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Issue 2, Volume 2 â€¢ Fall 2017

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Publisher Ronda Landygo ronda@prairiemanufacturer.ca 877.880.3392

In this issue Thank you, Brad

On August 10, Brad Wall announced he would be stepping down as Saskatchewan premier after more than a decade in office. Prairie Manufacturer Magazine Editor Derek Lothian reflects on one of Canada’s most complex public figures and the legacy he will leave behind.

Growing our value in the value-added economy

For more than 40 years, POS Bio-Sciences has been at the tip of the spear in the global quest to grow value-added sectors of the economy. But technology is changing the game, and Western Canada must be nimble to seize on a wave of opportunity.

Small towns, big dreams

Big machinery, big industry, big city, right? Think again. Meet three world-class manufacturers overcoming daunting odds to grow their businesses, and communities, in the heart of rural Saskatchewan.

The Saskatchewan spirit

Drink less. Therefore, drink better. And, while you’re being discerning, drink local. That’s the new mantra of the modern spirits connoisseur, fueling the big business of Saskatchewan’s microdistilleries — and the world is taking notice.

Keep calm and carry on

It’s time for Canada put on its poker face. The cards have been dealt and NAFTA negotiations are now underway. Cross-border business expert Jayson Myers breaks down the possible outcomes and what they mean for manufacturers.

Innovating from the (under)ground up

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Manufacturers have felt the pinch of commodity prices, but that doesn’t mean they’re standing still. Innovation — in product and process — is now the competitive differentiator, as companies vie for position in the resource development supply chain.

Next issue Spotlight: Potash, coal, uranium, precious metals, base metals, oil, natural gas, limestone, salts, diamonds — you name it, Western Canada has it. Our Winter 2017 issue explores the correlation between resource development and manufacturing, and the market pressures influencing each. Regional feature: We’re Alberta bound! Prairie Manufacturer Magazine heads west to meet with the companies and industry leaders standing tall amidst trying economic times. Booking deadline: November 10, 2017 Material due: November 17, 2017

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 2017 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

Thank you, Brad By Derek Lothian

itting at my kitchen table on the evening of August 9, I was suffering from a bout of writer’s block. I had struggled through all but the final paragraph of this column, yet couldn’t find the right words to precisely summarize the point I was trying to make. So, I closed my laptop and did what any other Saskatchewanian would do — flipped on an episode of Corner Gas. The next morning, plunked down at that same kitchen table, this column unexpectedly began to rewrite itself: Brad Wall had just announced he would be stepping away from politics after a 10-year run as Saskatchewan’s premier. Granted, an elected official departing the political scene, regardless of seniority, is not necessarily noteworthy. Even as a recovering political junkie myself, I must admit the Trumpian drama south of the border has been enough to numb me from much of the routine noise I’d otherwise gobble up. This, however, was different. This one hit home. Many of my friends in Ottawa and further east have long questioned the local appeal of Canada’s most popular premier. They see a pain-in-the-ass contrarian, hell-bent on fighting the federal machine and ensuring Justin Trudeau serves as a oneterm prime minister. In contrast, many on the Prairies view him as Western Canada’s white knight — the last crusader to champion the nobility of resource development and economic prudence. As with most things in life, the truth probably lies somewhere in between. Brad Wall is nothing if not a complex public figure. He is a boisterous cheerleader for free market solutions in a province riddled with Crown corporations, a little-C fiscal conservative prepared to piss off his most loyal supporters rather than run a deficit, and a true pragmatist equal parts stubbornly principled and populist. To me, he is the best prime minister we will never have. I moved back to Saskatchewan from Ontario in 2014, in large part because I shared in Wall’s passion and optimism for the future of the province. By that time, Saskatchewan had well eclipsed one million people. Skilled graduates were no longer our chief export, and Calgary had finally lost its moniker as Saskatchewan’s most populous city. I remember flying into Regina every Christmas, marvelling at the sheer scale and pace of development — entire

new neighbourhoods, complete with shopping centres and restaurants, that weren’t there 12 months prior. If there is a question mark on Wall’s long-term legacy, it will be on whether enough was done in the good times to prepare for the bad. Just this past spring, Wall’s Saskatchewan Party government tabled the toughest budget in its tenure, projecting a $685 million shortfall, despite raising the provincial sales tax (PST) rate and removing massive PST exemptions on insurance premiums, construction services, restaurant meals, children’s clothing, and fixed equipment in the resource sector. In the weeks that followed, ‘Where did all the money go?’ re-emerged as the rhetorical rallying cry of opposition MLAs. Ever the salesman, though, Wall had an answer for his critics. In his keynote address at the 2017 Premier’s Dinner in Regina, Wall exclaimed (and I’m paraphrasing): “$6 billion in cumulativetax relief, $20 billion in new infrastructure, 800 more teachers, 40 new and replacement schools, $1.4 billion in new health care infrastructure, 15 brand new long-term care facilities, a new hospital for Moose Jaw, the replacement of the 100-yearold Saskatchewan Hospital in North Battleford, building of a new children’s hospital, 750 more doctors, 3,000 more nurses, and $350 million over nine years that took the longest waitlists for surgery in Canada to the shortest — that is where the money went.” Wall’s detractors — and those looking in from the outside may be surprised to learn he’s amassed his fair share (it tends to happen after a decade in office) — will undoubtedly take issue with those talking points. And, in some cases, perhaps justifiably so. That said, I’m not sure it matters. Owning the narrative has been Wall’s most effective ability; and I would contend we as taxpayers have reaped the benefits as a result. Investment has flowed, business has prospered, the population has flourished, and we are punching above our weight class in the international arena. Few will debate style versus substance when you’re producing results. For manufacturers, the proof is in the pudding. Since Wall was first elected premier in 2007, manufacturing sales in Saskatchewan have swelled by 37 per cent — nearly 13 times the national

“I moved back to Saskatchewan from Ontario in 2014, in large part because I shared in Wall’s passion and optimism for the future of the province. By that time, Saskatchewan had well eclipsed one million people. Skilled graduates were no longer our chief export, and Calgary had finally lost its moniker as Saskatchewan’s most populous city.”

Prairie Manufacturer Magazine • Fall 2017

average. Manufacturing exports have spiked 48 per cent. Average weekly earnings for manufacturing employees are up 33 per cent — roughly double the rate of inflation. In the height of the boom, companies quite literally could not keep up to demand; and several adopted the employment policy ‘if you have a pulse and show up to work, we’ll hire you.’ Business was good. Did record commodity prices play a role? Of course. Is there room for improvement? Plenty. Saskatchewan’s share of manufacturing exports comparative to total manufacturing sales, for instance, hovers around 42 per cent — well below the marks of 53 per cent and 67 per cent set by Manitoba and Ontario, respectively. And of that number, threefifths are sent to a single market — the United States. We need to do better. Still, there is no disputing that Wall will leave the industry in a far better state than when he found it. Two of his most lasting impacts on the sector could very well be measures introduced in his final years as premier. The rollout of the Saskatchewan Commercial Innovation Incentive — a more liberal application of the ‘patent box’ model used in other parts of the world — is the first of its kind in Canada, providing a lower tax rate on income derived from new innovations brought to market. It is a program for which I have personally advocated for many years, and believe has the potential to

significantly accelerate research and development and enhance the global competitiveness of Saskatchewan-manufactured goods. The second major highlight is far less sexy, and much more controversial. In the summer of 2014, Wall announced the launch of Priority Saskatchewan — a government body mandated to modernize procurement practices, level the playing field for Saskatchewan suppliers, and ensure provincial agencies and Crown corporations are purchasing on the merits of best value, not lowest price. Opponents have suggested this approach smacks of protectionism; others fume these actions do not go far or fast enough. I err on the side of ‘if everyone is mad at you, you must be doing something right.’ Nurturing a deeper, more competitive supplier base — whether they end up landing substantially more domestic work or not — can only yield greater success outside our own borders. Wall is departing politics at a time when, on principle, it is difficult for him to leave. Few elected officials would do so, with as much humility or grace. But change is good, and I am confident the best is yet to come. That belief — a conviction in ourselves — is the legacy Brad Wall will leave behind.

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View from the C-Suite

Harnessing our innovation potential is not an either-or equation By Patrick Thera

Prairie Manufacturer Magazine â€˘ Fall 2017

ant to foster a high-tech community in the heart of the Prairies? Why not ask a Prairie company that has been successful in advanced technologies long before the rise of personal computing, the internet, and smartphones? SED Systems has been a pioneer in this field since the mid-1960s. Originally spun out of the University of Saskatchewan Department of Physics, SED has been involved in upper atmospheric studies, the development of space instruments, satellite imagery, search and rescue missions, mobile satellite communications, digital satellite radios, and deep space exploration, among its many other accomplishments. The success of SED has always been its ability to keep its customers happy and adapt to changing market conditions. For more than 50 years, SED has been solving tough engineering challenges, working side-by-side with the who’s who of the communications industry, and doing so all within the City of Saskatoon, and in the Province of Saskatchewan.

SED formed its manufacturing capability out of the need to reliably build the products it had designed. We quickly realized, however, that we could sell our excess capacity to do contract manufacturing for other companies in both the commercial and defence markets. This evolved to SED as it is today, with a staff pool of 300 professionals, including more than 130 highly qualified engineers and technical staff, alongside a sophisticated manufacturing department, which includes a state-of-the-art surface-mount electronics manufacturing line. In short, we turn our customers’ ideas into reality. Sometimes, that means manufacturing an end-product to meet their needs; other times, it materializes as a collaboration to bring their product concept to life. A major source of disruption for SED today is that we find ourselves thrown into the middle of a tech start-up bubble being aggressively cultivated by policymakers. This is not the first tech bubble SED has seen, and it certainly won’t be the last. A few years ago, oil, gas, and mining ruled the Continued on Page 8

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day, and you could expect very little government support for technology developments that were not geared toward these industries. Times change, though, and so do the capricious priorities of government. Saskatchewan was not the first Canadian region to jump on the most recent tech bandwagon, as many other jurisdictions across Canada have piled on to what they believe to be the big ‘out’ from the sinking commodities sector. I counted at least 10 other regions coast-to-coast, all claiming stake to the label of the next ‘Silicon Valley.’ This makes for a very attractive climate for tech start-ups. But, if past is prologue, we know the reality is maybe 10 per cent of these start-ups will actually make it to profitability. Until then, they subsist off the funding they receive from private venture and government subsidies. Don’t get me wrong: A start-up struggling toward profitability is a noble cause, and one that I support. SED is very proud to have played a small role in the success of several start-up ventures in recent years that have grown to prosperity. That said, the recent efforts of many lean more toward a pursuit of extremely high valuations, and a big sale or IPO. This pays early investors and principals handsomely,

yet leaves others (including taxpayers) holding a larger bag of debt. Eventually, the bubble bursts and we face another drought period of large layoffs and bankruptcies. How do these start-ups attract this kind of money? Key and foremost is the idea. Obviously, the idea holds merit or it would not attract much interest in the first place. Second, pitch it with a young entrepreneur in their mid-20s or 30s. Third, develop a ‘game-changing’ philosophy toward doing business, marketing, or the management of staff, that seems necessary to go along with bringing such an audacious idea to market. This is the new hook in the current bubble. The adoption of outlandish philosophies — whose effectiveness could never be proven, but that sound progressive — are attractive to both the venture capital investor (who only needs to hit a home run one out of every 10 times at the plate) and their target hiring group. Candy walls, band rooms, nap rooms, no fixed office plans, beer dispensers, inbound marketing, leapfrogging, and recruitment disguised as kitschy-sounding social events are but a few of the less creative concepts being bandied about. These are all great when your end-goal does not include

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being a profitable, sustainable company. After working more than three decades in the tech industry, I believe there is no substitute for running an efficient operation and for hard work. I also believe that amazing innovation, entrepreneurialism, and profitability can be obtained without a candy wall. The other fundamental hurdle to creating a tech hub is the availability of local technical talent. Saskatchewan has produced some of the very best technology expertise in the world. Even giants like Google recruit out of our post-secondary institutions. The problem is that there are not enough of these talented individuals to go around. The number of graduates from our university computer science programs is remarkably low — so low, in fact, the start-ups that are flooding into our province are fighting amongst themselves to attract the talent they need to fit their operations. So, now we are in a situation where we are rolling out the red carpet to create a start-up community without a resource pool capable of sustaining it. Most certainly, there are programs that could be adopted to attract more people into technical vocations as opposed to the trades. It’s still only a couple of years ago when policymakers were touting ‘the trades are the only

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Prairie Manufacturer Magazine • Fall 2017

way to go.’ Regardless, programs to increase local technical pools take time, probably more time than any of these start-ups have had to wait before. Instead, they look to a local source of highly trained, skilled resources — existing, longstanding tech companies. So, why don’t we jump on the startup bandwagon? As a part of the Calian Group of Companies, a publicly-traded entity, SED feels a great responsibility to return value to its shareholders. SED does this through two basic means: Our continuous consecutive profitable quarters allow us to return a dividend to our shareholders, and we have an agenda that focuses on sustainable growth. We make critical investments in core technology and products that will help us increase our competitiveness and our presence in the marketplace long-term. That’s not a very exciting raison d’être if you believe the boasts of the current wave of tech ventures. Nevertheless, this philosophy has kept us in business, providing successful, reliable careers in Saskatchewan since before the first man walked on the moon. Recently, our investments have allowed us to achieve double-digit growth in our products business. This is where we feel we can help spawn real, sustainable growth in our local high-tech community. I believe the true win for Prairie tech companies is through collaboration. SED has a breadth of capability, including the knowledge and equipment to help with product engineering, prototyping, functional and environmental testing, and full-up production. We seek to collaborate with businesses that have access to markets and ideas for products that we can help design, develop, or manufacture. Where the right business case exists, governments should help nurture these collaborations. The opportunities are endless, from product design to big data applications. With some joint investment, I believe that, working together, we can harness our true innovative potential, and create

“After working more than three decades in the tech industry, I believe there is no substitute for running an efficient operation and for hard work. I also believe that amazing innovation, entrepreneurialism, and profitability can be obtained without a candy wall.” the real win-win for tech in the province and beyond. It’s about raising our collective global presence, and building an industry that can withstand any bubble.

Patrick Thera is the president of SED Systems — a global trailblazer in the development and integration of complex satellite, communications, and aerospace technologies.

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Money & Markets

Growing our value in the value-added economy By Dr. Rick Green

here is a good chance that, before now, you haven’t heard of POS Bio-Sciences. Like many Prairie manufacturers, we are better known internationally than we are here in our own backyard. That being said, we shouldn’t be complete strangers. We have probably developed ingredients for the food you eat, and have created new opportunities for the crops that generate income for your friends or family. Take, for example, canola oil, which POS played a key role in introducing commercial processing methods for more

Prairie Manufacturer Magazine • Fall 2017

than three decades ago. The widespread adoption of this crop, innovated by Canadian seed breeders, has transformed the Western Canadian economy, the lives of farmers, and agricultural communities coast-to-coast. The technical work we do is highly complex. In the simplest terms, we take biological materials and, from them, produce specialized ingredients that can be produced at the commercial level — for use in food, nutraceuticals, pharmaceuticals, medical goods, cosmetics, and other industrial applications. Start-ups and multinationals

alike flock to Saskatoon to collaborate with our research scientists and scaleup their manufacturing efforts in our processing facilities. It would be fair to say we are at the tip of the spear in the global quest to grow value-added sectors of the economy. And there is reason for Canada — and the Canadian Prairies — to be leading that charge. When I look out onto the proverbial horizon, there are three macro trends stoking a sense of urgency. One, the rise of globalization has meant we are not as insulated to crops

grown elsewhere as we may once have been. If we want to lever influence on the value of our crops and how they’re competing in the global marketplace, it is important we retain some of the valueadded know-how near the source. The more we can do with a crop, the more it’s worth. Two, bulk transportation and fuel costs continue to track upward. Given our dependency on agriculture for our livelihoods, we are financially far better off shipping lower volumes of higher value product than we would be dropping our raw commodities into a railcar and sending them off to port. And, three, consumers themselves are changing. The advancement of the middle class in places like Brazil, India, and China is giving birth to a new understanding of and demand for enhanced nutrition. In the early 1990s, many Asian countries wanted only our whole crops. Today, they

want specific extracted fractions and ingredients. Closer to home, millennials are also revolutionizing how we eat. If you are of the baby boomer generation, you probably took health as a subject in school. Now, your kids are learning health, wellness, nutrition, and sustainability as a holistic system. That perspective has an upstream impact on the food we produce and how we produce it. These shifts have already had profound implications on our own business. Just this summer, POS announced its first spin-off company — Algarithm Ingredients Inc. — to manufacture DHA ingredients, such as powders and emulsions, out of algal oil (oil extracted from algae). DHA, or docosahexaenoic acid, is an omega-3 fatty acid that has been linked to improved cognitive function, heart health,

and eyesight. The main sources of DHA are from fish and microalgae (algae), and in the case of algae, the oil is extracted using chemical solvents, spurring the apprehension of many eco-conscious consumers. In response to these concerns, we were able to design an innovative water-based extraction technique to produce a vegetarian-class product, with better taste and diminished odour. Granted, alga is not exactly on the same plateau in Western Canada as wheat or peas or canola; but, it is a prime illustration of how we need to start looking for value in places it has been previously overlooked. POS has doubled-down on its strategy to become more globally connected, too. In the past year, we’ve acquired a facility in Illinois, established a joint venture in Sri Lanka, and have expanded our team of internationally-trained experts, who cumulatively speak 14 different languages. Continued on Page 12

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“The advancement of the middle class in places like Brazil, India, and China is giving birth to a new understanding of and demand for enhanced nutrition. In the early 1990s, many Asian countries wanted only our whole crops. Today, they want specific extracted fractions and ingredients.” These are resource-intensive, albeit necessary, investments for a company that does business in excess of 50 countries. The thing about change is it is both inevitable and continuous. If the Prairies are going to champion value-added processing over the next decade, we must be nimble and quick to seize on opportunity. Part of our success will stem from accelerating commercialization outcomes and embracing vertical integration. Saskatchewan, and — by extension — Western Canada, has long been a powerhouse in the development and adaptation of crops. In the 80s and 90s, we became exceptional at seed breeding for plant disease, climate, and efficiency

at the farm level, which led to higher yields and superior resiliency. This has laid the foundation for the engineering of higher protein and oil contents in our crops, as well as other preferred traits that are resulting in greater options for what processors can extract, modify, or purify from the plant. Not long ago, crop engineering was a function all its own. Food scientists, nutritionists, and processors are now working together to plan for the next crop varieties to develop. There’s even a medical food industry beginning to emerge in North America, rooted in this amalgamation. Our vision for where we need to go is not far-fetched. Others are sharing in

it, whether we see it or not. Earlier this year, French conglomerate, Roquette, announced plans to construct the world’s largest pea processing plant — a $400 million investment and significant boost to the local economy — in Portage la Prairie, Manitoba, building off a burgeoning demand for plant protein. And I can tell you other food giants are taking a very close look at what our region has to offer. Western Canada’s position in the market has not changed: We still produce what the planet needs, and, geographically, are ideally positioned to do so. Those needs may be different than 30, 20, or 10 years ago; yet, our core competency — innovation — remains our best value-adding asset. Let’s capitalize on it, together. Dr. Rick Green is the vice president of technology for POS Bio-Sciences, headquartered in Saskatoon, Saskatchewan.

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Lessons in Lean

Lean and green By Darryl Minty

here are as many characteristics to a lean organization as there are lean experts. Everyone has a unique definition, a personalized approach, and an underlying set of core values. In my near-30-year-career in manufacturing, however, I’ve found there are six attributes universal in businesses that embrace true lean thinking: They are laser-focused, aligned from the boardroom to the shop floor, relentless in their pursuits, fully engaged, teamoriented, and sustainable. The first five are not exactly news. In fact, they are the underpinnings to general business success altogether. But the definition of the last trait, sustainability, often elicits livelier debate. Indisputably, there is a long list of synergies between what it means to be

a ‘lean’ and ‘green’ manufacturer. Both strive to reduce waste. Both promote resource productivity. And both hinge on continual learning and a common understanding. The primary difference lies in the priority. Lean organizations are fixated first and foremost on delivering value for the customer. Green organizations, meanwhile, are dedicated to managing their environmental impacts. That’s why hundreds of manufacturers nationwide are now beginning to integrate the two concepts into single, unified ‘true north’: Lean and green. In real business terms, it fits with the premise of the ‘triple bottom line’ — people, profit, and planet. Some have advocated adding a fourth pillar — purpose — to create a more seamless organizational alignment, which further

lends to the argument that lean and green belong together after all. Think of it this way: Lean is your eyesight — the practical vision of where you need to go and how your organization will operate to get there. Green is the lens through which you are seeing, using traditional lean thinking to bring into focus wastes you may otherwise overlook. There are seven environmental wastes that touch virtually manufacturer: Energy, water, materials, garbage, transportation, emissions, and biodiversity. All of these consume significant resources, add cost, and detract from margins. This is doubly true in a changing regulatory climate that is attaching new premiums to how these wastes are managed. Just think of the federally-mandated carbon tax.

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Prairie Manufacturer Magazine • Fall 2017

Photo credit: Michael Pratt

Being a lean and green manufacturer, though, means not compartmentalizing environmental wastes from the basic lean wastes we’ve all come to understand. Reducing the number of product defects, for example, also reduces the materials consumption and mitigates the energy required to produce a replacement part. The elimination of excess inventory is no different. It cuts back on the power needed to store that inventory, and, in turn, generates positive ecological and financial benefits. Here at Canadian Manufacturers & Exporters (CME), we have developed a Lean & Green 101 workshop to help companies understand this correlation and begin to use a modified set of tools, from environmental value stream mapping techniques to energy flow charts, so that employees and managers alike can recognize opportunities for improvement and identify appropriate performance indicators. But don’t just take it from us. The perennial king of lean, Toyota, has long embraced this symbiotic relationship. Earlier this year, Toyota Motor Manufacturing Canada (TMMC) was even named one of Canada’s Greenest Employers. As part of its environmental management system, or EMS, TMMC embeds environmental engineering specialists across each of its departments to find efficiencies in its manufacturing operations that lead to a reduced environmental footprint. This system also

includes in-house and external audits, as well as an annual sustainability report to foster public commitment to measured progress. Today, across its three Ontario plants, TMMC uses returnable packaging for 99 per cent of its North Americansourced parts, and has been successful at recycling 96 per cent of its physical waste. Furthermore, it boasts a heat recovery steam generator that produces enough electricity to power the equivalent of 7,000 houses. So, why do they do it? Why does Toyota invest millions of dollars per year in bettering its environmental stewardship? The answer is in the nucleus of the lean and green philosophy: It’s equal parts good business practice and the right thing to do. No organization gets there overnight. As every lean purist will attest, it is about the journey. And to help guide you along that journey, there are four benchmarks by which to measure your headway. The first is where the overwhelming majority of Prairie manufacturers find themselves. In this stage, companies seldom monitor their environmental performance, and have limited understanding of how lean thinking and green practices can co-exist. The second stage is characterized by a basic knowledge and implementation of lean tools, coupled with an awareness that the elimination of environmental wastes may lead to enhanced customer and organizational value. This is where many

enterprises turn to groups like CME for training. The third stage is perhaps the most difficult to reach. Here, companies fully embrace the notion that lean and green practices do add significant customer and organizational value. While lean and green practices are commonplace, they are generally viewed and executed separately, with KPIs managed primarily at the operational plane. And, the final level is the complete symbiosis between lean and green. These high-performing manufacturers are aware of the direct and indirect impacts stemming from their actions, and have well-established mechanisms in place to continuously improve their performance. KPIs are monitored alongside organizational objectives. Employees are conscious of their role in the greater environment, and are proactively engaged in improving processes. The real question is: Why do lean and green remain separate in your organization? Is there a good reason? Or is it because you are avoiding the clear signs the marketplace is giving you? Lean and green is about each of the 4Ps. Ignore one, and you ignore them all. It’s your job to bring them together. Darryl Minty is certified as a Lean Master Black Belt, and serves as interim vice president of Saskatchewan for Canadian Manufacturers & Exporters.

LEAN & GREEN

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Building scientific thinking habits through practice By Mike Rother & Jeff Liker

ean training seemed fairly straightforward in the 1990s, as it focused on tools and general concepts. But those of us who directly studied Toyota realized that its visible tools and practices are built on an invisible, scientific way of thinking. You can say that scientific thinking is a comparison between what we predict will happen next, seeing what actually happens, and adjusting based on what we learn from the difference. In other words: You iterate your way forward — always adding to knowledge as you take steps — instead of trying to decide your way forward. If lean involves a change of thinking, then there’s an obstacle that can be named with one word: Habit. Just as there are habits for writing with our dominant hand or tying shoelaces a certain way, there are habits in our ways of thinking. Unfortunately, the default way we think about problems generally involves jumping to conclusions, not scientific thinking, because the brain doesn’t like uncertainty. The unconscious part of our brain takes bits of surface information, quickly extrapolates to fill in blanks, and gives us a false sense that we know what’s going on. Fortunately, we have the power to change our habits.

short daily practice sessions in the real workplace, with corrective feedback, are far superior to lecture instruction. There are many practice guides for learning how to play music, cook, paint, play a sport, play chess, and countless other pursuits, but surprisingly few for the important skill of scientific thinking. First, we would need a practical model of scientific thinking, in components or steps that can be taught one by one. Second, we would need something specific for beginner learners to practice. Finally, we would need a coach who can provide corrective feedback to the learner. This is what the Improvement Kata and Coaching Kata are designed to do. 1. It starts with a model, or pattern, of practical scientific thinking — in this case, with four steps. 2. There are small practice routines for each step, called Starter Kata. 3. There is also a Coaching Kata, to help the coach practice sensing how the learner is thinking and giving effective feedback, in daily interactions called coaching cycles. The goal is to master each Starter Kata’s fundamental pattern so you can then build on and adapt it under a variety of circumstances as a reflex, with little

thought or hesitation. Starter Kata are like a beginner musician practicing a musical scale. You don’t stick with playing a musical scale forever; you build on what you learned from practicing it. The next learner who comes along then begins with the same Starter Kata. Practicing Kata has been utilized for centuries as a way of preserving effective skillsets, transmitting them from person to person, and building effective teamwork. It’s how Toyota does it. Starter Kata are especially useful when you want to create a shared way of thinking and acting, a deliberate culture, among a group of people, because everyone begins with the same fundamentals. Ultimately, though, Kata are not the important thing. What is important are the skills and mindset that practicing them imparts, which you and your organization can use. Mike Rother and Jeff Liker are two of the world’s foremost authorities on lean manufacturing. Rother is the award-winning author of Toyota Kata, The Toyota Kata Practice Guide, Toyota Kata Culture, and Learning to See. He will be speaking at the 2018 Canadian Lean Conference, June 4-7 in Winnipeg. Visit embracingexcellence.ca for more information.

Deliberate practice: A countermeasure to habits you want to change Changing mindset involves forging new neural pathways, by practicing a new way, which over time replace the old pathways. Want to lose weight? Practice new patterns of eating and exercise. This raises the bar on educating ourselves to think more scientifically, because a workshop or course alone doesn’t change thinking habits. We have a pretty good idea of what does work —

Illustration from Toyota Kata Culture, N.Y.: McGraw Hill, 2017.

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The Principal Resource

Navigating the disruptive winds and disturbing calm of internal conflict By James Mitchell

Prairie Manufacturer Magazine â€˘ Fall 2017

or decades, operational specialists and heads of the world’s most successful companies have realized the value of involving people at all levels of an organization — in assessing needs, developing plans, making decisions, and successfully executing and evaluating the development of a service or product. Would it surprise you to then learn that, despite this greater awareness and consensus, only about one in five employees today feels valued? Why, if we as business leaders truly believe that our people are our most valuable resource, do so few of them feel that they

are? From experience, I would say a certain ‘wind’ — or lack of wind — is the problem. I will spare you the grandeur of the analogy; however, if businesses are ships and we are the owners or officers of our ships, we understand that too much wind, not being prepared for changes in wind, or having too little wind can often lead to problems. In corporations, wind may be produced by shifting markets, supply issues, technological development, board or management power struggles, interdepartmental disconnects, Continued on Page 20

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team dysfunction, and so on. Wind, or an unhealthy lack thereof, may be influenced or even created by our own internal responses. I’m regularly asked how a lack of wind can be a problem in business. A period of calm can be a good thing, absolutely. A brief tranquility after a storm offers a helpful period of reflection and can build confidence when systems and relationships work as they should. But, if a prolonged lack of disruption is the result of fear, apathy, or some other demotivating factor, a business may avoid important decisions, actions, and the taking of healthy risks. That may manifest itself as ineffective governance and management, increased absenteeism, decreased engagement, problems with retention and recruitment, dampened production, as well as spikes in errors, complaints, lawsuits, and other losses. We need enough wind to keep us challenged, alert, and moving forward. In my line of work, we tend to call this wind by another name — conflict. While some might see the job of

Prairie Manufacturer Magazine • Fall 2017

managing conflict and disputes as the domain of negotiators, lawyers, mediators, arbitrators, or HR specialists, paying attention to conflict is everyone’s job, from the shop floor to the corner office — just as it is up to all officers and crew aboard a ship to identify, prepare for, and manage changing wind conditions. So, with the effects of conflict or not enough conflict in our companies all-too-obvious, what should we do? Ignore them? Suppress them? Fire troublemakers or slackers? Offer better incentives? Hire a consultant to do an analysis, mediate a conflict, or facilitate a team-building exercise? Although just about any of these responses can be appropriate under the right conditions, most of them would be ineffective or incomplete on their own. One of the most common mistakes is relying solely upon continually mounting benefits and perks in the hopes they will keep employees happy and productive. History shows that, beyond certain salary and benefit levels, simply increasing ‘extras’

can be counterproductive and even demotivating. Likewise, insulating staff from corporate realities alienates employees and hampers efforts in responding to changing conditions. Real engagement is about paying attention to what is happening to and around others, at all levels of the organization, and including them in the planning, decision-making, and other processes. We have all heard examples of companies who are very successful at adapting work schedules, environments, and benefit packages to the needs of employees. At the same time, we also know of companies where top talents line up to serve, sometimes for longer hours and lower wages, because they believe in the work and feel their unique contributions are needed and valued. Another frequent mistake is misunderstanding the role of consultants, mediators, and other specialists (and I should know — I am one). Let me be clear: These professionals can play an important function in managing conflict and ensuring healthy winds are blowing.

But they must be accompanied by an intentionally renewed interest in the work and greater purpose behind it, along with a genuine regard for the people involved. This may not seem like profound insight, yet these qualities are vital, and so many of us fail to sustain them over time. As leaders, if we are not truly interested and motivated by our work, how can we expect others to be? And, if we do not truly respect and consider those serving with us, how do we expect them to believe their contributions are worthwhile? These are not practices you can fake, either. Have you ever been surprised when people close to you have identified one of your thoughts, when you’ve never said it aloud? It happens all the time. People sense what we think — through our decisions, our actions, our body language, and our tone. Therefore, if my words and conscious actions toward you seem good, but my regard for you is not genuine, should I be surprised when you start fighting me at the boardroom

“While some might see the job of managing conflict and disputes as the work of negotiators, lawyers, mediators, arbitrators, or HR specialists, paying attention to conflict is everyone’s job, from the shop floor to the corner office — just as it is up to all officers and crew aboard a ship to identify, prepare for, and manage changing wind conditions.” table, disengaging from work, making more mistakes, contributing to a less-than-healthy workplace, making demands, or taking legal action? In the same fashion, isn’t it odd how, if I am gruff or clumsy in our work relationship, but you know I sincerely respect you and your conviction in fulfilling the vision, values, and mission, that you will likely overlook my lesser qualities, feel appreciated, and dig deeper into the challenges we face? There is no shortcut for achieving this level of engagement. Being prepared and responding effectively means being okay with conflict or differences — even valuing them. Often, when things are going well, we do appreciate the different skills, personalities, opinions, and approaches

others bring to our organizations. When things get tough, though — when wind becomes violent or a needed breeze dies completely — we often panic. We draw tighter on the reins of power. The result is more fear, more tension and conflict (or not enough), less regard, and less effectiveness. Don’t forget to give your people the opportunity to help respond to what is coming. If the ship sinks, whose fault it is doesn’t matter. James Mitchell is the principal of Saskatchewan-based Conversations Consulting. He has a master’s degree specializing in conflict analysis and management, is a certified management consultant, and is a chartered mediator.

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The future of food production

(and the equipment revolution behind it) By Trent Meyer

e have all heard the shocking numbers that are being thrown around by demographers and those selling the ‘future of agriculture’ — the most common being the world needs to feed up to nine billion people by 2050 (give or take a billion or a decade). For many in our industry, this goes well beyond the proverbial 30,000-foot view, into an area that seems too far away to concern ourselves with. We look at our operations and note that we just make (insert your product here), so we will continue to do so and hopefully keep or expand our share of the market. The fact is we have always been in the game of feeding the world, so there is no reason we should hide from the lofty expectations of 30 years from now. Most of us have been around for 15-30 years already, many longer, and have watched the demand for commodities balloon right alongside production capacity. We’ve been up to the task thus far — the modern challenge, however, is simply being framed in a much different way. As an agricultural implement manufacturer, the area most concerning for our industry is how we interact with the coming data revolution, if our products can realize a value benefit from the addition of data to aide in management and decision-making. While I believe most, if not all, of the ag equipment and products we manufacture

in Western Canada could benefit from the use of data, I am not convinced the sector as a whole has committed sufficient thought or resources to where this might lead. At SeedMaster, like others in the seeding space, we have been immersed in data for years. From the initial tractor guidance systems shepherding our equipment around the field to complex variable rate mapping and the overlay of yield maps from harvest, the potential in-and-out data integrations for our products are, and have been for some time, immense. This has helped prepare us to embrace the latest data wave more organically. With data piling up, the potential for semi- and fully-autonomous operation of equipment has been increasing at an exponential rate. Enter Dot Technology Corp. and our Dot Autonomous Power Platform™, or simply DOT. The culmination of years of concept development and innovation, DOT brings together the advancements made in driverless technology, mostly from the automobile industry, with the farm data that has been building for years to control a unit that makes any Dot Ready™ Implement autonomous. The advent of autonomous agriculture can be viewed through more than one lens. Some see it as a job-killing machine that will eventually render farmers and

“The question is whether we will allow farming processes to be led by the major players in the industry, who will continue to do their best to force farmers down a rigid path of technology adoption, potentially locking out the shortline manufacturers (the heartbeat of the Prairie manufacturing industry). Instead, we want to lead the charge from our side — putting the farmers’ interests first.”

Prairie Manufacturer Magazine • Fall 2017

farm help redundant. On the other end of the spectrum, it can be seen as the mechanism by which to allow farmers and their hired help to focus on higher value functions while freeing them from the tractor cab. Most viewpoints are somewhere in between, where the shortto mid-term reality likely sits. Mainstream autonomous agriculture is coming. That is undeniable. Many of the technologies that allow DOT to function without human intervention, in a much safer and more reliable way, stem from current farming practices already built into modern agricultural equipment. We have merely removed the cab and allowed them to do their jobs more effectively and (hopefully) more profitably. The question is whether we will allow farming processes to be led by the major players in the industry, who will continue to do their best to force farmers down a rigid path of technology adoption, potentially locking out the shortline manufacturers (the heartbeat of the Prairie manufacturing industry). Instead, we want to lead the charge from our side — putting the farmers’ interests first. The intention of DOT and the Dot Ready™ Implement program is to empower other implement manufacturers to harness their innovative instincts and imagine what their products might look like if powered by autonomous technology. I suppose we are attempting to push others into thinking about what the future might look like for their products when they harness data and connectivity to the benefit of the farmer. There will be some who feel there is nothing to see yet, that there is no reason to jump on-board. We all understand this choice. But to suggest

this is a future too far out to concern ourselves with is selling short the incredible momentum permeating through the industry. All segments of our economy and facets of our lives that consist of moving things are ripe for disruption in the coming years. Some sooner than others. The building blocks, though, are in place today. We can concern ourselves with liability, but thatâ€™s an excuse. Insurers are well down the road to understanding how

autonomy will lower their risk, not raise it. We can look to job loss; however, the industries in question generally have a very difficult time finding qualified people today as is. The impediments are most often human, and fear-based as opposed to technological. Every manufacturer in business right now started as an innovative idea. Without that innovation, incremental or radical, these employers would not exist. At times, there are external pressures

that force our hand; and I believe this time is upon us now. Substantive change creates opportunity, and that time of change is here. Some of us have already started down that path. But, for the sake of the vibrant manufacturing community we are part of, we hope more will join soon. Trent Meyer is the executive vice president of SeedMaster and Dot Technology Corp., both located in Emerald Park, Saskatchewan.

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SMALL TOWNS

BIG DREAMS

Meet three manufacturers overcoming the odds to grow their businesses, and communities, in rural Saskatchewan By Colleen Mackenzie

Prairie Manufacturer Magazine â€˘ Fall 2017

ig machinery, big industry, big city, right? Think again. In Saskatchewan, nearly one-third of the manufacturing base is situated outside the two largest centres of Saskatoon and Regina. Some of these rural enterprises employ staff complements half, equivalent to, or even double the size of the communities they operate in. And many are punching well above their weight class on the world stage. Saskatchewan Business Hall of Fame inductee, Doepker Industries, traces its roots back to the northern United States, where the Doepker brothers emigrated from before settling in the small agricultural community of Annaheim, Saskatchewan, 125 kilometres east of Saskatoon. Following the completion of World War II, the brothers studied welding and mechanics, and decided to open a repair shop to serve local farmers. They quickly built a reputation as entrepreneurs who did the right thing and helped their neighbours in need. Growth was inevitable. It’s a familiar storyline on the Prairies. Today, Doepker Industries is a leader in the production of trailers for the agricultural, forestry, construction, and industrial sectors, providing 150 jobs out of its head office in Annaheim, current population: 210. But the company knows small-town life isn’t for everyone. So, they’ve adapted. To meet the demands of a growing business, and to accommodate a variety of employee lifestyle preferences, Doepker Industries has established facilitates in the cities of Moose Jaw and Saskatoon. They’ve invested heavily in communications infrastructure as well, from virtual private networks to video conferencing capability, that enables support staff to work remotely. According to President & CEO Evan Doepker, these are the types of unique challenges that rural manufacturers must surmount. “The largest disadvantage for us is time. Overnight delivery isn’t really an option when shipping something from suppliers in Eastern Canada or the United States,” he explains. “That’s why we were driven to focus on inventory management and planning systems, which, in turn, has developed into a competitive advantage. We’ve been able to overcome the timing issue and respond to a dynamic demand environment.” Dynamic could also be used to describe the relationship between the company and the community. Given the relatively remote setting, the lines between work life and family life are not always distinct. Children of employees play on the same sports teams, go to school together, and attend each other’s birthday parties, while the employees themselves are often in the same community clubs, church groups, and volunteer associations. Doepker believes these close-quarter connections promote a team mentality and a win-win value proposition. “Take the volunteer fire department. It has a large number of people that work at the company, and their familiarity with what we do would help immensely in an emergency,” he says. “Company resources are used to support community functions — photocopiers, office supplies, meeting rooms, vehicles, snow clearing equipment — and community efforts go to help the company.” The evolution of the business has had a profound impact on the composition of the village, too. Continued on Page 26

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“Low overhead, low taxes all lead to our prices being very competitive with both domestic and offshore companies. Close proximity to our customers means we can deliver quickly, and our commitment to lean methodology and best practices result in top quality for our customers.”

Despite aggressive investments in advertising and recruitment over the years, labour mobility in Saskatchewan remains a significant economic hurdle. The province has not been immune to the continental trend in urbanization; and that has hampered the ability of rural manufacturers to fill every type of position. One of the more creative efforts to subvert the struggle in recent memory came courtesy of AGI Envirotank in the west-central Saskatchewan town of Biggar. In 2014, founder Dave Burton ran a job posting with only two requirements: Applicants had to live in Biggar or the surrounding community, and they needed to qualify to play for the local senior hockey team. The campaign yielded about 10 new hires and was the subject of a television profile aired on Hockey Night in Canada. For Doepker, immigration — not hockey — has been the saving grace. It began as far back as the 1970s, when Annaheim saw an influx of families from Vietnam. In the early 2000s, South Africa seemed to be the spring of talent. And, lately, people from the Philippines, Tunisia, and Mauritius have been making their way to Saskatchewan in droves.

Prairie Manufacturer Magazine • Fall 2017

“Various community and church groups organize to help with the integration process of the entire family — getting housing ready, necessities like winter clothing and cookware, and food hampers to get started,” says Doepker. “Not all of these people have remained part of the Doepker team; however, many have stayed in the community, and we still see that as a win.” Two-and-a-half hours away, located halfway between Saskatoon and Regina on the shores of Lake Diefenbaker, sits another unlikely manufacturing town, Elbow. In the 1990s, the community of 300-plus strove to diversify from its reliance on agriculture and seasonal tourism, and successfully wooed a small technology firm away from Saskatoon. A facility was built and business was good. Several years later, the company was at a crossroads, and that is when the community stepped in once again. Twenty-four local farmers, company employees, and ordinary citizens pooled their money to purchase the company. The new proprietors wanted to reflect the community ownership spirit, so they renamed the company Commutron — a combination of community and electronics.

“This is a place where people can fulfill their dreams, professionally and personally. People wanting the simple life have a home here. The cost for a modest house in the city can build the house of your dreams in our community. And when you are an international company like Honey Bee, active in 29 countries, there are opportunities to go anywhere in the world.”

More than two decades later, Commutron Industries continues to manufacture custom printed circuit boards and electronic sub-assemblies for the energy, transportation, agriculture, and communication sectors. Half of the original 24 investors are still involved, and seven sit on the board of directors. At any given time, there are between 17-26 staff members. Not all of them, though, are native to the area, including Robert Leonardo, who moved from Ontario in 2015 to assume the reigns as general manager. Elbow is definitely no Toronto — yet Leonardo maintains that isn’t necessarily a detriment in an industry more synonymous with Shanghai than Saskatchewan. “Low overhead, low taxes all lead to our prices being very competitive with both domestic and offshore companies,” he says. “Close proximity to our customers means we can deliver quickly, and our commitment to lean methodology and best practices result in top quality for our customers.” Despite being one of the largest employers around, Leonardo has been surprised by how many locals are unaware of what Commutron does in their own backyard. An open house, held in celebration of the manufacturer’s 20th anniversary has helped change that, but it’s a constant reminder of how the community and company must work hand-in-hand. “We’d like to get involved with the school system, maybe by providing

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a space for training or contributing to the curriculum in some way,” says Leonardo. “We don’t forget our roots. Whether it’s raising funds for a local event, providing input to the school division, or face-painting kids for Canada 150 celebrations, it’s important to give back for the support the community has shown us.” It’s the same ‘good neighbour’ mentality that inspires Jamie Pegg every day. When Pegg, the general manager of Honey Bee Manufacturing, drives down the grid roads in the southwest corner of the province, he can’t help but smile at the company’s iconic yellow and black swathers and combine headers at work in the fields. “To see our neighbours buying and using our products gives us a great sense of pride,” he exclaims. “It shows how much our community supports the business.” In 1979, brothers Greg and Glenn Honey needed a new tractor for their expanded farming operation. So, what’s

Prairie Manufacturer Magazine • Fall 2017

an entrepreneurial Prairie farmer to do? Build one, of course. And a rodweeder. Then a swather. Neighbours nearby liked what they saw, and, soon, the demand for their equipment led to the Honeys setting up production in their farmyard quonset. Within a decade, demand outgrew capacity. The family picked up stakes and moved production 30 kilometres down the road to the Village of Frontier, taking over a facility previously occupied by Friggstad and Flexicoil. Since then, the site has undergone countless renovations and additions, expanding to 100,000 square feet and dominating the country landscape. “The more we can do in-house the better,” says Pegg. “Our header reels used to be brought in by two different suppliers from the United States. The freight costs for these items were extremely high. We needed solutions and the answer was vertical integration.” Honey Bee’s research and development team got to work. The

result was a world-class reel cut, drilled, welded, blasted, painted, and assembled right in Frontier — a better product and greater level of valueadded work performed internally. The key to making it all happen, as with any business, adds Pegg, is good people. Virtually the entire Honey Bee workforce is from within 70 kilometres of the plant, and several employees have been with the company north of 30 years. It’s like a neighbourhood all its own. “We don’t desire to move anywhere else. We are committed to this place and these people,” avows Pegg. “This is a place where people can fulfill their dreams, professionally and personally. People wanting the simple life have a home here. The cost for a modest house in the city can build the house of your dreams in our community. “And when you are an international company like Honey Bee, active in 29 countries, there are opportunities to go anywhere in the world.” Big machinery, big industry, big dreams. Prairie spirit.

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The Saskatchewan

spirit

Micro-distilleries are becoming big business in Saskatchewan â€” and the world is taking notice By Joanne Paulson

Prairie Manufacturer Magazine â€˘ Fall 2017

rink less. Therefore, drink better. And, while you’re being discerning, drink local. That’s the new mantra of the modern spirits connoisseur — often a millennial, sometimes a locavore, and invariably a lover of finely-crafted consumables. The local food-and-drink movement lit the gas that has fueled the explosive growth of micro-distilleries across North America over the past decade. Craft breweries and wineries were at the head of this trend; but, today, small-volume, boutique distilleries are sprouting up in every corner of our expansive national landscape. Saskatchewan — population 1.16 million — has more than its fair share, despite the industry still emerging out of relative infancy. The first two micro-distilleries were gleams in their owners’ eyes as recently as 2010. That number has since blossomed to the double-digits. Customers, meanwhile, are lapping up the whisky, gin, vodka, rum, and liqueurs pouring from the barrels and stills more today than ever before. It all began, though, with a trickle. At Last Mountain Distillery, located a short drive north of Regina in the picturesque hillside community of Lumsden, owners Meredith and Colin Schmidt were unsure if they could make the 5,000 litres of product targeted in their first year. It is not a concern the couple shares anymore. “We doubled in size each of the first five years,” says Meredith. “We’re in our sixth year of business. We didn’t double in size this year, but we’re still growing. Actually, we’re trying not to double in size. You can only do that for so long. We’re family-oriented, too, which is partly why we started this.” Two-and-a-half hours away, in Saskatoon, managing growth has also been a central theme at Lucky Bastard (LB) Distillers. The company began in 2012, but, by 2015, had moved its operations to a new, 15,000-square-foot facility, which expanded capacity tenfold and allowed for the manufacture of a larger, more dynamic product line. LB Distillers now offers around 20 different SKUs, plus an additional 23 varieties of whiskies — the first of which was released this year. In fact, demand was so strong for the initial four-year-old batch, customers had to enter a ‘lottery’ for a chance to buy a bottle. “Our list is significantly longer than our ability to produce it, which is a great thing for a company,” beams President Cary Bowman. “We try to make some things Continued on Page 32

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seasonal, but they become so popular, we need to rotate them into regular production.” Even the new kids on the block are experiencing nearunrealistic success. John Coté and Barb Stefanyshyn-Coté’s vision for Black Fox Farm and Distillery was to blend farming, tourism, and proprietary ‘hard drink’ in an agricultural setting — yet accessible from the urban bustle. They began by growing flowers and grains seven years ago, and launched their first line of distilled products in 2015. The concept was an instant hit. One short season later, in 2016, they were awarded three medals at the International Wine and Spirits Awards in London, England: A silver medal in the liqueur category for their honey ginger liqueur; another silver in the gin and tonic category; and a bronze for contemporary-style gin. And this year, they followed that up by taking home the honour of Best Cask Gin at the 2017 World Gin Awards, for their unmistakable, barrel-aged, vapour-infused gin.

“Our list is significantly longer than our ability to produce it, which is a great thing for a company. We try to make some things seasonal, but they become so popular, we need to rotate them into regular production.”

Prairie Manufacturer Magazine • Fall 2017

Family roots In true Saskatchewan style, most distilleries are at least partly family-run. Meredith Schmidt had just married her husband, Colin, in 2010, and was enjoying some welcomed rest and relaxation at nearby Last Mountain Lake. An American expat, she had seen the early interest around micro-distilleries bubbling in the U.S., and was inspired by a connection who was working in Hawaii, creating spirits from pineapple. The newlyweds’ imagination was sparked. They called the Saskatchewan Liquor and Gaming Authority (SLGA) and asked what was required to start a micro-distillery. The answer? “Send us a business plan and we’ll meet.” Three days later, they finished penning a business plan, and were eventually green-lighted by regulators. They spent the next month trying to find a house that would accommodate the necessary equipment with a good water supply, and found it in Lumsden, a quaint town of less than 2,000 people. “The following spring, we had to get water and gas out to the garage, and then we opened in September on a very, very micro scale — literally a 500-square-foot garage,” recalls Meredith. “Within a year, we opened up and, by the following summer, we built a single car garage next to the double just to house our bottles.”

That didn’t last long. The business expanded at a break-neck pace, prompting the Schmidts — who have two children — to build a dedicated 5,000-square-foot facility, adding another 3,600-square-feet only recently to accommodate roughly 20 employees. Like any other manufacturing operation, the Schmidts believe their success is grounded in three fundamental pillars — a good business climate, a receptive market, and innovative products. According to Meredith, one of the primary advantages of being a micro-distillery in Saskatchewan is the regulatory framework. Producers can sell directly and distribute both through private retailers as well as SLGA-operated outlets, thanks to sweeping new reforms. Although, in the end, it’s all about the customer. “We consider ourselves incredibly fortunate to be doing what we’re doing here in Saskatchewan,” she says. “Saskatchewan people have given us the success we have. They’re so eager to embrace a local product, and they like a good drink, so it makes for a good combination.” The company is also stretching into Alberta and B.C., but the sourcing of inputs stays, largely, in Saskatchewan. Last Mountain Distillery procures its wheat from a farm near the Village of Earl Grey, while the dill and cucumbers for their popular Dill Pickle Vodka come from nearby Lincoln Gardens.

“We consider ourselves incredibly fortunate to be doing what we’re doing here in Saskatchewan. Saskatchewan people have given us the success we have. They’re so eager to embrace a local product, and they like a good drink, so it makes for a good combination.”

The only time the pair diverges from their ‘Saskatchewan first’ purchasing strategy is when certain ingredients simply cannot be found in the province, or in the quantity they need — for instance, the apple juice or cinnamon that goes into their Apple Pie Moonshine. “Saskatchewan people love Saskatchewan. It gives me such as sense of pride to be part of it, even a little part of it. It’s about the people here — they’re amazing. They’re incredible to be so enthusiastic and supportive of Saskatchewan products.”

Locally made, globally inspired Similar to the Schmidts, the seeds of inspiration for Cary Bowman were planted beyond Canada’s borders. In 2010, while on a trip to Europe, he read an in-flight magazine profiling the resurgence of micro-distilleries in the U.S. Continued on Page 34 www.prairiemanufacturer.ca

“The consumer does not want artificial stuff. They want to support local farmers. We found a tremendous opportunity in an industry that hadn’t really begun here. Now, there are about 100 micro-distilleries in Canada. In the U.S., there are close to 1,500. It’s gaining and gaining fast.”

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Prairie Manufacturer Magazine • Fall 2017

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“I was intrigued,” he recounts. “Here I am off to Europe and they’re everywhere, in the tens of thousands.” (He also noted that micro-distilleries are not an entirely new phenomenon. “Prohibition wiped them out in North America, but Europe never went through that.”) Unlike the U.S., larger commercial brands don’t have a powerful foothold in the European marketplace, where most alcoholic beverages are locally or regionally made. So, Bowman decided to tour those facilities and meet the families running them. He was hooked. “I came back to Canada and there was nothing going on,” he says. “There were a handful of distilleries spread across the country. I started doing some research and talked to the SLGA. They didn’t even have a policy to deal with us.” Bowman, an investment banker, wanted to be on the leading edge. Idea in-hand, he turned to friends Lacey Crocker and Michael Goldney. Goldney was a practicing physician coming off a $14.6 million lottery win approximately a decade prior (the impetus for the Lucky Bastard name) — an experience he “highly recommends” to those he meets. Both needn’t think twice. They were in. Goldney even took a step back from his Saskatoon medical practice and joined LB Distillers full-time beside Bowman. “We’ve found people have really embraced it,” says Bowman. “The consumer does not want artificial stuff. They want to support local farmers. We found a tremendous opportunity in an industry that hadn’t really begun here. “Now, there are about 100 microdistilleries in Canada. In the U.S., there are close to 1,500. It’s gaining and gaining fast.”

Success did not come, however, without significant changes to the business plan. The original concept was to be a single malt whisky producer. The drawback is that whiskies must be aged, differing revenue along with it. Scotch whisky must be matured in oak barrels for at least three years. Instead, vodka makes up the overwhelming share of the distillery’s worldwide sales. Other specialty products have made inroads as well, including rye, Caribbean-style amber rum, and European-style single-fruit berry liqueurs — not all of them sweet. “Some are tart. No water, no preservatives. We use a pound-and-ahalf to three pounds of fruit to produce one little bottle. And all our fruit is from right here in Saskatchewan. We do Saskatoon berry, haskap, crème de cassis, a dwarf sour cherry developed by the University of Saskatchewan, and a sea buckthorn and wild honey liqueur.” LB, which was ranked number four on USA Today’s list of top distilleries in Canada, now manufacturers between 125,000 and 150,000 litres of product per year. Most of those beverages remain on the Prairies, and are stocked by 300 bars and restaurants in Saskatchewan alone. “The economic spin-off of what we micro-distilleries do is a lot bigger than we are,” exclaims Bowman. “Most of our orchards weren’t commercial orchards before we started buying from them. Some people have quit their jobs and are in full-time fruit growing because of us. That’s rewarding.” Sure, rewarding is one thing. But Bowman sums up the entire experience in three words, echoing a sentiment shared by Meredith Schmidt: “It’s downright fun.”

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“The economic spin-off of what we micro-distilleries do is a lot bigger than we are. Most of our orchards weren’t commercial orchards before we started buying from them. Some people have quit their jobs and are in full-time fruit growing because of us. That’s rewarding.”

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Keep calm and carry on: The art of negotiating NAFTA chaos By Jayson Myers

teve Verheul is an awesome poker player. You can’t tell what he’s thinking. You never know what cards he holds. But, you can bet he will play them well. Better yet, he knows when to walk away. And, he knows how to win. That’s good. Steve was Canada’s chief negotiator for our ground-breaking free trade agreement with the European Union. Now he’s Canada’s lead for renegotiating NAFTA. It’s a tough job. I can tell you, though, that poker-faced Steve is more than up to the task. It’s much more difficult to say what we should expect from the NAFTA negotiations themselves, other than that day one, August 16, will go down in the annals of trade negotiations as a media circus. Subsequent negotiating rounds better get into substantive issues fast. Both Mexico and the United States are under pressure to conclude an agreement by early January — that is when Mexico’s presidential election campaign begins in earnest, and if President Trump waits until that election is over in June, he will need to renew his own trade negotiating authority with Congress, which will be highly difficult as congressional election campaigning kicks off next summer.

Prairie Manufacturer Magazine • Fall 2017

The negotiating objectives for both Canada and Mexico are fairly simple to understand: Do no harm and seek to expand market access for goods and especially for services, like digital commerce, that were not covered by NAFTA. If it were only that easy to understand what the U.S. really wants to achieve. Power struggles in the White House aside, the 16 pages of negotiating priorities published by the U.S. Trade Representative (USTR), the office in charge of NAFTA negotiations, don’t tell us very much apart from the fact that the Trump administration has no intention of negotiating all of its stated objectives in the space of five months. More than half of its objectives are lifted from the USTR’s annual laundry list of trade barriers with its NAFTA partners. (Canada has a long list of its own when it comes to problems that Canadian companies experience doing business in the United States and Mexico.) That said, several objectives listed by the USTR should be achievable if an overall agreement is in sight. They are based on measures already agreed among the NAFTA partners in TransPacific Partnership negotiations, and

they may offer real benefits for Canadian businesses — regulatory cooperation, improved regulatory management practices, more effective enforcement of trade rules, and improvements in border efficiency, for example. Canada should push hard to make real progress in these areas because the ambition of the USTR falls way short of what U.S., Canadian, and Mexican officials have actually been able to achieve. Then there are the U.S. objectives that give rise to concern: The underlying

assumption that trade deficits are a result of unfair trade; elimination of the impartial procedures for resolving disputes in cases among NAFTA partners where unfair trading practices are alleged to have occurred (a ‘red-line’ issue for Canada for which it fought so hard in the Canada-U.S. FTA negotiations); rules of origin that may require higher U.S. content; inclusion of stricter labour provisions (which, ironically, the U.S. itself is unlikely to adopt); intellectual property rights; more open access to government procurement (a non-starter as long as Buy American restrictions remain in place); and, of course, a range of outstanding bilateral trade issues including, where Canada is concerned, supply management, softwood lumber,

and export financing. Still, there is room to negotiate. The U.S. wants a model agreement for other countries and to clamp down on unfair trading practices, so a deal that would coordinate actions against dumping and subsidized imports from other states outside NAFTA might just overcome U.S. distaste for NAFTA’s own dispute settlement provisions. Likewise, closer monitoring of North American content, while likely more expensive for business, might avoid narrower rules of origin. There is even some room for manoeuvre on the issue of supply management, but don’t expect the Canadian government to open access very much. That would imperil the entire system. On red-line issues like that, Canada is prepared to walk away from the negotiations if the U.S. proves to be intransigent. But, the US needs a deal, too. Canada’s strongest allies are the U.S. customers and suppliers of Canadian businesses, the Continued on Page 38

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“The real question for the negotiators will be what can be agreed upon over the next five months that will let President Trump claim that NAFTA has turned from being the worst to the best agreement ever. It may not take that much.”

states, and the local governments, that depend on competitive supply chains extending across North America. The U.S. is hardly in a strong position to tear up NAFTA. The real question for the negotiators will be what can be agreed upon over the next five months that will let President Trump claim that NAFTA has turned from being the worst to the best agreement ever. It may not take that much. While public attention will be fixed on the political spectacle of the negotiations, business will go on as usual. Currency volatility will remain a problem. There will always be a risk

that something stupid will happen, most likely outside of the context of NAFTA. But, Prairie manufacturers and exporters also need to keep an eye on the business opportunities that lie ahead, especially as the U.S., Mexican, and our own domestic economies begin to gain traction. In Mexico, new shale gas deposits are being brought into production. The government is pursuing its plan to develop hydro, solar, wind, and geothermal energy sources. Major investments in infrastructure are also on the table, including sizable investments in clean technologies. And all this is in addition to growth in Mexican mining,

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Prairie Manufacturer Magazine • Fall 2017

The negotiating objectives for both Canada and Mexico are fairly simple to understand: Do no harm and seek to expand market access for goods and especially for services, like digital commerce, that were not covered by NAFTA. If it were only that easy to understand what the U.S. really wants to achieve. auto, aerospace, and food processing sectors. Production capacity in Mexico is limited. Meanwhile, Canadian companies looking to invest or establish production or supply partnerships may find Mexico an even more inviting market in light of its government’s new policy of diversifying both exports and imports to reduce reliance on the United States. There are new opportunities emerging immediately south of our border as well. Manufacturing is on an upswing and commodity prices are firming up. Producers of specialized components, products, services, and technologies will have an edge as

U.S. industry reboots investment in equipment after a decade of sluggish growth. My advice at this crazy time? Think of Steve Verheul. Keep your cool. And take advantage of those opportunities for growth opening up across North America. Jayson Myers is an award-winning business economist, specializing in industrial and technological change. He is an advisor to both private and public sector leaders, and has counselled Canadian prime ministers and premiers, as well as senior corporate executives and policymakers around the world.

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Innovating from the (under)ground up

Manufacturers have felt the pinch of resource prices, but that doesn’t mean they’re standing still By Joanne Paulson

nnovation is generally understood, in the public realm, as a ground-breaking discovery or never-before-seen product. Tesla. The internet. Insulin. It’s a valid perspective — one that has been borne out on the Canadian Prairies for generations. The region has historically been a hotbed of economy-changing product and process innovation, from the development of canola to remotecontrolled uranium mining to the Blairmore Ring. But there is also incremental innovation — the small, yet meaningful improvements that build on genius, deliver greater customer value and improve operational performance. In Saskatchewan’s present post-boom era, that’s precisely what manufacturers

Prairie Manufacturer Magazine • Fall 2017

are focusing on to better support the resource development sectors and sharpen their competitive edge in the supply chain. Not all recent economic retraction, however, is related to lower prices in commodities like potash, oil, and uranium. Many new major capital projects, such as the new K+S solution potash mine near Bethune, drove significant supplier demand during the construction phase, yet have now entered production. PotashCorp alone — which announced a $36-billion merger with Agrium this past June — spent more money per capita in Saskatchewan in recent years than the federal government. Eric Anderson, executive director of the Saskatchewan Industrial and Mining

Suppliers Association (SIMSA), says the economic stimulus stemming from that level of investment could have powered the province through the 2008-09 recession on its own. “The provincial government put incentives in place, saying an expansion would be treated well,” he explains. “Everybody started and completed. Nothing’s been cancelled. Some of the juniors may have felt some pain, but the big guys completed what they said they were going to do.” Global pressures have not been friendly, either. Although Saskatchewan remains the largest potash producer on the planet, accounting for approximately 30 per cent of the world’s supply, lower production

costs in Eastern European jurisdictions such as Russia and Belarus are putting significant strain on Canadian activity. “We’re competing directly against Russia, which beats us up and down on labour every day,” says Kipp Sakundiak, general manager of Saskatoon-based Prairie Machine and Parts (PMP). “So, if they can produce a tonne of potash for 40 per cent less, we must figure out a way to produce the same tonne for 40 per cent less, while offsetting more expensive labour.” That means finding efficiencies in equipment, process, and maintenance regimes. And, it means leveraging the capacity growth of the past decade to our advantage. In 2015, PMP acquired Papa Bravo Innovations, a local manufacturer of electric vehicles for underground mining. These units, or EVs for short, typically require less maintenance than a standard diesel engine and are built with a modular design so components may be swapped out with ease. “Say you have a part that a company spends $10,000 on per year in a diesel truck. They might only spend $2,000 on the equivalent EV,” notes Sakundiak. “When you’re talking about millions of dollars, saving $8,000 on 10 trucks may be half a per cent of the total budget.” There are other value-added benefits down the line as well. Improving ventilation by preventing diesel particulate from entering the air is equal parts health conscious and cost savings. Many hard rock mines, like gold and iron ore operations in Ontario, are deep below the surface and are subject to very warm underground temperatures, compounded by the running of diesel engines. Most firms are required to haul fuel up to these sites to power air conditioners that cool the working environment — a massive expense. For PMP, it all comes back to providing solutions — the same mantra that has kept the business thriving for the past 40 years. Few of those solutions are as flashy as an EV. The majority are not large whatsoever. It’s not the size of the project, Sakundiak maintains, it’s the size of the problem it solves. One of the company’s most compelling inventions is a safety device for potash boring machines. When rotors cut two

“One good thing since the current [federal] government came into power is that more and more of our work has been staying in Saskatchewan. At one time, I couldn’t have sold anything here. Now I’d say Saskatchewan is about 40 per cent of our business. That’s something relatively recent.”

circles into the ore, a small V, called a cusp, is formed at the top between the circles. This is a dangerous piece in the process, as it has the potential to fall and injure the miner. Until recently, a shaft in the gearbox of the machine has driven a chain to trim the cusp material. Sometimes, though, the chain becomes stuck, peeling off the shear pin and stops. Operators must then cease production, back up the boring machine, and install a new pin. The cusp, meanwhile, can potentially fall onto workers if the machine is not sufficiently reversed. “We developed a system where we get rid of the pin altogether,” says Sakundiak. “Our system is resettable from the operator cabin. It takes about five minutes. He stays in the machine and just hits the reset button, safely, from the cab. “It’s things like that. It’s not new technology; this technology has been around for a long time. It’s just applying it in a different way.” Jeff Burton echoes that sentiment. He, too, has weathered the impact of commodity cycles — only his attention hasn’t been solely fixed on potash over the past three years; it has also been focused on oil. Burton is the director of operations for AGI Envirotank in the town of Biggar, located an hour west of Saskatoon. For the first time in its 25-year history, the company was forced to pull back on employment when oil markets took a dive. “Oil is 40 to 50 per cent of our business,” he says. “And it drives other development, so a low price slows down the refined fuel side as well. The last three years — I’ve never seen it any tougher. This year is better. The oil price hasn’t come back a lot, though things have improved since January. Companies have decided to keep working.” The key, Burton believes, is not standing still. Diversification is always top-of-mind, and has been so since the company’s creation.

Envirotank, as its name suggests, is perhaps best known for its refined fuel tanks — in many ways, becoming the ‘Kleenex’ or ‘Tylenol’ of the industry. Shortly thereafter, in the mid-90s, it began manufacturing oilfield tanks, and then underground ore bins and other industrial containers. A container, he assures, has many applications. Envirotank’s goal is to be an expert in those specific applications. “We purchased a pipe mill, similar to what Evraz has in Regina. Instead of making pipe, we make tank shells,” he explains. “Evraz goes to 64 inches in diameter when making a cylinder; ours goes to 183 inches. “Everybody else that makes tanks will take a piece of flat material, roll it into a cylinder, take the cylinders, and weld them together. Our machine spirals it out like a paper towel roll. Our seams are spiral instead of straight-seam connected.” A year after installing the system, Envirotank landed a Department of National Defence contract for 160 tanks, when the government was setting up fuel facilities in the north. A home run. Next on the docket is expanding its presence in the setup of large cardlock systems, known as Go Stations. Envirotank strives to provide the fullcycle solution, from the tanks and pumps to the electrical work, shielding itself from other ‘one trick’ competitors. It built its first unattended Go Station in 1993, and has implemented a total of 50 across Canada. And the most unforeseen priority for Envirotank these days: Saskatchewan sales. “One good thing since the current [federal] government came into power is that more and more of our work has been staying in Saskatchewan,” says Burton. “At one time, I couldn’t have sold anything here. Now I’d say Saskatchewan is about 40 per cent of our business. That’s something relatively recent. “It’s all about adapting.”

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How beco pub me our lic proc com urem peti tive ent can adv anta ge By K e

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Prairie Manufacturer Magazine â€˘ Fall 2017

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n the wake of NAFTA negotiations and ‘America first’ policies, there exists a fine line between favourable and unfavourable public procurement practices. From a free enterprise perspective, a strong case can be made for the inherent benefits of interjurisdictional trade, whether it be at the international or interprovincial level. Conversely, when it comes to public dollars, there is just as clear of a benefit for those dollars to be spent within the jurisdiction from which goods or services are being procured. When you try to combine the two scenarios, however, the vision, the process, and the results become much murkier. And the line between good public policy and outright protectionism becomes as fine as a razor’s edge. Saskatchewan Premier Brad Wall has been among the more outspoken supporters of free enterprise, market-driven economic policies. One of his first orders of business upon being elected in 2007 was declaring that Saskatchewan was, in fact, open for business. Soon thereafter, the province joined Alberta and B.C. in the New West Partnership Trade Agreement, patterned after the two western-most provinces’ TILMA pact (Trade, Investment, and Labour Mobility Agreement), first struck in 2006. The spirit of these agreements is to serve as a means of breaking down trade and investment barriers and increasing interprovincial cooperation. Given the relative instability of government priorities due to changing political whims, ideologies, and budgets

with each respective fiscal year, building a business on or around public procurement isn’t likely anyone’s top strategy. But, having recently experienced the contraction of the resource sectors, many companies — manufacturers included — are increasingly looking to public procurement to keep their work orders filled and employee bases intact. There are two approaches to public procurement that can produce dramatically different outcomes. For years, Saskatchewan modelled its procurement on a lowest cost definition of ‘best value.’ This is, unfortunately, far too common of a practice, with little foresight given to the lifecycle cost of ownership — potential warranty work, maintenance and management requirements, longevity, and downtime. Every shortcut imaginable would be exercised in the name of being the lowest-cost supplier. Innovation was an afterthought. Fundamentally and refreshingly opposite to this approach is true ‘best value’ procurement, where several other factors are weighted against price to ensure dollars are being spent in an efficient, prudent, and cost-effective manner. In Saskatchewan, this prospect has been made possible by the creation and work of a government agency called Priority Saskatchewan. Like any other prospective procurer, the provincial government now has the mechanism to impart discretion as a purchaser (what a novel concept!). By opening the definition of ‘best value,’ the Province is allowing for what we might call strategic procurement.

“By opening the definition of ‘best value,’ the Province is allowing for what we might call strategic procurement. Procurement officials in a request for proposal (RFP) or invitation to tender (ITT) can actively seek out and reward innovative technologies and processes that jointly create a greater level of value for the intended application and for the taxpayer.”

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Procurement officials in a request for proposal (RFP) or invitation to tender (ITT) can actively seek out and reward innovative technologies and processes that jointly create a greater level of value for the intended application and for the taxpayer. Incenting this type of forward thinking can also give rise to new or more competitive businesses, and entire new industries. Renewable energy technology to support Saskatchewan’s power generation needs (which are supplied by a Crown corporation) is a perfect example. This has been the case with Saskatchewan’s potash mining sector. The ongoing development of the province’s vast potash reserves over the past 50 years has genuinely positioned Saskatchewan as the world’s leading jurisdiction for potash mining infrastructure. From manufacturers and machine shops to welding and

fabrication facilities and other service providers, these are world-class companies that can compete not only in-market, but globally as well. They are, bar none, the best in their field. The point is: If you instill purpose — and the necessary dollars — to develop an industry, you can create the opportunity for innovation in the supply chain. On the opposite side of the spectrum, in comparison to what happened in Alberta through the oil boom, Saskatchewan missed the proverbial boat. Before the Second World War, both provinces consisted of a similar population and scope of industry development. The entrepreneurial political philosophy adopted by our sister province to the west, however, especially with regard to investment attraction and supply chain development, led to both a boom

in exploration and in the infrastructure necessary for extraction and shipping. Before you knew it, the City of Calgary exceeded the entire population of Saskatchewan. Potash and oil development are two private sector case studies that paint a vivid illustration of how public procurement can have a very real impact on shaping the economic landscape of a province. It is why strategic procurement needs to be the norm, not a novelty. To date, the team at Priority Saskatchewan has worked hard to broaden the definition of ‘best value’ and build the foundation for the implementation of strategic procurement across the various government ministries and Crown corporations. Even though it is a relatively new entity, Priority Saskatchewan has already riddled off an extraordinary number of successes. Three in particular stand out:

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Prairie Manufacturer Magazine • Fall 2017

First and foremost is the structuring of tenders to score and award points for innovative ideas. This is especially effective in design-build RFPs that allow companies to propose alternative design options so long as they meet basic project requirements. Second is the reissuing of tenders that are too restrictive in nature. All too often, specifications are written in a manner that prevent competition and, in some cases, multiple bidders altogether. Nothing stifles the drive toward innovation quite like limiting your pool of suppliers. And third is the continual education effort to urge procurement officials to challenge their ideas of which companies can do what type of work. The production of a fire pump handle, for instance, does not require a deep specialization or unique equipment, yet was previously purchased and shipped to Saskatchewan from Ontario.

“Potash and oil development are two private sector case studies that paint a vivid illustration of how public procurement can have a very real impact on shaping the economic landscape of a province. It is why strategic procurement needs to be the norm, not a novelty.”

Identifying the manufacturers that had the competencies and capacities closer to home (and there were many — a long list of which supplied industrial sectors like mining, as well as oil and gas) led to a cost savings of 40 per cent and a quicker turnaround time. It must be stressed that strategic procurement does not equate to protectionism by any measure, definition, or interpretation — nor does ‘best value’ mean ‘local only.’ While a local company may ultimately provide the best value, it cannot and should not hinge on their location. What we should be rewarding are those suppliers providing value above and beyond the minimum standards of an

RFP or ITT, and those contributing to the growth of an industry or sector that can compete beyond our own borders. The last thing an export-reliant, landlocked province of 1.1 million people wants is to be seen as having its borders closed for business. In the case of Saskatchewan, nothing could be further from the truth. Not only are they open for business, they are open-minded when it comes to using public procurement as a means of driving innovation and competitiveness. The rest of Canada should follow suit. Keith Moen is the executive director of the NSBA – Saskatoon’s Business Association.

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PMM Career Board PRO METAL INDUSTRIES Pro Metal Industries is one of the only 100% Indigenous manufacturers and military suppliers in North America. Wholly owned and operated by Pasqua First Nation, Pro Metal is a leading precision manufacturing, assembly, and fabrication specialist, serving both OEM and aftermarket customers in a range of industries, including oil and gas, mining, clean technology, agriculture, defence, and government utilities. Recruiting All Positions Pro Metal is currently looking for skilled assemblers, welders, machinists, sales and management professionals, and other administrative personnel to join its growing team, based in Regina. Proven experience and technical competency are assets, but a willingness to learn and a positive attitude are musts. Successful applicants must also pass a drug and alcohol test. Apply to: Pro Metal Industries Regina, Saskatchewan info@prometal.ca

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blockchain With Greg Hutch, director of new service development with ISM Canada – an IBM company

Some have called blockchain ‘the most important IT invention since the internet itself.’ Yet, if you ask folks on the street, few can succinctly define it. In layman’s terms, what is blockchain and how does it work? Blockchain is a technology that lets people who do not know or trust each other build a shared, dependable ledger. In other words: It is a way of recording transactions securely and reliably without the trusted third party — like a bank — that is usually required for verification. There are some very interesting mathematical and computational underpinnings for blockchain, but the fundamental idea is that blocks of information can be securely tied into chains. Each block can represent information like a transaction. Each time a block is added to the chain, it is securely connected to the preceding blocks, and anyone trying to change a link will be detected. There are also multiple copies of the chain, which avoids having a central authority or a single copy of a record. Everyone can see the blockchain and confirm what it contains.

In May 2016, Fortune magazine published an article entitled, Why blockchain will change the world. One month later, Forbes ran a competing piece headlined, Blockchain is not going to change the world. Who is right and why? I would take a slightly different angle and say that, over time, the business innovations that arise from blockchain will change the world. The Forbes piece focused on immediate, direct implications of the technology. I think blockchain today is comparable to the early days of e-commerce. The opportunities for increased efficiency and disintermediation will be disruptive. We are just starting to see interesting applications of this technology take shape, in ways never before imagined, including the design-to-production processes in additive manufacturing. I don’t think we’ve even begun to seen the transformative impact yet.

What industries will be most impacted by blockchain technology? In the near term, it looks like the financial sector will be most impacted. We are already seeing financial transactions performed with blockchain, with few barriers. Bitcoin is probably the best known. Even regulators generally seem supportive. 48

Prairie Manufacturer Magazine • Fall 2017

The potential impacts on other industries, though, go much farther. Blockchain can provide a clear chain of custody and ensure data is not altered as it is moved. For example, there is work underway to explore blockchain as a fast, efficient, and secure conduit for health information. I expect to see blockchain used in situations where traceability is of the utmost importance. The creation of smart contracts is one possible — albeit complicated — application. These are built between entities whereby the contract is enforced by prenegotiated actions and conditions recognized by the blockchain. This helps manage risk in situations where trust may be lacking.

Some have suggested that blockchain will revolutionize physical supply chains, removing barriers to sourcing, designing, and transportation. What changes do you see coming in this space? This is perhaps one of the most interesting applications of blockchain technology. One of the earliest case studies is around gemstones, like diamonds. There are efforts ongoing to use blockchain to track the origin, history, characteristics, and ownership of rare or high-value gemstones, providing visibility into the global chain supply chain, which — in turn — can help deter fraud and ensure compliance with conflict minerals legislation. The same theoretical approach is now being used to track food origins and statuses, like organic certifications, from producer to consumer.

What is one piece of advice you have for Prairie manufacturers and processors to better understand or embrace blockchain? Don’t ignore it because you don’t understand it. I expect blockchain to touch all industries. Watch for business innovations that are enabled and fast-tracked by blockchain. Some of the world’s largest companies are investing heavily into this technology, and that may result in your business changing quickly by way of necessity, whether you like it or not. Look for more local applications, too. There is some money being sunk into leveraging blockchain for the development of trusted registries, such as land ownership. We are still seeing new ideas spring up every day for blockchain to streamline privacy and confidentiality, improve traceability, accelerate processing, and enhance efficiency. If those sound like traits important to the success of your business, you probably don’t want to ignore blockchain for very much longer.

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