the past three years. Of the 43 per cent that indicated conditions have improved, threequarters cited stronger customer

If there is one theme that repeated itself in seemingly every metric, it’s labour. The availability of skilled workers again topped the list of the challenges facing Canadian manufacturers. Sixtynine per cent of businesses say they

are facing immediate shortages today, which is up from 40 per cent only two years ago. To make matters worse, that number is expected to jump to 74 per cent by 2024. Skilled production remains the most significant pressure point (coming in at 73 per cent), followed by general labour and assembly (51 per cent), production management and supervision (29 per cent), technical positions (18 per cent), and sales and marketing (17 per cent).

Taxes and red tape No one likes to pay taxes. That said, I haven’t met too many business leaders on the Prairies who aren’t willing to pay their fair share. The question is: What is fair?

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“The availability of skilled workers again topped the list of the challenges facing Canadian manufacturers. Sixty-nine per cent of businesses say they are facing immediate shortages today, which is up from 40 per cent only two years ago.”

Unfortunately, there are no simple answers. The notion of fairness must be viewed simultaneously through the lens of competitiveness, and that is a dynamic outside of our singular control. The United States under President Trump, for example, has moved aggressively to slash corporate income tax rates (CIT) and stimulate investment in machinery and equipment (M&E). That has left Canada on the outside looking in, wondering how to keep pace without adding billions of dollars to the deficit. In the government’s fall fiscal update, Finance Minister Bill Morneau rejected calls to match American reductions in the CIT. Instead, he chose to focus on expanding accelerated capital cost allowances — tax incentives that permit companies to write off the full cost of M&E purchases in a shorter period. Two in five survey respondents agreed that this type of tax measure should be a priority. The overall tax and regulatory burden, however, continues to weigh heavy. And, according to manufacturers at least, policymakers aren’t helping. More than half of all manufacturers believe governments are not supporting investments in, and the growth of, their companies; and roughly half (53 per cent federally and 47 per cent provincially) say government tax and regulatory policy has become less supportive since 2015.

Trade There is no debate that Canada is an exporting jurisdiction. Only 16 per cent of survey participants reported they produced goods exclusively for

the Canadian market, and 40 per cent sell at least half of their total output to foreign buyers. Unsurprisingly, the U.S. persists as the most common export destination for Canadian goods. Roughly 94 per cent of respondents that export signalled they sell directly south of the border. Focus, though, is arguably beginning to shift. Largely as a result of the greater market access contained within the free trade pact with the European Union, 37 per cent of manufacturers see growth opportunity across the pond in the E.U. compared with less than onequarter that did in 2016. Optimism in the Asia-Pacific and Latin America is up as well. Twentythree per cent of manufacturers anticipate the recently signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will have a positive effect on their businesses.

The innovation equation Innovation, commercialization, and technology adoption is, in my oh-sohumble opinion, the topic that looms largest for Canadian manufacturers. It is, after all, the value proposition of the modern age — the disruptor that has the potential to transform entire business models and put more rigid, less adaptable manufacturers out of business. The survey results paint a picture of tepid concern. A paltry 40 per cent of manufacturers suggested they do not currently use advanced manufacturing technologies — cost

Prairie Manufacturer Magazine • Winter 2018

restraints, uncertainty around ROI, and inadequate capital being the main barriers. It was also interesting to note that one-third of manufacturers were hesitant to invest in new technologies due to a lack of clarity around how they would fit into their existing operations. The management of technology implementation is a competency often overlooked, and — reflected in study after study — has shown to lead to disappointing outcomes. The silver lining? Fifty-three per cent of manufacturers expect to invest in advanced technologies within the next three years.

A final word I love data. When collected properly, it tells a story removed of bias and ambiguity. Yet, like any good story, it is always wrapped in nuance. Surveys, as with polls (and elections have taught us how accurate those can be), are snapshots in time. My final caution is to take them as such — a moment, peered at in your rear-view mirror. Influencing factors change, and so, too, must your positions and your decisions as a result. Keep your eyes on the road in 2019. There are many risks waiting to jump out, and — yes — plenty of opportunity to take you in a different direction if you’re alert. I think I’m getting the hang of this.

REPEAT. EVOLVE. COMPETE. SUCCEED. REPEAT. EVOLVE. THE DESIRE TO IMPROVE IS AT THE HEART OF EVERY SUCCESSFUL BUSINESS.

Alberta businesses need to be globally competitive. This is critical to our future and to the welfare of all.

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assess and improve business practices

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provide workforce training with a focus on productivity

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host industry conferences and events.

Through our work with partners, we will support the creation of globally-competitive and prosperous organizations, smarter communities and an Alberta that continues to lead the way.

Learn more at nait.ca/Industry NAIT is grateful for the $34.9M in funding from the Government of Canada’s Post-Secondary Institutions Strategic Investment Fund, which made the Productivity and Innovation Centre possible.

View from the C-Suite

Prairie Manufacturer Magazine â€˘ Winter 2018

From metal-bashing to military procurement: Inside one First Nation’s manufacturing journey By Bob Dumur

hree years ago, I came out of a short-lived retirement to help out neighbours. These neighbours, however, weren’t hoping to borrow a lawnmower or move some furniture — they were looking to buy a manufacturing plant. As it turns out, retirement wasn’t all it was cracked up to be anyway. I had just left Dumur Industries, a metal fabricator-turned-military manufacturer I founded 30 years prior, and I was having a tough time sitting on the sidelines. The opportunity to get back in the game was one I couldn’t pass up. Plus, I admired what they were trying to accomplish. The ‘neighbour’ was Pasqua First Nation — a Saulteaux-Cree First Nation, located roughly 40 minutes east of Regina, along the banks of Pasqua Lake, where I reside. While the addition of manufacturing in the band’s investment portfolio was a strategic move to diversify away from its traditional holdings and complement its position in the resource development supply chain, it was also a platform to create employment pathways for their people. Within months of our initial discussions, we had acquired Pro Metal Industries — a custom fab shop in the north end of Regina. It had all the fundamentals of a good business, yet a lot of unrealized potential. I had been exposed to hundreds to near-identical companies in my career, and it seemed a few minor tweaks around the edges would do the trick. I quickly realized that assumption was dead wrong — not because of our evaluation of the business, but because of how we were defining success. Generating new revenue and growing margins was the easy part. The problem was that those targets in the existing business model were not automatically symbiotic with the other core priority of creating First Nation jobs. Metal fabrication is a highly skilled industry, requiring years of training, hands-on practice, and institutionalized knowledge. Simply dropping new individuals into those types of positions wasn’t practical. Instead, we needed to create an environment where the barriers to entry were low, where we could identify what our new employees had a passion and natural affinity for, and where we could still afford to keep the lights on. We found that right fit in the assembly of farm equipment. Pro Metal’s ‘nextdoor neighbour’ to the south, Degelman Industries, was searching for a partner on the manufacture of its rotary cutters. That gave us a staple product and a continuous production line, which allowed us to create standardized, repeatable processes, and better manage a quickly changing workforce.

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The experiment proved to be a win-win-win. Degelman freed up capacity for its primary business lines, Pro Metal had a new seven-figure revenue stream, and Pasqua First Nation had ownership in a business with a demonstrated commitment to and track record in employing Indigenous Peoples. In roughly 18 months, our crew doubled in size, and Pro Metal went from having zero First Nations workers on staff to a companywide representation of roughly 50 per cent. That, though, only solved a handful of our issues. The thing about manufacturing is that it is a sector embroiled in incessant change. Just when you have your operations figured out and running smoothly, there will be new a competitor that enters the picture, a new technology that disrupts your market position, or a new financial pressure that forces you to rethink your calculus. Often, all three come barrelling down at you at once. Other times, they are more incremental, quietly manifesting in the background until it’s too late to pivot. For us, we recognized early on that, like Pasqua, we needed to diversify. Particularly in a soft economy, where manufacturers are scrambling to fill their order books, custom fabrication is a tough gig to make much money in. We didn’t want to abandon it — that was central to who we were as a company — but we did want to hedge our bets. That meant moving further up the value chain.

Prairie Manufacturer Magazine • Winter 2018

So, we turned to what I personally knew best — military work. Fortunately, I had a few advantages to lean back on, such as recognized status in the federal Controlled Goods Program — not to mention a rolodex with two decades’ worth of contacts in the sector. Within eight months (which is unheard of in the defence world), we had our first contract as a tier two supplier to General Dynamics and were soon making parts for Mack Defence. To my knowledge, we remain the only 100 per cent Indigenous-owned manufacturer to supply to Canada’s military. The endeavour served as a proof-of-concept for the opportunity that existed in the defence procurement space — especially for innovative First Nations looking to capitalize on trends in corporate social responsibility and Indigenous inclusion. Which brings us to this fall. This November, Pasqua First Nation took the next step in that journey, acquiring a majority stake in NP Aerospace from global giant Morgan Defence Systems. NP Aerospace currently has facilities in Burlington, Ontario, and Coventry, U.K., and is a leading manufacturer of composite materials (such as carbon fibre components), including Canadian military helmets, body and vehicle armour, and bomb disposal suits. Some of that production work will flow to Saskatchewan in the coming months.

“The thing about manufacturing is that it is a sector embroiled in incessant change. Just when you have your operations figured out and running smoothly, there will be new a competitor that enters the picture, a new technology that disrupts your market position, or a new financial pressure that forces you to rethink your calculus.”

It really is a Western Canadian success story to be proud of. I think it provides an interesting case study for overcoming the plight of the modern manufacturer as well. We talk a lot in this industry about adaptation and the need to be nimble, although it is generally in the context of process improvement. Don’t get me wrong: That is imperative, and is something we have spent countless hours — and many dollars — on.

True agility, however, may mean thinking bigger. It may mean changing your business focus altogether several times throughout the course of a planning cycle. And that requires a ‘neighbourly trust’ throughout every level of your organization. Bob Dumur oversees the manufacturing portfolio for Pasqua First Nation. He is also the founder and former CEO of Dumur Industries.

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Money & Markets

Prairie Manufacturer Magazine â€˘ Winter 2018

Agri-food economy can thrive despite headwinds By J.P. Gervais

he agri-food economy on the Prairies recorded strong growth in 2018 despite facing headwinds: Trade tensions, rising interest rates, and weather challenges quickly come to mind. Here’s why the outlook for agribusinesses and food manufacturers remains promising despite the challenges ahead:

Looking beyond global trade disruptions The recent U.S.-Mexico-Canada Agreement will preserve market access conditions for Canadian exporters while lifting uncertainty around business investment. There are, however, other trade tensions to monitor for Prairie businesses. The U.S.-China trade dispute is projected to slow the growth of the world economy, according to the International Monetary Fund, yet the 3.7 per cent growth forecast for 2019 global gross domestic product (GDP) suggests a robust demand for food and agriculture commodities. Keep an eye on whether U.S.-China tensions can be eased in early 2019. Status quo or an escalation, both are bound to have U.S. producers and agribusinesses adjust their production plans and indirectly impact Canadian agri-food markets. Trade barriers and tariffs on Canadian pulse exports to India, and steel and aluminium exports to the U.S., are other relevant disrupters to monitor.

Canadian economy remains robust Projections for growth in Canadian GDP remain above two per cent for 2018 and 2019, driven by stronger exports and business investment than recorded in 2017. Consumption spending is projected to grow at a more moderate pace, slowed by five increases in the overnight rate of the Bank of Canada in the last 18 months. The bank will look to bring its overnight rate towards its ‘neutral level,’ estimated to be between 75 and 175 basis points higher than it was at the end of November. Don’t expect to see the pace of rate increases accelerate, given wage growth is slowing and inflation is slowly returning towards the bank’s target. Yet, higher interest rates are on the horizon.

U.S. economy expands at a rapid pace while U.S. farm economy is still roiling Preliminary estimates of U.S. GDP growth for the third quarter of 2018 suggest a robust U.S. economy driven by strong consumer spending. This is not surprising considering the unemployment rate is the lowest it has been in 49 years. Long-awaited wage growth is finally occurring in the U.S.: Wages grew at the fastest pace of the last 10 years in Q3. Strong economic expansion was also driven by higher inventories

that will likely be a drag on economic performance in the following months. So, expect the U.S. economy to grow at a more moderate pace in 2019. Higher wages are supportive of U.S. household disposable income, which is positive for Canadian food manufacturers, considering the U.S. accounts for 75 per cent of our food exports. The Loonie will remain under 80 cents, boosting the competitiveness of Canadian exporters. The outlook for the U.S. farm sector is not as encouraging. The U.S. Department of Agriculture recently projected that net farm cash income will decrease $12.4 billion USD (or 12 per cent) in 2018. This would be the lowest level recorded since 2010. Rising interest rates are causing the balance sheet of U.S. producers to deteriorate. While the U.S. administration rolled out a financial aid package to compensate producers for the negative impacts of the U.S.-China trade spat, it did not address broader challenges related to weakening commodity prices. The 2018 supply of corn and soybeans could reach record-high levels and livestock production continues to climb, making it unlikely prices will rebound and lead U.S. producers towards broad profitability. The U.S.-China trade relationship will help determine the health of the 2019 U.S. farm economy.

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“Rising interest rates and steady — or possibly weaker — farm cash receipts in 2018 are likely to moderate farm equipment purchases in 2019. Food manufacturers continue to record strong growth in revenues, although sales have slowed in the last 12 months so inventories have climbed, reducing capacity utilization in some food manufacturing sectors. Implementing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2019, coupled with the European agreement, will help Canadian exporters overcome volatility in the global marketplace and increase sales.”

Canadian agri-food economy differs from the U.S. outlook Profit margins of Canadian grain and oilseed producers are expected to be tighter in 2018 because of variations in yields and quality across the Prairies due to weather. Livestock profit margins have also been challenging. Hog production margins dropped significantly in August-September 2018 due to U.S. trade tensions with China and Mexico, while high feed prices have been putting pressure on cattle margins. Hog prices have now

rebounded due to outbreaks of African Swine Fever in China and Europe. Rising interest rates and steady — or possibly weaker — farm cash receipts in 2018 are likely to moderate farm equipment purchases in 2019. Food manufacturers continue to record strong growth in revenues, although sales have slowed in the last 12 months so inventories have climbed, reducing capacity utilization in some food manufacturing sectors. Implementing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2019, coupled with the

Prairie Manufacturer Magazine • Winter 2018

European agreement, will help Canadian exporters overcome volatility in the global marketplace and increase sales.

World food production grows — demand remains robust Agricultural and food production is growing in many parts of the world. Trade impediments remain, yet the most positive trend is the strength of the demand for Canadian agricultural commodities and food at home and abroad. Canadian agribusinesses and food manufacturers can succeed in these conditions; however,

higher interest rates, production cost inflation, and volatility are possibilities that should be carefully considered from a risk management standpoint. J.P. Gervais is the vice president and chief agricultural economist at Farm Credit Canada. He obtained his Ph.D. in economics from Iowa State University in 1999. Gervais previously served as president of the Canadian Agricultural Economics Society and as the Canada Research Chair in AgriIndustries and International Trade at Laval University.

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Lessons in Lean

The real hurdles of implementing lean across a virtual team By David Fritz

here is book by Art Byrne called The LEAN Turnaround in which the author reveals that 95 – 97 per cent of businesses fail when attempting to implement lean. There is not a fully deployed corporate strategy for lean at Supreme Steel. Since Byrne is evaluating success at the enterprise-wide level, our company would probably be lumped into that group of failures. Categorizing our lean journey that way, however, would be a major misrepresentation. We have experienced many successes when applying lean principles and tools that can and should be celebrated. I reject the notion that lean is an ‘all or nothing’ proposition. Everything in life is a process — from brushing your teeth to making your morning coffee. Contained in every process is an abundance of the eight different kinds of waste. For this reason, I encourage our team members to learn to see the waste in their processes and then eliminate it by making small improvements. That said, always start with yourself! We individually have enough waste for 10 lifetimes. There is no need to look at everyone else when you have plenty of room for improvement. Supreme Steel is the largest privately-owned steel fabricator and erector in Canada. Headquartered in Acheson, Alberta, we employ approximately 800 people. Two years ago, our parent entity, Supreme Group, underwent a restructuring that essentially evolved us from eight separate companies into one business with virtual teams focused on project delivery with excellence. During this same time, while working as a project manager, I was teaching lean sessions throughout our company’s facilities in both Canada and the U.S. Great operational improvements were discovered as a result, and the success of the program was a contributing factor to my transition into the role of director of project solutions. In this new capacity, I had inherited an incredible team, and we had one mission: To win work. Working as a virtual team was new to us. I wasn’t sure where to start. Everyone was doing everything differently. There was no standardization, no defined processes, and no focus on lean. Our team had to figure out how to apply lean principles to our work in a virtual environment. Searching for answers, I contacted Paul Akers, who replied to me with this note: “Your virtual team problem, in my opinion, is not an issue. You just need to be creative. It's totally doable. People do it all the time. Giving you the answer would not solve your problem.” He was right. Having none of the answers forced us to rely upon the principles we already knew — first and foremost: Everything is a process, and in every process is waste.

Prairie Manufacturer Magazine • Winter 2018

Shortly after the exchange with Paul, our Project Solutions Team got together for a weeklong session (which we dubbed the Project Solutions Summit), where we discussed lean principles and lean problem-solving methodology. We discovered how to see waste in our virtual environment. As a team, we discussed which processes were causing our biggest problems, and then we jumped in and started to develop solutions. All the decision-makers were in the room. That led to accountability being taken, and actions being informed. The

outcomes of that summit included: The standardization of our templates and forms (without standards, we couldn’t make progress); the 5S of our file structure (again, standardization in this space would allow us to mine for data); and, the creation of a virtual daily huddle. Using the daily huddle as a staple of our routine drove us to become a true team, and establish a regular forum to share small daily improvements. Lean is often deployed as a cost-saving initiative. But what is often missed is how it can greatly improve customer

experience. We used lean in this way to help us achieve our primary goal of ‘winning work’ for Supreme. This enhanced customer experience at the front end led to greater (and quicker) earned trust and, subsequently, more work. In the 12 months following the summit, our proposal success rate (or win rate) went from five per cent to 26 per cent, we tendered an unprecedented number of projects with no additional resources, and — most importantly — we filled all our shops with work. Our team is very proud of the improvements we’ve made over the last year. We fully recognize, though, we still have a long way to go in terms of process excellence. We’ve found that some of our ‘simple’ improvements turned out to be very difficult to deploy. Standardizing our tools has been, by far, the most challenging. Some of our veteran staff have been estimating projects the same way for 40 years. We are trying our best to capture their knowledge and intuition with our tools to help guide decision-making for younger estimators, yet this remains a challenge. I think it is equally important to recognize what hasn’t worked with the same enthusiasm as what has. Along our journey, we regularly found ourselves questioning if the changes we were making were the right ones. We made plenty of mistakes, but we also never dwelled on them. We dusted ourselves off, modified our approach when necessary, and tried again. We were open and honest about our hurdles, and removed the negative connotation from the word problem, since a problem simply means an opportunity for improvement. Hindsight being 50-50, there were three big mistakes I made that I encourage others embarking on a lean journey to learn from and avoid: Off the top: I tried to solve problems on my own. Once we provided training and clear objectives to our team, we struck gold and improved lightyears. But it took me letting go and trusting those around me. Second, I initially didn’t practice what I was preaching. I personally have plenty of waste in my own daily processes, yet that didn’t stop me from pointing out other peoples’ waste for them. Trust me: Starting with yourself will become contagious. Finally, I made excuses and waited for someone to tell me when to start implementing lean. I thought that lean needed to start at the top, and that left me with an excuse for not applying lean to my work. Don’t take an easy out like that. Start today. Make one small improvement before you clock out. David Fritz is the director of project solutions for Supreme Steel, and is a certified Lean Black Belt practitioner.

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Prairie Manufacturer Magazine â€˘ Winter 2018

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just ask... By Kimberley Puhach

ne of the most common questions I am asked — in my personal and professional lives — has to do with appropriate use of terminology when referring to certain individuals and groups. It is usually focused on Indigenous Peoples, but sometimes includes a broader conversation on gender and persons who identify within the lesbian, gay, bisexual, transgender, transsexual, queer, questioning, and two-spirit — or LGBTQ2S — community. Often, these are informal discussions with those who are comfortable sharing their thoughts and who are genuinely interested in understanding more, while hoping not to offend anyone at the same time. After all, it is an important conversation. What’s behind the fear and sensitivity in addressing it? How do we have respectful dialogue on these critical topics? It seems complicated, doesn’t it? That’s because identity is a complex issue. The good news? It doesn’t always have to be, if we take the time to consider a few things when we broach these seemingly touchy situations. First, ask yourself: Why don’t we know? Look at where we are as Canadians today. Look at the world. Yes, times are a changin’. Diversity and inclusion are being discussed with great prominence in most

organizations. Human rights are at the core of this dialogue and, in some cases, basic rights such as equality are a large part of the conversation. Civility in the face of the current world context and events that surround us become more punctuated. It’s hard to imagine that we still have so much work to do considering who we are as Canadians and how we rank as one of the top countries in the world to live in. We are a friendly, happy, and apologetic bunch! All of this makes the topic of language and terminology worthy of some head-scratching. You are likely wondering by now what this has to do with how we talk about and refer to other groups of people. Well, it has become clear that it starts with us. It is about educating ourselves as a first step. To know where we are going, we need to know where we have been. Knowledge is our most powerful weapon against ignorance. When we come to understand that the how, what, and why of our language and actions have many meanings and consequences, then it becomes much easier for us to understand how we navigate these sometimes choppy waters. There is so much information available to us today. Go out and research at least the basics of those areas you are unsure

about. Education will provide you a greater comfort level while engaging in sensitive topic areas. There is no substitute for doing your homework. We are living at a time when reconciliation and Indigenous inclusion efforts are underway through the Truth and Reconciliation Commission’s 94 Calls to Action and the United Nations Declaration on the Rights of Indigenous Peoples, which are the foundations to Canada moving forward together. Canada is just learning about its own history. And then there is the #MeToo movement. Overall gender equality dialogue and the related LGBTQ2S inclusion within these important discussions are now on our agendas — and rightly so. Why is this important? How does this affect the way we have conversations, and the terms we use? All we know is that it does, and that it really matters. This column’s genesis was born of the idea that we need to talk about and share information. I was recently having a conversation with a good friend, and we started down the path of how I felt about the evolving terms used for Indigenous Peoples. She had sent me an article from Maclean’s on the topic that spurred an interesting chat, which led us in a couple of directions, including how we should refer to women and LBGTQ2S individuals and groups. What we should

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“If you aren’t sure and you don’t know, just ask that individual how they like to be addressed or referred to. What is most important, however, is asking in a respectful way that comes from curiosity and kindness rather than suspicion or judgement. And, if you are presenting to a group or in a group setting, consider declaring your openness to stand corrected as you share information on topic areas you are not certain about.”

say, and what we may not want to say, are questions we all have. As I thought about our conversation more, and as I asked colleagues, friends, and folks who had lived experiences in the areas we were talking about, a few things became clear: There is a need to learn more, to keep the conversation going, and to keep a few things in mind while doing so. Not being an expert by any means, I consulted with trusted advisors and wanted to share their thoughts and insights in three key themes: Educate and learn, know the situation, and practice humility. I will be doing just that in future issues of Prairie Manufacturer Magazine. At the end of the conversation, we boiled it down to something simple: If you aren’t sure and you don’t know,

just ask that individual how they like to be addressed or referred to. What is most important, however, is asking in a respectful way that comes from curiosity and kindness rather than suspicion or judgement. And, if you are presenting to a group or in a group setting, consider declaring your openness to stand corrected as you share information on topic areas you are not certain about. When we are truly interested, it is not what you ask but how you ask that is most essential, and this includes the reason for why you are asking. This builds bridges rather than creates barriers in genuine and authentic understanding. What’s wrong with that approach? What an opportunity! There may be an opinion that is different from what the

political line is on a subject, and this opens the dialogue and the chance to learn more about each other and topics that affect our workplaces and lives overall. A great piece of advice that was shared with me was two-fold: Remember the Golden Rule, treating others the way we want to be treated and thinking of the person first rather than the label that may accompany that person. And, when in doubt, just ask! Kimberley Puhach is the director of human resources and Indigenous inclusion at the Manitoba Institute of Trades and Technology. She also serves as chair of the Mayor’s Indigenous Advisory Circle in Winnipeg, and was recently appointed to the MAVEN Leadership Council, which aims to address gender equality in the tech sector.

Have a question? Just ask. Conversation is a powerful tool. It has the potential to break down barriers, dispel stereotypes, build understanding, and strengthen relationships. Sometimes, however, the sensitivity around a particular topic can result in those conversations not taking place, regardless of how important they really are. That’s why, in 2019, we here at Prairie Manufacturer Magazine are committing to steps to improve the dialogue. Each of our four issues over the next year will feature a Just Ask column that explores diversity and inclusion, and the terms we use in our everyday lives. These informative editorials will focus on gender dynamics (Spring 2019), Indigenous inclusion (Summer 2019), LBGTQ2S (Fall 2019), and workplace diversity (Winter 2019). I hope you will join us and be a part of the conversation. Ronda Landygo Kimberley Puhach

Publisher, Prairie Manufacturer Magazine

Prairie Manufacturer Magazine • Winter 2018

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Prairie Manufacturer Magazine â€˘ Winter 2018

Canadian oil continues to trade at half the price of American crude — and it’s taking a toll on Prairie manufacturers By Joanne Paulson

t 11 a.m. Mountain Time, on a particularly unpleasant day in November for those who live or work in oil country, the price of heavy Western Canadian Select (WCS) sat at $19.86 per barrel. Half an hour later, it had dipped south of $18, signaling yet another week of increased volatility. John Stringham, manager of fiscal and economic policy with the Canadian Association of Petroleum Producers (CAPP), decided to use the moment to make a point. “Take the benchmark for West Texas Intermediate (WTI), and take the Select in U.S. dollars, and then subtract the two for a $42.35 differential,” he said in a media interview. “That’s nearly double what the Alberta government was forecasting.” The intersection between what customers pay for oil on either side of the border and the availability of pipelines to move product to tidewater has become a hot-button issue for economists and politicians alike. The lack to capacity to transport Canadian crude to foreign — and even domestic markets — has meant that jurisdictions like Alberta and Saskatchewan end up selling oil at a steep discount compared to their competitors. www.prairiemanufacturer.ca

2018 Year to Date Lost Revenues vs. WTI Jan. – Oct. 29 year to date es/mated lost revenues = $3.7 billion USD

Assump:ons: 1)  Natural diﬀeren/al = Quality + transport diﬀ = ~USD12.54 per barrel 2)  Approx. 30% of total Canadian heavy supply is subject to spot pricing (i.e. 3.1 million b/d x 30% = 0.93 million b/d). 3)  This is a very conserva/ve es/mate and does not consider impacts to Index pricing

According to Stringham, between January and the end of October, the absence of market access led to $3.7 billion USD in lost revenue. To make matters worse, the Alberta treasury has estimated that every dollar above a $22 differential costs the province in the neighborhood of $210 million. To put it in perspective, the gap is now approximately double that mark — around $44 in the forward curve, suggesting a cost to the province of more than $4.6 billion. “We’re losing money hand over fist here in Alberta,” lamented Stringham. “In Saskatchewan, with the differential persisting as high as it is, we’re looking at provincial royalty revenue being foregone of about $500 million, which roughly equates to nine per cent of Saskatchewan’s entire budget for the fiscal year.” Perhaps the most significant shortterm impact, however, has been the outright loss or deferral of capital investment. Lower prices result in tighter margins, which leaves fewer dollars

on the table for new exploration or equipment upgrades. Construction and manufacturing are among the industries bearing the brunt. David McHattie, the newly elected national chair of Canadian Manufacturers & Exporters (CME) and the director of public affairs in Canada for pipe-maker Tenaris, says the integrated nature of the country’s resource-based economy creates a ripple effect when times are tough in the energy sector. “As the oil price differential has increased, activity by the Canadian energy sector has decreased. So, too, has productivity by Canadian manufacturers, with 25 – 33 per cent being negatively impacted,” he explains. “A domestic energy supply chain means that people, families, and jobs across all regions of the country are impacted, and will continue to be impacted, as the oil price differential widens and we continue without access to markets.” Next door in Saskatchewan, Steve McLellan is echoing that sentiment. McLellan, who heads up the provincial

“We currently have just over 200,000 barrels per day getting railed out. The challenge with the railroads, though, is that they want long-term commitments. They need to source locomotives, off-loading facilities, tankers — the whole thing. That takes time, and it’s not like we can flip a switch.”

Prairie Manufacturer Magazine • Winter 2018

chamber of commerce, was cautiously optimistic when the federal government stepped into purchase the assets of the beleaguered Trans Mountain pipeline back in May. But the Court of Appeal’s recent decision to quash Ottawa’s approval of the expansion has soured any hopes of limiting the damage. “Orders were cancelled, people were laid off, and nobody knows for sure when that piece of pipe or that mile of survey is going to be needed,” he says. “It’s hard to run a business when you have a big client who may or not need the work, or the product, in six months, 12 months, 18 months. There were a whole lot of people whose years were planned around that project going forward.” While a majority of the Trans Mountain work would arguably flow toward Alberta or B.C., McLellan believes that Saskatchewan still stood to benefit to the tune of hundreds of millions — if not billions — of dollars in procurement. Unfortunately, that work is now probably at least two years away. And although most suppliers can keep the lights on through a protracted downturn, eventually, a shift may be necessary. “Saskatchewan doesn’t have oil sands, but it is a big enough piece of business that it affects the entire resource sector,” chimes Eric Anderson, executive director of the Saskatchewan Industrial and Mining Suppliers Association (SIMSA). “Our heavy oil up in Lloydminster and Kindersley is impacted less than WCS; and, Bakken oil (the light oil being drilled in southern regions of the province) is impacted less than that, so we don’t see quite as dramatic a reduction as Alberta. “That said, we’re still seeing a pretty big reduction, and it’s needless. Why are we selling oil at $17 to the U.S. and buying it back in Ontario for $70?” SIMSA’s membership includes dozens of companies that are direct players in the oil patch, from manufacturers of pressure

$60

$16,000

2016 to 2018 Jan. – Oct. 29 year to date es/mated lost revenues = $13.65 billion CAD

$14,000 $12,000

$40

$10,000

$30

$8,000 $6,000

$20

$4,000 $10

$2,000

Daily Revenues Lost (Left Axis)

Nov-18

Jul-18

Sep-18

May-18

Jan-18

Mar-18

Nov-17

Jul-17

Sep-17

Mar-17

May-17

Jan-17

Nov-16

Jul-16

Sep-16

May-16

Cumulative Revenues Lost (million CAD)

$50

Jan-16

The differential between Canadian and U.S. oil prices, or at least to the current extent, is not due to any singular factor. Instead, several forces have culminated in a perfect storm of adversity. One catalyst is refining capacity. Three-fifths of the refining capacity supplied by Canadian crude is located in Ohio, where 1.1 million barrels of demand have been taken offline due to maintenance. The good news is that much of that capacity is expected to return in the latter portion of 2018. The bad news is that another refinery — this 2 time an Exxon facility — is scheduled for downtime maintenance in 2019. The second reason is a disruption in traditional supply and demand. Virtually all of Canada’s oil exports are to the United States. As U.S. companies continue to ramp up production, however, America’s reliance on Canadian shipments has diminished significantly. The third — and most politically charged — contributor is transportation. “We’re scrambling to get rail up and going,” notes Stringham. “We currently have just over 200,000 barrels per day getting railed out. The challenge with the railroads, though, is that they want longterm commitments. They need to source locomotives, off-loading facilities, tankers — the whole thing. That takes time, and it’s not like we can flip a switch.”

Mar-16

The perfect storm

2016 -‐ 2018 Year to Date Lost Revenues vs. BRENT

Daily Revenues Lost (million CAD)

vessels and cabling to welding and engineering firms.

Cumulative Revenues Lost (Right Axis)

Assump:ons: 1)  Natural diﬀeren/al = Quality + transport diﬀ = ~USD12 per barrel 2)  Approx. 30% of total Canadian heavy supply is subject to spot pricing (i.e. 3.1 million b/d x 30% = 0.93 million b/d). 3)  This is a very conserva/ve es/mate and does not consider impacts to Index pricing

“We’re losing money hand over fist here in Alberta. In Saskatchewan, with the differential persisting as high as it is, we’re looking at provincial royalty revenue being foregone of about $500 million, which roughly equates to nine per cent of Saskatchewan’s entire budget for the fiscal year.”

Pipelines, meanwhile, are full. The addition of Trans Mountain’s extension to the west coast would offer up another 590,000 barrels per day in capacity. Some naysayers believe the project is dead in the water, yet Stringham is not so convinced. “Certainly, the government has shown they’re serious about this. They’ve purchased the pipeline, and have indicated their intent to quickly remedy

the court’s decision,” adds Stringham. McClellan concurs. “By and large, because of the many strengths we have, Saskatchewan and Canada are still good places to do business,” he exclaims. “This lackluster environment will pass. We will get this pipeline built. We will get oil to tidewater. And we will have renewed confidence in Western Canada because of it.”

What exactly is Western Canadian Select? There are many of different streams of crude produced in Western Canada — each distinct in quality, grade, source, composition, and specification. This specification is typically defined by several characteristics or markers, including sulphur content, density, and viscosity. These special ‘recipes’ are unique to each operator. Operators market their blends direct to customers (most often refineries or commodity traders), which requires each blend to have its own storage facility and transportation. This historically has led to major inefficiencies and practical challenges keeping prices competitive and getting product to market. To address these issues, four heavy oil producers — Canadian Natural Resources, Cenovus, Suncor, and Talisman Energy — joined forces in 2004 to develop a shared blend, known as Western Canadian Select, or WCS. Today, WCS is one of the flagship blends sold in North America.

www.prairiemanufacturer.ca

Federal carbon tax plan fails fairness and competitiveness tests for small business By Marilyn Braun-Pollon

here has been much debate over the last several years about carbon taxes in Canada — how expensive they are, how effective they would be, and how they would hinder competitiveness and economic growth. Despite concerns from many business owners, the federal government has been adamant that every province must put a price on carbon, regardless of what investments they have made in clean energy or plans they have to reduce emissions. We now know the details of the federal government’s carbon tax plan, and it’s clear that business owners’ concerns have been ignored. The federal government announced its carbon pricing backstop plan on October 23, for the provinces without a price on carbon of their own — Saskatchewan, Manitoba, Ontario, and New Brunswick. This new plan includes a costly carbon tax, which is set to begin in April 2019 and increase each year until 2022. These provinces will have a carbon tax of $20 per tonne of CO2 emissions, which will increase by $10 every year to $50 per tonne in 2022. The carbon tax will be applied to a wide range of fossil fuels, including gasoline, diesel, natural gas, and propane. The costs will be significant for those businesses reliant on fossil fuels, with this tax adding roughly 11 cents per litre to the cost of gasoline in 2022. Important industries like manufacturing, transportation, and construction will be among the hardest hit. This tax will add nearly $575 each year for every vehicle using 100 litres of fuel per week. The cost of diesel will be higher still, and the price of

“Manufacturers will be affected more than most: 80 per cent of them hit by this new carbon tax said they would be able to pass along only a quarter or less of these costs to their customers.”

Prairie Manufacturer Magazine • Winter 2018

natural gas for heating will see a dramatic increase. To paint a picture of the impact, an example was recently provided by a small Saskatchewan trucking company that will see its diesel costs increase by more than $500,000 a year when the pricing plan is fully implemented. While there will be some offsets for farmers for the direct costs, we all know producers will still face many indirect cost increases. The federal government has committed to keeping the carbon tax revenue-neutral (all revenues collected will be returned to Canadians through rebates), aside from the GST charged on top of the carbon tax. There is, apparently, an official name for the rebates as outlined in the federal government’s press release: Climate Action Incentive payments. While the carbon tax debate rages on, one thing that is not debatable about the new plan is that much of the bill will be paid by small businesses. Of the revenues collected, 90 per cent will be returned to residents through rebates, regardless of their individual emissions. The remaining 10 per cent of the revenues would be used to fund programs and additional relief measures for small businesses and other groups, such as universities, hospitals, schools, and municipalities. Large emitters deemed to be in a ‘high competitive risk’ category by the government will have their emission rules eased so they are allowed to emit more CO2. So, the federal government will unfairly hand disproportionate rebates to residents, while exempting some big emitters. Small businesses will be left holding the carbon tax bag, getting back only a small fraction of their tax bill, and are expected to pass down the costs to customers. It is alarming that the federal government expects businesses to simply pass these significant cost increases on to customers. New research by the Canadian Federation of Independent Business (CFIB) debunks this important assumption.

“The bottom line is that small business owners cannot afford the combined costs of five years of CPP increases and four years of costly federal carbon tax increases, both starting in 2019.”

According to these findings, roughly three–quarters of business owners from the four affected provinces said they would be able to pass along only 25 per cent or less of carbon tax costs to their customers. Manufacturers will be affected more than most: 80 per cent of them hit by this new carbon tax said they would be able to pass along only a quarter or less of these costs to their customers. Of course, these results should be expected. This new plan will not only increase business’ overall costs, but likely endanger their competitiveness as well. This is particularly true for those industries that are trade-dependent, such as manufacturing. This sector will be hit even harder, as the United States is not implementing a carbon tax policy of its own. In fact, another recent CFIB survey found the majority of Manitoba and Saskatchewan small business owners (77 per cent and 73 per cent, respectively) said that a federally imposed carbon tax will make their business less competitive. New research from the University of Regina found that a carbon tax of $50 per tonne of CO2 emissions could carry a $16 billion price tag in Saskatchewan alone by 2030, reducing GDP by 2.43 per cent annually, while doing virtually nothing to reduce the province’s emissions. To make matters worse, there is another hugely expensive federal tax increase beginning in 2019. Beginning in January 2019, Canada Pension Plan (CPP) premiums for both employees and employers will increase each year for the next five years. This will see businesses paying more in labour costs: For an employee earning $55,900, the business must contribute an additional $524 to CPP premiums annually in 2023.

The bottom line is that small business owners cannot afford the combined costs of five years of CPP increases and four years of costly federal carbon tax increases, both starting in 2019. Let’s be clear: Protecting the environment is important to small business, and more than three-quarters believe we can grow the economy and protect the environment at the same time. In fact, 97 per cent of small businesses have already implemented environmentally friendly measures in their business. Small business owners are working hard to reduce emissions because of their personal beliefs, and believe punitive measures, like a carbon tax, are the least effective way to reduce emissions. Too often, governments immediately turn to increased regulations, taxes, and fees to solve a problem. Climate change and personal savings don’t seem to be the exceptions. Small businesses support measures that protect the environment, but with consumers getting rebates and some large emitters getting exemptions, it is unfair to expect small firms to shoulder the bulk of this new tax. That’s why we’re urging business owners to join the fight in telling the federal government to find better ways to reduce emissions that won’t negatively affect small businesses and the economy. The federal government already picked a fight with business owners with the small business tax changes in 2017. Unfortunately, it looks like there will be another big fight over carbon taxes. Marilyn Braun-Pollon is vice president, prairie and agri-business, with the Canadian Federation of Independent Business.

www.prairiemanufacturer.ca

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Prairie Manufacturer Magazine • Winter 2018

INNOVATION. CONNECTION. REPRESENTATION.

Canada’s leading manufacturing association dedicated to helping manufacturers grow. Celebrate 100 years of excellence in the Prairies. TH

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“Over the years we’ve had several people attend. They’re usually people that are involved in our Lean process and we’ve always had positive feedback from them.” “Usually the outside speakers that have come in have been quite positive. That hits home for me in terms of giving good ideas that can make Lean better at our company.” “It’s neat to see that other people are dealing with similar problems that we’re dealing with. Instead of my employees hearing it from me, they get to hear it from people who are maybe doing similar jobs in similar companies.” “There’s no downside. There’s only upside. There’s an opportunity to learn from an outside speaker who has probably got a particular message to send to us and who generally has nothing to sell to us. It’s a good use of time. It’s a way to get out of the office and be able to stand back and think about your own company.”

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Safety starts here. Prairie Manufacturer Magazine is developing a new series of articles in collaboration with the public agencies that oversee workplace injury prevention in Manitoba and Alberta. Each article will focus on the approach one of these organizations is taking to maximize workplace safety and health, including the details of strategies and programs that have been implemented.

hile Manitoba and Alberta may vary in their strategies, the intent of their efforts is the same: To reduce workplace injury and illness — the great burden of these injuries on workers and their families, as well as costs to employers and society as a whole. The series will begin with Manitoba in the Spring 2019 edition. This article will focus on the province's three-pronged approach to reducing workplace injury and illness. The first of these elements is the support and expansion of industrybased safety programs (IBSPs). SAFE Work Manitoba has helped to develop five new IBSPs since 2015 — in the manufacturing, trucking, service, agriculture, and self-insured sectors (Manitoba's construction sector is served by two longestablished safety associations). The work of these organizations speaks to the importance of partnerships in enhancing workplace safety and health. In manufacturing, Made Safe is the IBSP that provides a broad range of services directly to its members. These services include training courses, access to events and resources, consulting, and certification. The article will also discuss the development and implementation of SAFE Work Certified, a program that provides employers in all industries across Manitoba with an opportunity

to become safety certified. The process of becoming certified will be highlighted, along with the benefits of safety certification, such as reduced injury rates and higher levels of employee engagement. In addition, the article will touch on the third component of the strategy: A prevention rebate program for employers. Eligible, certified employers can qualify for a rebate based on a percentage of their WCB premiums. You'll read how the program works and who qualifies to receive the rebate. Alberta’s article will focus on major changes to the province’s occupational health and safety (OHS) laws. These changes represent the first significant updates to Alberta’s OHS laws in more than four decades, and bring them in line with other Canadian provinces. The new laws are designed to prevent work-related injuries, illnesses, and deaths, so more workers go home safely to their families at the end of the day. Workers now have more rights and protections. Plus, the changes cover workplace violence and harassment, joint worksite health and safety committees, and more. Look for the launch of the series in your Spring 2019 issue of Prairie Manufacturer Magazine.

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Prairie Manufacturer Magazine • Winter 2018

SAFETY IS EVERYONE’S RESPONISBILITY. A safety-focused culture means safe work processes and thinking are ingrained in every aspect of the business – no matter what the worker’s job duties. Ingraining safety habits – patterns of repeated behaviours or practices – not only create consistency but can also improve awareness.

Here are three tips for manufacturers to get you started:

Don’t assume that you “might” know how to do a task. Don’t be afraid to ask questions from a supervisor or a fellow worker. Get in the habit of asking questions to learn safely.

Be aware of the risks, use all available safeguards and work at a manageable pace.

Be enthusiastic and encouraging about safety. Safety is everyone’s responsibility. Every worker should be and feel safe while being at work. Be the change and a positive influence to those around you.

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Hon. Maryam Monsef, Minister of Status of Women with the Government of Canada, (middle) poses with the four Women in Manufacturing scholarship winners and other representatives from Canadian Manufacturers & Exporters.

Prairie Manufacturer Magazine â€˘ Winter 2018

We can do it!

New national campaign aims to add 100,000 women to the manufacturing workforce by 2023, starts by awarding scholarships to four young women pursuing manufacturing careers By Laurel Johanson

rom a young age, Madi Griemann followed in her father’s footsteps. Literally. A naturally curious child, she would tail close behind him as he walked about his mechanics shop, wondering what he was doing and the types of equipment he was working on. The formative years of her life were split between that shop and the industrial arts facility at her school in Moosomin, Saskatchewan, where it didn’t take long for Griemann to decide that she wanted a career in manufacturing. “I always knew I was heading for a trade since I was little,” says Griemann. “I liked working with my hands and keeping busy. As I started taking more shop classes, I realized the ones I liked best were those related to metal and manufacturing.”

Griemann, 17, is one of four recipients of the national Women in Manufacturing scholarships, sponsored by Canadian Manufacturers & Exporters (CME), Fiera Foods, and Artistic Skylights. Women in Manufacturing (WIM) is a pan-Canadian initiative of CME that aims to increase the number of females employed in the manufacturing industry. The awards were presented in Ottawa this year at CME’s annual conference in support of the education of young women entering the manufacturing workforce. Ten scholarships in the amount of $4,000 will be given out between 2018 and 2020. “The fact that I’m one of four women chosen, it’s almost a confidencebooster that you are on the right track as a woman in manufacturing,” says Griemann. “It’s so reassuring to know

that there are other girls out there doing this, too.” Griemann is enrolled in the Innovative Manufacturing program at Saskatchewan Polytechnic in Regina, where the shop classes are still her favourite. She is expected to graduate in 2020, with plans of becoming a journeyman machinist. Griemann says that although some people question her decision to go into manufacturing as a female, the community at her school is highly supportive. “We have a program at [SaskPolytech] called Women in Trades and Technologies, where we have pizza lunches and we can meet and talk,” explains Griemann. “I think the guys are getting a lot more accepting, but if anything were to be going on, you could share it there.”

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2018-11-16 3:37 PM

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“Two or three years ago, I wouldn’t have even been able to describe what manufacturing was or meant. Especially when you’re at the beginning of your career, you’re looking for people to look up to and inspire you to pursue something. Especially as a woman, if you don’t see other women doing something, you don’t even consider it or think that it’s something you could do.”

Griemann maintains what she is most excited about is getting to do what she loves every day. “Manufacturing has such a long history in Canada that it needs to continue to thrive,” says Griemann. “Everything in your world is manufactured. It is an important sector, and I’m excited to be able to contribute to that.” Sarah Harris is another Prairie recipient of the national scholarship. Harris studies biomedical engineering at the University of Manitoba, and recalls a pivotal moment last June during her internship at the Orthopaedic Innovation Centre that solidified her desire to pursue biomedical manufacturing. “The first time I got to see a surgery was a bilateral knee replacement,” says Harris. “It was kind of intimidating. Up until then, I had only ever done cadaver work, so this was amazing because it was live.” Harris says witnessing the surgery and seeing all the tools in the operating room put to work made her realize she

wanted to be a part of the manufacturing of medical devices. “It was just insane to see someone go through that whole process and know that it was going to have so much of an impact on them,” says Harris. “You see someone after surgery and it’s almost like magic. They’re literally open on a table, and then they recover.” Now in her third year at the university, Harris also serves as a cofounder of the Women of Manitoba Engineering Network at the U of M. The group aims to promote opportunities for female-identifying engineering students, including financial support and networking events connecting them to mentors and role models. “Two or three years ago, I wouldn’t have even been able to describe what manufacturing was or meant,” says Harris. “Especially when you’re at the beginning of your career, you’re looking for people to look up to and inspire you to pursue something. Especially as a woman, if you don’t see other women doing something, you don’t even consider

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Prairie Manufacturer Magazine • Winter 2018

it or think that it’s something you could do.” These are sentiments echoed by Rhonda Barnet, the outgoing chair of CME’s national board, as well as and president and COO of Steelworks Design. "If you can see me, you can be me," says Barnet. "By sharing the stories of successful women in today's manufacturing world, we hope to encourage mentorship, and to help change the image of manufacturing for women and girls to inspire them to pursue a career in the sector.” Women comprise 48 per cent of the Canadian workforce, but only 29 per cent of the manufacturing workforce. Through its recently announced We Can Do It! campaign, WIM aims to increase the number of women in manufacturing positions by 100,000 over the next five years. As for Harris, she says receiving the scholarship is a very validating experience. “I put so much work into school and getting this job, and you’re working two jobs trying to support yourself and pay for school,” says Harris. “It felt so nice to have someone acknowledge that and support it. Everything has been almost too good to be true.” For more information on WIM, to partner, or to pledge your support, visit womeninmanufacturing.ca

Manitoba Aerospace honours industry excellence

n November 22, Manitoba Aerospace held its 17th annual Aerospace All-Stars Awards of Excellence in Winnipeg. The event recognizes partners or individuals involved in or with the aerospace and defence industry, who have demonstrated excellence in a variety of areas, from leadership to business growth. Award winners are nominated by their industry peers. Four recipients were recognized this year for their outstanding achievements:

Industry & Government Collaboration Category

Innovation Category

“The annual All-Stars Dinner is an ideal forum for recognizing excellence in our aerospace community,” says Manitoba Aerospace Chair Ron Drepaul. “The dinner is also a major fundraiser for the Manitoba Aerospace Student Endowment Fund. Through the generous support of individuals, companies, and organizations over the years past, this fund has raised over $305,000, and has helped 107 deserving students. “Ultimately, this endowment fund is a win-win situation — larger numbers of students will be able to benefit from specialized schooling, and the number of high-quality young people in the aerospace and defence industry will also increase. All of this together will only serve to strengthen our industry.” Manitoba’s state-of-the-art aerospace and defence industry is the largest in Western Canada, and is the third largest aerospace hub in the country, producing and selling more than $2.1 billion dollars of products and services annually. Aerospace is one of the province’s premier sectors, directly employing more than 5,000 highly skilled Manitobans.

Presented to the Canadian Composites Manufacturing Research and Development Team – Knife Edged Fairing Composite Technology Demonstrator. Team members include: Boeing Canada – Winnipeg, Convergent Technologies, Magellan Aerospace, ASCO, PCM, AVCORP, National Research Council, Red River College, Composites Research Network – University of British Columbia, and the Composites Innovation Centre.

Education & Training Category Presented to Greg Link with the Technical Vocational High School (also known as Tec Voc).

“The annual All-Stars Dinner is an ideal forum for recognizing excellence in our aerospace community. The dinner is also a major fundraiser for the Manitoba Aerospace Student Endowment Fund. Through the generous support of individuals, companies, and organizations over the years past, this fund has raised over $305,000, and has helped 107 deserving students.”

Presented to Jim Prendergast of the National Research Council – Industrial Research Assistance Program.

Builder Category Presented to Kim Westenskow, managing director with Boeing Canada Operations Ltd.

About Manitoba Aerospace Manitoba Aerospace is a not-for-profit sector association that works to connect the local aerospace industry to national and international markets, and also aims to develop a world-class workforce to meet industry’s needs through partnerships with Manitoba educational institutions and other key stakeholders.

www.prairiemanufacturer.ca

PHOTO CREDIT: SUPREME STEEL

Prairie Manufacturer Magazine â€¢ Winter 2018

Onto the next chapter With USMCA negotiations in the books, manufacturers are asking ‘What’s next?’ for the Canada-U.S. trade relationship By Martin Cash

y just about any metric, NFI Group Inc. (formerly New Flyer Industries) is the poster child for the Prairie manufacturer that has integrated its supply chain throughout North America. The Winnipeg-based bus-maker generates close to 90 per cent of its revenue in the U.S. and has consistently met the rising and stringent Buy America requirements. Being able to work within these protectionist parameters allows municipal transit authority customers to receive federal funding to purchase NFI’s Xcelsior buses for fleet updates. The company already had production facilities in Minnesota, North Dakota, and Alabama, before opening a 300,000-square-foot parts fabrication plant in Kentucky this past September. And, despite the kind of careful, long-term planning that NFI is known for, it had little recourse but to make the tough decision to move 90 positions from its Winnipeg production headquarters to the new Kentucky facility in November. That represents a mere three per cent of its current Winnipeg workforce, and the Buy America provisions — relating only to direct purchases by the U.S. federal government on rail or road transportation — is outside the scope of the renegotiated NAFTA. Still, somehow it seems indicative of the general sense that it is getting more difficult to do business south of the border. The landscape, especially for manufacturers, was not much altered by the completed negotiations on the U.S.-Mexico-Canada Agreement (USMCA), which concluded at the end of September but have not yet been signed or ratified by any of the three countries. Unfortunately, that also means the costly, margin-crushing U.S. tariffs and Canadian reciprocal tariffs on steel and aluminum remain in place. Carlo Dade, director of the Trade & Investment Centre at the Canada West Foundation in Calgary, says, “From a technical aspect, for someone who is not concerned with the larger strategic or political or trade implications, there’s really not much different for manufacturers with the new USMCA. In essence, the agreement was about trying to hold onto what we had.” But, for many, the entire process has been a ‘shot across the bow’ from U.S. policymakers. In a recent interview, Canada’s Foreign Affairs Minister Chrystia Freeland said, “When I look at the deal we achieved, I am absolutely confident that it’s a good deal for Canada.” After all, the pact was negotiated in the context of an unconventional U.S. presidential administration that campaigned on fundamentally revamping or even severing NAFTA altogether. As for the steel and aluminum tariffs, Freeland said, “We believe using the 232 provision (claiming it is an issue of national security) against Canada and against Canadian exports

“NAFTA moved us up from Windows 95 to Windows 97. Canada was just hoping that Trump wasn’t going to send us back to Windows 3.0.”

www.prairiemanufacturer.ca

“If we want to protect 1,000 jobs in Canada, we need to have a good relationship with the U.S. We could not replace that with the rest of the world in 100 years. There’s not a chance we could manufacture product in Canada to the scale we manufacture today and replace American business by trading with the Pacific Rim countries. Not a chance. Zero.”

of steel and aluminum is both illegal and also, frankly, absurd.” There is no indication when the tariffs, however, will be lifted; and now that the Democrats — arguably the original American ‘protectionists’ — control the House of Representatives, the whole process may be in for one more drawnout political set piece. “We’re not out of the woods yet,” Dade suggests. “The other issue with ratification is that there are still some things that have to be worked out. They still have to do the legal scrub. That process could still be very disruptive.” Meanwhile, along with riding the normal economic waves, manufacturers have had to endure close to two years of uncertainty and months of expensive tariffs that are eating into whatever is left on the bottom line. WGI Westman Group Inc. is a privately-held company that owns culvert and metal fabrication shops — 67 of them — mostly in Western Canada, including well-known brands such as Meridian, Behlen Industries, and Westman Steel. Paul Cunningham, CEO of WGI Westman, is not particularly concerned about the twists and turns of trade policy as he is with ensuring all his plants are properly staffed up. “As for [the USMCA], for us at this point, nothing has changed either way — whether they sign it or not,” he explains. “What has really hurt us, though, is the tariffs. The minute the tariffs went on, the local mills just raised their prices.” WGI Westman operates a couple of shops in Iowa, but, in total, only about 20 per cent of its revenues are from U.S. customers. Cunningham says the U.S. market remains of interest, although the company has had to go hard just to keep pace with domestic demand. Through all the uncertainties over the free trade landscape, one of the more noteworthy alterations to their business — other than the higher cost for steel and aluminum — is that there doesn’t seem to be as much

U.S. competition to deal with north of the 49th Parallel. “The U.S. economy is charging ahead and, as a consequence, we are not seeing as many U.S. competitors coming up here as we used to, or as aggressively as they used to,” adds Cunningham. There are others, like Carlo Dade, who are not impressed with the details of the new USMCA, especially in comparison to the modern features of other international free trade agreements that Canada has also recently entered into. He believes the 11-nation Comprehensive and Progressive TransPacific Partnership, which is on track to take effect by the end of the year, and the Comprehensive Economic and Trade Agreement, which is already in place with the European Union, give Canadian companies significantly more modern trade parameters than is the case with the USMCA. “It was clear with these negotiations we were not going to get an updated NAFTA,” says Dade. “In fact, we already had an updated NAFTA that met most everyone’s concerns — a 21st century ‘Windows 10’ trade agreement that was the Trans-Pacific Partnership (TPP).” Of course, President Trump withdrew the United States from TPP negotiations shortly after taking office, forcing other signatories to revisit the agreement without the world’s largest economy at the table. “NAFTA moved us up from Windows 95 to Windows 97. Canada was just hoping that Trump wasn’t going to send us back to Windows 3.0.” While some experts would have liked to see a more robust USMCA borrowing on the strengths of the TPP talks, a ‘watered down’ accord protects much of the powerful advantage Canadian exporters have when it comes to accessing the U.S. market. Take, for example, the ongoing work around regulatory harmonization, which is accomplished through the joint efforts of the Canada-

Prairie Manufacturer Magazine • Winter 2018

U.S. Regulatory Cooperation Council. “I don’t think people realize how much of an advantage that is for us, and that is not an area contained in NAFTA,” says Dade. “Luckily, Trump hasn’t figured out what regulatory harmonization really is, and anyone who knows what it is in D.C. keeps their mouths shut about it every time he walks into the room. “This is what distinguishes us from the Germans and the Japanese. With us, our rules and regulations are [largely] the same as theirs. That gives us a huge advantage selling into the U.S.” Gerry Price is the CEO of Price Industries — another large, privatelyowned Manitoba manufacturer, which produces HVAC products for the non-residential construction market throughout Canada and the U.S. With the majority of its sales in the U.S. and its sizable production facilities equally split on both sides of the border, access to the U.S. marketplace is not just an avenue of growth for Price — it is fundamental to its future. “If we want to protect 1,000 jobs in Canada, we need to have a good relationship with the U.S.,” Price says. “We could not replace that with the rest of the world in 100 years. There’s not a chance we could manufacture product in Canada to the scale we manufacture today and replace American business by trading with the Pacific Rim countries. Not a chance. Zero.” There nevertheless is an increasing call for Canadian trade promotion supports to slant toward geographic diversification. The long-standing convenience of cross-border trade between Canada and U.S. has created sophisticated supply and production chains that will continue to bind Canadian and U.S. partners. Now may be the time to focus attention elsewhere. According to Dade, that’s exactly what trade diversification will require — time. “The U.S. is still the richest, easiest market on the planet, and for lots of businesses, it still makes sense to take the risk and go to the U.S,” he says. “But now that trade elsewhere has become more attractive, it just gives businesses the incentives to build supply and production chains into these markets as well.”

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Prairie manufacturers can be cautiously optimistic for 2019 By Jayson Myers

rairie manufacturers are on a tear. Export sales into a robust U.S. economy and to markets in Asia and Latin America are booming. And, it looks like there is still plenty of momentum in those markets to sustain sales growth over the year ahead. Yet, despite an optimistic outlook for revenue growth, 2019 will prove to be a year of heightened uncertainty and rising cost pressures for manufacturers across Canada. Bottom-line performance will not be as strong as top-line expectations. Good news first: Since the end of 2016, Prairie manufacturers have enjoyed a period of exceptionally strong revenue growth. The total value of goods produced and shipped by manufacturers across the three Prairies provinces jumped by 18 per cent between December 2016 and August 2018, when overall monthly sales stood at a record $9.8 billion. For the past year-and-a-half, sales growth for Prairie manufacturers has been running at almost double the 9.5 per cent national average. Manufacturing sales are up by 16 per cent in Manitoba, 15 per cent in Saskatchewan, and 19 per cent in Alberta. That’s just as strong a performance as the boom that took place in western manufacturing between 2010 and 2012. And, it is happening in many of the same sectors of manufacturing — petroleum and chemical products, wood products, fabricated metal products, machinery, and equipment.

Sales growth can be expected to remain strong throughout the remainder of 2018 and into next year, although growth rates are likely to slow. New orders and order backlogs are both running at record highs — the former at roughly the same level as monthly sales, the latter about 50 per cent higher. Sales and orders are growing because customer demand is increasing, leading to higher levels of output. Still, about 40 per cent of the sales growth we’ve seen over the past year-and-a-half can be attributed to price increases. Prairie manufacturers have been able to take advantage of renewed pricing leverage in North American and global markets. Their prices have risen more rapidly than their input costs. But, now, operating costs are also on the rise and will remain a concern throughout the year ahead. The full impact of U.S. tariffs on aluminum, steel, and Chinese imports has yet to make its way through North American supply chains. The hit from retaliatory tariffs imposed by Canada and Mexico on imports from the U.S. is already being felt. Tight job markets and new regulations are pushing up labour costs. Plus, central banks in Canada, the U.S., and other major economies are increasing interest rates in response to stronger economic growth and rising price levels. Higher interest rates will increase borrowing costs for manufacturers. They will also very likely spur demand for higher wages.

Unfortunately, the very same forces that are pushing up costs are also beginning to slow growth in customer demand. Lower interest rates in the aftermath of the Great Recession have done their job to reflate the global economy, but a return to more normal levels won’t be easy. Consumers, households, businesses, and governments have been on a borrowing spree around the world. Household and consumer debt now account for record levels of after-tax personal income in Canada. Government debt has never been higher in the United States and Europe. And, soaring levels of business and government debt make emerging markets highly vulnerable to any significant increase in borrowing costs or downturn in asset markets. Even China is not immune. Growth in the world’s second-largest economy is slowing down — albeit to a still torrid pace of 6.5 per cent. Higher interest rates are bad news for manufacturers everywhere. So, too, is the political uncertainty that surrounds American trade policy, Brexit negotiations, and the future of the European Union and the other international institutions that underpin trade and market stability in the global economy. The conclusion of ‘NAFTA 2.0’ negotiations has calmed business concerns here in Canada to some degree. But, neither U.S. nor Mexican ratification of the USMCA can be taken for granted. The Trump administration has shown

“For the past year-and-a-half, sales growth for Prairie manufacturers has been running at almost double the 9.5 per cent national average. Manufacturing sales are up by 16 per cent in Manitoba, 15 per cent in Saskatchewan, and 19 per cent in Alberta. That’s just as strong a performance as the boom that took place in western manufacturing between 2010 and 2012.”

Prairie Manufacturer Magazine • Winter 2018

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that it can be highly capricious when it comes to slapping tariffs on imports. Protectionist pressures are also mounting in Europe. Meanwhile, the stand-off in trade relations between the United States and China is unlikely to be resolved anytime soon. Geopolitics may be in a mess, which means manufacturers should be cautious. There are also, however, many reasons for optimism in the year ahead. The U.S. economy is humming and capacity constraints south of the border will generate further demand for imports from Canada. Canada’s Comprehensive Economic and Trade Agreement with Europe and our newly ratified transpacific agreement will open new markets in Asia-Pacific — most notably in Japan — for commodities and processed goods from the Prairies. Canadian exporters

Growth in Manufacturing Sales 120

115

110

105

100

2017

2018 Prairie Manufacturing

should benefit from the displacement of U.S. goods in Chinese markets as well. Is it time for a strategic rethink? Absolutely. Prairie manufacturers need to prepare for new growth opportunities and for elevated levels of political and market risk. Manufacturers also need to double-down on their efforts to innovate and improve productivity, because out of all the economic and political factors that will shape market prospects in 2019, none will be more telling than the ability of manufacturers to keep pace with changing technologies and customer expectations.

Monthly Value of Manufacturing Sales 12

Billions of Dollars

2015

2016 Manitoba

2017 Saskatchewan

Prairie Manufacturer Magazine • Winter 2018

2018 Alberta

Canadian Manufacturing

Jayson Myers is the CEO of Next Generation Manufacturing Canada — the country’s advanced manufacturing supercluster. An award-winning business economist and leading authority on technological change, Myers has counselled Canadian prime ministers and premiers, as well as senior corporate executives and policymakers around the world.

www.prairiemanufacturer.ca

INDUSTRY EVENTS JANUARY 2019

2019 MARCH 2019

Women in Manufacturing Planning Session January 15, 2019 CME Office, Winnipeg, Manitoba www.cme-mec.ca

Made Safe Manufacturersâ€™ Forum March 6, 2019 Winnipeg, Manitoba www.Madesafe.ca

Levene Graduate Programs Information Session January 16, 2019 Levene Graduate School of Business, University of Regina, Saskatchewan www.levenegsb.ca/register-for-an-information-session/

SREDA Forum 2029 Thursday, March 7, 2019 TCU Place, Saskatoon, Saskatchewan www.sreda.com

The Art of Negotiating with Others January 29, 2019 Viscount Gort Hotel, Winnipeg, Manitoba www.cphrmb.ca/events The Art of Negotiating with Others January 30, 2019 Clarion Hotel & Suites, Brandon, Manitoba www.cphrmb.ca/events

FEBRUARY 2019 Kaizen Conference February 21, 2019 Samuel N. Cohen Auditorium St. Boniface Hospital Research Centre, Winnipeg, Manitoba www.cme-mec.ca Levene Graduate Programs Information Session February 26, 2019 Levene Graduate School of Business, University of Regina, Saskatchewan www.levenegsb.ca/register-for-an-information-session/ MITT Open House 2019 February 27, 2019 Manitoba Institute of Trades and Technology, Winnipeg, Manitoba www.mitt.ca

Dare to Compete March 19, 2019 RBC Convention Centre, Winnipeg, Manitoba www.cme-mec.ca CME Gala Awards Dinner March 21, 2019 RBC Convention Centre, Winnipeg, Manitoba www.cme-mec.ca Performing Under Pressure: The Science of Emotional Intelligence March 20 & 21, 2019 Hilton Suites Winnipeg Airport www.cphrmb.ca/events Levene Graduate Programs Information Session March 28, 2019 Levene Graduate School of Business, University of Regina, Saskatchewan www.levenegsb.ca/register-for-an-information-session/

APRIL 2019 CME Manitoba AGM April 24, 2019 Norwood Hotel, Winnipeg, Manitoba www.cme-mec.ca

To have your event listed in the next issue, contact info@prairemanufacturer.ca 46

Prairie Manufacturer Magazine â€˘ Winter 2018

New software tool available to identify workplace impairment

AlertMeter 101 What types of companies currently use the system? There have been more than 50 million worker hours tracked using AlertMeter. The largest users are mining giant Anglo American and consumer goods manufacturer Unilever, although many user firms have fewer than 100 employees.

By Derek Lothian

Does this replace pre-employment testing?

Pre-offer and pre-employment testing indicate whether a worker has used a drug at some indeterminate past date, and do not indicate a level of current impairment. Therefore, these tests can remain in place if the employer feels they are necessary.

his November, the Safety Association of Saskatchewan Manufacturers (SASM) announced a new partnership to become the licensed distributor of AlertMeter in Canada — revolutionary software aimed at proactively identifying workplace fatigue and impairment. AlertMeter is a non-invasive tool to ensure employees are fit for daily duty. At the start of each shift, employees in safety-sensitive environments take an on-screen test that lasts between 60 – 90 seconds. This quiz incorporates puzzles to measure a worker’s ability to classify various geometric shapes quickly and accurately. The system then compares the results to each individual’s past baseline performance, and uses advanced predictive analysis to detect impairment from a variety of sources, including lack of sleep, emotional stress, or drugs and alcohol. Any anomalies trigger a second test, and — if they still exist —an instant alert to both the user and his or her direct supervisor. SASM Executive Director Ken Ricketts believes the software has the potential to save lives by focusing on prevention opposed to response. “There are still far too many workplace fatalities and injuries, and I am proud of this concrete step to help employers reduce the risk of those occurrences before they happen,” says Ricketts. “This system is not about a worker’s lifestyle. It is expressly about their alertness and their ability to keep themselves and their coworkers safe on the job.” “There are still far too many workplace fatalities and injuries, and I am proud of this concrete step to help employers reduce the risk of those occurrences before they happen.” AlertMeter was originally designed in the United States, and was first adopted by the mining industry in South Africa four years ago. The system is now owned by Colorado-based company Predictive Safety SRP Inc., and has received development funding through the U.S. National Institute of Occupational Health and Safety, as well as through the National Institute of Health. While manufacturing is understandably his primary focus, Ricketts maintains the system — which can be accessed from any personal computer, tablet, or smartphone — has applications in other industrial sectors on the Prairies, too, from construction to oil and gas. “Safe workplaces aren’t the domain of any one industry, “he says. “The software’s track record is impressive. Companies that have made AlertMeter part of their safety culture have documented significant reductions in WCB claims simply because employees are proven alert and ready to work.”

Should AlertMeter be used as a top-level indicator post-incident? No. After an incident, due to adrenalin, shock, and other factors, it is unlikely that a worker will test within the parameters set in the system. Why aren’t there more systems like this? Systems to test alertness and impairment were first developed in the late 1990s, primarily in the study of sleep deprivation. They, however, took more than 10 minutes to complete. The advent of smartphone and touchscreen tablet technology, coupled with Predictive Safety’s software, has shortened the time required, making it more suitable for workplaces. Is the system secure? Could there be a data breach? The only personal data in the system is the employee’s name, the name and atwork email address of the employee’s supervisor, and the company name. No other personal data is required. If the organization uses employee numbers, the employee’s name can even be omitted from the data. The system uses Microsoft’s Azure security system, and the servers are located in Canada. AlertMeter iPhone app.

www.prairiemanufacturer.ca

QUESTIONS

about the new cannabis ‘green rush’ With Joel Peterson, vice president of government relations with H+K Strategies

Recreational pot is now legal in Canada. Where do you think the economic opportunity is most prevalent? In the gold rush that started in 1896, most of those who made lasting fortunes were not miners. Rather, they were the ones selling picks and shovels, building hotels and restaurants, and supplying food and clothing to those hoping to strike it rich. Just think of the Levi Strauss story. When news of the California Gold Rush made its way east, Strauss journeyed to San Francisco to establish a wholesale dry goods business under his own name and served as the west coast representative of the family’s New York firm. He eventually renamed his company Levi Strauss & Co., maker of the famous Levi’s jeans. Similarly, now that cannabis has been legalized, the $23 billion panCanadian ‘green rush’ spans well beyond production. There is a vacuum of potential on the supply and services side, too, with significantly lower barriers to entry.

Can you provide some examples from other jurisdictions? In Colorado, the ancillary cannabis market is estimated to be more than $20 billion, and Washington has benefitted from an additional $100 million in cannabis-related tax revenues that are not directly from sale of cannabis. The sky is the limit — everything from technological solutions to breathalyzers and testing kits, cannabis paraphernalia, security and transportation services, hospitality and tourism, not to mention investment and financial support. 48

Why are the Prairies so wellpositioned to capitalize? Cannabis cultivation is a high-tech, high-skill industry. With the different types of cannabis, and the multiple strains, there is opportunity for genetically engineering cannabinoid profiles to create new variations. The linchpin will be finding the people — and enough of them — with the right competencies to do the work. It just so happens these skill sets tend to be geographically concentrated in Western Canada, and that alone presents a major opportunity for our agricultural sector and its sophisticated biotechnology industry.

Perhaps the most underestimated growth opportunity, however, relates to the ugly cousin of cannabis — hemp, which produces valuable cannabidiol (or CBD), a non-psychoactive compound with an array of potential medical applications. While cannabis is generally grown in small quantities under tightly controlled conditions, hemp is grown like most other field crops, such as peas, lentils, and alfalfa. Hemp also tolerates a wide variety of soils and temperatures, requires no pesticides, and grows extremely fast, soaring to as much as 20 feet in 100 days.

Will farming really play that big of a role in cannabis development?

You mentioned product traceability — that requires technological infrastructure. Is there a role to play for the private sector in that space?

It’s hard to say, but the potential is there. Cannabis is a notoriously finicky crop, and the ability to fine-tune growing processes could lead to superior products and larger, better quality yields. Agricultural producers in this part of the world are a technologically savvy group, and have long been leaders in adopting new practices, implementing systems and procedures for organic production, genetically modifying crops, leveraging data, as well as leading standards for food and food supplement safety. The new cannabis framework will require innovative approaches to assist in product differentiation, traceability, safety, and compliance — all of which already have a foundation in other regional industries, like beef production. The experience and knowledge learned in those other sectors can easily be adapted for cannabis.

Although cannabis will be legalized, it will still be a controlled product, and will be subject to various controls throughout the growing, wholesaling, and retailing phases. New advancements and innovations in IT will be vital to moving the industry forward across the country, and will be required to track cannabis from seed to sale. For instance, producers will need a software solution to track the growth cycle and maintenance of their plants. Retailers will need software for keeping tabs on inventory that preserves compliance with federal and varying provincial rules. And those selling will also need to limit and monitor the amount sold to consumers. There is definitely a niche there for solutions that sync up the compliance burden with internal quality assurance and other business demands.

Prairie Manufacturer Magazine • Winter 2018

“Turns out we’d been under-forecasting.” People who know Manufacturing and Distribution, know BDO.

The Manufacturing and Distribution Practice at BDO BDO’s Manufacturing and Distribution practice combines accounting, tax, and business advisory with industry prowess. Whether you’re looking to leverage international operations, grow through acquisition, or optimize inventory management systems, BDO stands ready with proactive information and guidance wherever in the world you do business. In the Prairies, our BDO locations proudly include: Brandon | Calgary | Edmonton | Grande Prairie | Lethbridge | Pembina Valley | Portage la Prairie | Red Deer | Winnipeg Proud partner of:

Assurance | Accounting | Tax | Advisory www.bdo.ca/manufacturing

Be innovative. With your products. With your operations. With your thinking. Adapt and anticipate in an unpredictable world.