NBmetalsector08 en

SECTOR STUDY
ON
METAL FABRICATION / MACHINE SHOPS
FINAL REPORT
Submitted to:
Atlantic Canada Opportunities Agency
Fredericton, New Brunswick
Submitted by:
AMEC Earth & Environmental,
A Division of AMEC Americas Limited
Fredericton, New Brunswick
August 11, 2008
TE81026
Sector Study
Metal Fabrication / Machine Shops
Final Report
August 11, 2008
TE81026-Sector StudyMetal Fabrication Final Report-Aug 11 08-jp-cjy Page (i)
EXECUTIVE SUMMARY
Introduction and Methodology
AMEC Earth & Environmental, a division of AMEC Americas Limited (AMEC), was retained by
Atlantic Canada Opportunities Agency (ACOA) to conduct a sector study on metal fabrication
and machine shops in New Brunswick.
The study involved three primary components:
Development of a comprehensive sector inventory and profile.
Survey of a representative sample of the most active firms in the sector.
Examination of broad market opportunities.
The inventory of machine shops and metal fabricators was assembled comprising 308
companies across the Province. Databases and publications available from government
departments and agencies, public and private directories, and industry associations were
reviewed. As well, information was obtained from individual company official websites.
The survey involved the design and field testing of a questionnaire geared towards soliciting
information on several major topics related to the current issues regarding products, workforce,
production capacity, investment, financing, and target markets.
A survey sample of 47 firms was selected at random from the inventory, ensuring good
representation by geographic location, size, specialty and niche products. The questionnaire
was transmitted to the sample firms by email and responses were received via email, fax,
telephone interviews and face-to-face interviews. All responses were treated as confidential.
In addition to the questionnaire and the information review, face-to-face interviews were
conducted with selected representatives from government, the private sector and industry
associations.
Summary Sector Profile
New Brunswick machine shops and metal fabricators are generally concentrated in the southern
part of New Brunswick which accounts for 56% of the total inventory (173 companies). About
half of those firms are located in or near Saint John, Moncton, and Fredericton. About 20% of
the firms are located in the northern part of the province (Gloucester, Restigouche counties).
Western New Brunswick (Madawaska-Victoria-Carlton) and Eastern New Brunswick (Kent-
Northumberland) together account for about 24% of total firms.
The size of individual firms varies from 350-500 employees to less than 5 employees. Most
firms maintain a work force of less than 50 employees.
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About 60% of total sector revenue is generated by the custom fabrication sub-sector (fabrication
of structural steel for buildings, electric power plants and industrial facilities, bulk handling and
storage systems, offshore oil and gas equipment and naval and merchant ships). Machine
shops that fabricate machine tools, robotics, and manufacturing tooling, microelectronics and
commercial aircraft parts for North American markets account for about 8% of total sector
revenue. Another 10% is attributable to the sheet metal industry that is comprised of
manufacturing of heating and ventilation systems for residential, commercial and industrial use,
metal signs and heat recovery units. Farm machines, mobile material handling machinery, air
and water heating systems, valves, musical instruments, doors, and corrugated pipes make up
14% of total sector revenue.
New Brunswick firms have developed close relations with their primary customers and
suppliers, through quality work and responsiveness to client needs. These attributes facilitate
the development of niche markets for specialized products and services. Firms that are able to
rapidly change design and fabricating practices are more optimistic for long-term growth and
ongoing market expansion in the face of intense competition.
Summary of Issues
The issues facing the machine shop and metal fabrication sector are similar to those
encountered by most businesses in the Atlantic region.
Increasing operating costs due to soaring fuel prices and appreciation of the Canadian
dollar.
Negative impact on profitability in international markets due to the slowdown of U.S.
economy.
Less competitive in the international market.
Lack of confidence and initiatives to exploit the international market.
Gaps between skills needed and local talent available.
Lack of capability to attract and retain a skilled workforce.
Lack of financial resources for short-term and long-term cash-flow management and
investment.
Safety issues.
Lack of standardized quality assurance / control measures.
Lack of a recognized credential system.
Conclusions
The machine shop and metal fabrication sector in New Brunswick is very active and enjoying
high levels of success. From many perspectives that sector is generally at or close to capacity.
In order to advance beyond current levels of activity and product mix, the sector needs to
consider:
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Increased Lean Manufacturing.
Enhanced export market development and collaboration.
Market-oriented training and incentives that root the workforce in New Brunswick.
Plant modernization and technology adoption to be competitive.
Strategic positioning in the value chain.
Creative leadership and effective coordination.
Lean Manufacturing: Focusing on waste elimination and Supply Chain Management (SCM),
improves speed and flexibility in responding to changing customer demand and maximizes
product quality and profits with lowest cost. New Brunswick metal fabricators and machine
shops should maintain close relations and continuous communication with suppliers to facilitate
information sharing and maintain inventories at minimum levels. Information technology needs
to be upgraded in local companies to facilitate efficient communication, effective operation, and
eliminate redundant tasks. Programs to promote lean manufacturing already exist. Government
could assist small companies with limited time for forward planning to actively pursuing lean
manufacturing.
Invest in Competitiveness: To sharpen their competitive edge, firms should consider
outsourcing overseas to achieve lower costs, increase quality to become less price-sensitive,
and invest in innovation, people skills, marketing and sales. Related actions could include:
Make market analysis a permanent activity and provide the required resources and
information.
Encourage innovative approaches geared to market demand.
Promote the awareness and use of tax credits such as the Scientific Research and
Experimental Development (SR&ED) programs.
Establish financial assistance and support for investment in on-site training programs
relevant to specific locations, operations and equipment
Foster alliances and collaboration among small companies to allow bidding on large
tenders. .
Recruit and Retain Local Workforce: Firms need to develop and implement human resource
plans that address recruitment, hiring, retention, employee training and development, for both
residents of New Brunswick and new immigrants. On-site / on-the-job training programs, with
consistent curriculum, bridge the skill gap between recent graduates and the specific production
requirements, improve worker safety and increase productivity. These activities could be
augmented by workforce adaptability programs and co-op/internship opportunities targeted at
local talent near the shops and fabricators. Attention should also be directed to retaining
educated workers at the beginning of their careers so as to establish roots in the province.
A well-trained work force reduces operating costs and accelerates the innovation process. With
an ageing work force, two dominant requirements are incentive programs to encourage seniors
to participate in upgrade training and work longer as well as mechanisms to facilitate the
transfer of business ownership from retirees to younger management.
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Quality Assurance: New Brunswick metal fabricators and machine shops produce high quality
products that result in loyal customers and repeat business. To maintain superior product quality
in the future, systematic product quality measures, formal certification to internationally
recognized standards, and promotion of service integrated products should be considered.
Safety: Due to increased litigation and heightened public awareness, customers are
demanding high standards of safety from their suppliers. The machine shop and metal
fabrication sector should make safety the highest priority by: establishing licensing and
regulatory programs to protect public health, safety, and the environment; promoting the sharing
of operational experience to enhance decision-making; and conducting safety oversight
programs, inspections and enforcement to monitor performance.
International Markets: Faced by high costs and barriers to international markets, the machine
shop and metal fabrication sector needs assistance and direction for overseas market
expansion. Related actions could include: establishing international entrepreneurship
programs; promoting outsourcing to reduce costs; building strategic alliances, networks and
collaborations to improve collective capacity and developing new ideas; and using technology to
reduce constraints on profitability and identify target customers with specific interests, A simple
immediate measure would be to establish an on-line bulletin board for business information
sharing.
Transportation Costs: As high shipping costs become a barrier for companies to compete in
remote markets, economies of scale are possible by shipping in bulk rather than small
consignments, through consolidating brokers and freight contracts that allow a partial shift of the
cost to the customer (FOB contracts).
Financing: The predominant small size of sector firms hinders access to financial support; a
key factor for growth and development and access to larger markets. Financial institutions need
to recognize the value of investing in innovation, human capital, and technology. Investment tax
credits and other tax structures could enhance sector investment in improving both tangible
assets and supporting resources.
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TABLE OF CONTENTS
PAGE
1.0 Introduction .........................................................................................................................1
1.1 Mandate ......................................................................................................................1
1.2 Process .......................................................................................................................1
1.3 Background .................................................................................................................1
2.0 Inventory .............................................................................................................................3
2.1 Classification ...............................................................................................................3
2.2 Inventory......................................................................................................................3
2.3 Summary Profile..........................................................................................................4
3.0 Survey.................................................................................................................................6
3.1 Objectives....................................................................................................................6
3.2 Questionnaire..............................................................................................................6
3.3 Sampling .....................................................................................................................6
3.4 Response Rate............................................................................................................6
3.5 Sector Profile...............................................................................................................7
3.5.1 Establishment and Certification............................................................................8
3.5.2 Workforce ............................................................................................................8
3.5.3 Sales and Operating Costs ..................................................................................9
3.5.4 International Trade...............................................................................................9
3.5.5 Productivity and Innovation................................................................................10
3.5.6 Infrastructure, Facilities and Equipments ...........................................................10
3.5.7 Financing...........................................................................................................10
3.5.8 Other Issues ......................................................................................................11
4.0 Market Environment ..........................................................................................................12
4.1 Domestic Activity .......................................................................................................12
4.2 International Markets .................................................................................................12
4.3 Productivity, Innovation and Technology....................................................................12
4.4 Human Resources and Training ................................................................................14
4.5 Competitiveness........................................................................................................15
4.6 Financing...................................................................................................................15
5.0 Market Trends...................................................................................................................17
5.1 Regional Opportunities ..............................................................................................17
5.2 National Opportunities ...............................................................................................18
5.3 International Opportunities.........................................................................................20
6.0 Conclusions.......................................................................................................................23
7.0 References........................................................................................................................25
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TABLE OF CONTENTS (cont)
PAGE
LIST OF TABLES
Table 2.1 List of Metal Fabrication/Machine Shop Sub-sectors............................................3
Table 2.2 Source of Company Profiles ................................................................................4
Table 3.1 Sample Distribution by Region.............................................................................6
Table 3.2 Respondent Distribution by Region......................................................................7
Table 3.3 Respondent Distribution by Company Size..........................................................7
Table 3.4 Average Operating Costs.....................................................................................9
Table 5.1 Major Projects, Energy Sector, New Brunswick..................................................18
Table 5.2 Major Projects in Other Atlantic Provinces .........................................................19
Table 5.3 Financial Estimates - Metal Products and Machinery Manufacturing..................19
Table 5.4 Expected Sourcing of Oil Sands and Upgrader Inputs by Market Area...............20
Table 5.5 Comparative Business Costs Index* - Aerospace Industry/Aircraft Parts
Manufacturing....................................................................................................21
Table 5.6 Top Six Canadian Exports to Argentina, 2005....................................................22
LIST OF FIGURES
Figure 4.1 Labour Productivity for the Metal Fabrication Sector in Canada.........................13
LIST OF APPENDICES
Appendix A Inventory
Appendix B Questionnaire
Appendix C Survey Results
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1.0 INTRODUCTION
1.1 Mandate
The purpose of this report is to present an environmental scan for the metal fabrication and
machine shop sector in New Brunswick and Atlantic region. This includes identifying the
weaknesses and challenges of, and potential opportunities for, the sector, as well as providing
observations regarding improving the sector performance to make a positive contribution to the
overall objectives of economic growth and increased productivity for New Brunswick.
1.2 Process
The research process included the following steps:
Create an inventory of metal fabricators and machine shops in New Brunswick and
Atlantic Canada.
Survey a sample of the inventory ensuring representation by size and geography.
Conduct an environmental scan.
Analyze market trends.
1.3 Background
The metal fabrication/machine shop is a vibrant sector in New Brunswick. However, the
combination of rising oil prices, rapid appreciation of the Canadian dollar and a dampened U.S.
economy has slowed growth over the past few years. The sector experienced an average
growth rate of 2.4% in fiscal year 2006-2007, representing a 0.6 percentage point drop from
fiscal year 2005-2006.
As of 2007, there are 308 metal fabricators and machine shops in New Brunswick and 425
located in the other three Atlantic Provinces. These 308 establishments are involved in five sub-
sectors activities:
machinery and equipment manufacturing;
welding and metal fabrication;
precision machining;
sheet metal products; and
foundries.
The metal fabricators and machine shops sector responds to demand from various other
sectors such as energy, mining, aerospace, fishery, forestry, and construction, in regional,
domestic and international markets.
Most of the metal fabricators and machine shops in New Brunswick are small to medium sized
enterprises (SME), and are facing challenges and issues that are common to SMEs
everywhere:
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lack of financial and human resources;
vulnerability to economic shocks;
poor capacity to conceptualize, develop and exploit market opportunities; and
insufficient time and resources to focus on innovation and appropriate new technologies.
Large NB firms are aggressively expanding markets outside of the Atlantic region and inclined
to pursue investments in resource rich Alberta, Saskatchewan, Newfoundland and Labrador and
international markets. Small firms are more apt to service regional markets. The potential
opportunities for the metal fabrication sector are very promising in the context of significant
energy initiatives and other large scale resource projects proposed for the Atlantic region over
the next 10 years.
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2.0 INVENTORY
2.1 Classification
This section describes the inventory of business establishments in the metal fabrication and
machine shops sector, as defined by the North American Industry Classification System
(NAICS) used by Industry Canada: fabricated metal product manufacturing (NAICS 332), and
machinery manufacturing (NAICS 333). Table 2.1 presents a list of sub-sectors.
Table 2.1 List of Metal Fabrication/Machine Shop Sub-sectors
Sub-sector NAICS Code
Fabricated Metal Product Manufacturing 332
-Forging and Stamping 3321
-Cutlery and Hand Tool Manufacturing 3322
-Architectural and Structural Metals Manufacturing 3323
-Boiler, Tank and Shipping Container Manufacturing 3324
-Hardware Manufacturing 3325
-Spring and Wire Product Manufacturing 3326
-Machine Shops, Turned Product, and Screw, Nut and Bolt Manufacturing 3327
-Coating, Engraving, Heat Treating and Allied Activities 3328
-Other Fabricated Metal Product Manufacturing 3329
Machinery Manufacturing 333
-Agricultural, Construction and Mining Machinery Manufacturing 3331
-Industrial Machinery Manufacturing 3332
-Commercial and Service Industry Machinery Manufacturing 3333
-Ventilation, Heating, Air-Conditioning and Commercial Refrigeration
Equipment Manufacturing
3334
-Metalworking Machinery Manufacturing 3335
-Engine, Turbine and Power Transmission Equipment Manufacturing 3336
-Other General-Purpose Machinery Manufacturing 3339
Source: Industry Canada, 2006
2.2 Inventory
A preliminary list of machine shops and metal fabricators in the Atlantic region was gleaned
from the Canadian Welding Bureau (CWB) and the Yellow Page directories. This base list was
expanded for the Province of New Brunswick by referring to government and private sources.
Table 2.2 provides the sources and a description of the search process.
By combining, filtering and synthesizing these various sources, 734 companies from the four
Atlantic Provinces were identified. Information on the 308 firms in New Brunswick was complied,
including:
Name;
Coordinates: address, telephone number, fax number, web site, etc.
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Table 2.2 Source of Company Profiles
Source Description of Search
Yellow Pages The on-line Yellow Pages for New Brunswick, Nova Scotia,
Prince Edward Island, and Newfoundland and Labrador
were searched for companies listed under metal fabrication
and machine shops category.
Canadian Welding Bureau (CWB) The CWB web site was explored for members identifying
services related to metal fabrication, equipment repairs,
welding and other fabrication services. The search
included companies located in the four Atlantic provinces.
Metal Working Association of New
Brunswick (MWANB)
The MWANBs web site was searched for companies listed
under metal fabrication and machine shops.
Industry Canada The Industry Canada web site was searched for data of the
companies listed under metal fabrication and machine
shops (data include legal name, company size, description
of service/products, international market, year of
establishment, etc.).
Profile Canada The on-line search in Profile Canada provided detailed
information on companies under metal fabrication and
machine shops.
Frasers Canadian Industry Directory database provided by
Frasers.com was searched for business information about
machine shops and metal fabricators in New Brunswick.
(http://www.frasers.com/)
Scotts Directories Scotts Directories website was consulted for companies in
metal fabrication sector for New Brunswick.
(www.scottsinfo.com)
Contact person;
Primary products and services;
Number of employees;
Annual sales;
Export/Domestic sales;
Export market locations; and
Major equipment.
The complete inventory is provided at Appendix A.
2.3 Summary Profile
New Brunswick machine shops and metal fabricators are generally concentrated in the southern
part of New Brunswick which accounts for 56% of the total inventory (173 companies). About
half of those firms are located in or near Saint John, Moncton, and Fredericton. About 20% of
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the firms are located in the northern part of the province (Gloucester, Restigouche counties).
Western New Brunswick (Madawaska-Victoria-Carlton) and Eastern New Brunswick (Kent-
Northumberland) together account for about 24% of total firms.
The size of individual firms varies from 350-500 employees to less than 5 employees. Most
firms maintain a work force of less than 50 employees.
About 60% of total sector revenue is generated by the custom fabrication sub-sector (fabrication
of structural steel for buildings, electric power plants and industrial facilities, bulk handling and
storage systems, offshore oil and gas equipment and naval and merchant ships). Machine
shops that fabricate machine tools, robotics, and manufacturing tooling, microelectronics and
commercial aircraft parts for North American markets account for about 8% of total sector
revenue. Another 10% is attributable to the sheet metal industry that is comprised of
manufacturing of heating and ventilation systems for residential, commercial and industrial use,
metal signs and heat recovery units. Farm machines, mobile material handling machinery, air
and water heating systems, valves, musical instruments, doors, and corrugated pipes make up
14% of total sector revenue.
New Brunswick firms have developed close relations with their primary customers and
suppliers, through quality work and responsiveness to client needs. These attributes facilitate
the development of niche markets for specialized products and services. Firms that are able to
rapidly change design and fabricating practices are more optimistic for long-term growth and
ongoing market expansion in the face of intense competition.
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3.0 SURVEY
3.1 Objectives
A survey of selected firms in the inventory was undertaken to obtain an up-to-date portrait of the
status, size, products, market activity, capacity and issues and challenges facing the sector.
3.2 Questionnaire
A questionnaire was developed to obtain the information identified in the Terms of Reference
and as supplemented by the Steering Committee. The questionnaire was reviewed and
approved by the Steering Committee and pre-tested with a small number of firms. The
questionnaire is provided at Appendix B.
3.3 Sampling
A total of 47 companies in New Brunswick were randomly selected for survey purposes. Table
3.1 summarizes the geographic distribution of the sample.
Table 3.1 Sample Distribution by Region
Geographic
Region
Counties No. of
Companies
No. of
Samples
Sample
Ratio*
NB East Kent, Northumberland 22 6 27%
NB West Madawaska, Victoria, Carlton 51 9 18%
NB North Gloucester, Restigouche 62 12 19%
NB South York, Sunbury, Queens, Albert, Westmorland,
Saint John, Kings, Charlotte
173 20 12%
Total 308 47 15%
* Sample ratio: Number of companies sampled in a geographic area divided by the total number of companies in that
region.
3.4 Response Rate
The survey comprised a combination of questionnaire, telephone interviews and site visits.
Nineteen companies took part in the survey and three companies expressed not interested;
representing a 47% response rate. The distribution of respondents and response rate by region
is presented in Table 3.2. No responses were received from the eastern part of the province.
The responses were also categorized by number of employees (Table 3.3).
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Table 3.2 Respondent Distribution by Region
Geographic Area No. of Responses Response Rate*
NB East 0 0
NB West 6 67%
NB North 4 33%
NB South 9 45%
Total 19 47%
*Response rate is calculated by dividing the number of responses by the total number of companies sampled.
Table 3.3 Respondent Distribution by Company Size
Location Number of Employees No. of
Responding
Companies
NB West (0-10] 2
[11-30] 3
[31-50] 0
[51-100] 1
Subtotal 6
NB North (0-10] 0
[11-30] 2
[31-50] 1
[51-100] 1
Subtotal 4
NB South (0-10] 2
[11-30] 5
[31-50] 1
[51-100] 1
Subtotal 9
Total 19
Although only 19 firms out of 308 responded to the survey, the results can be considered to be
reasonably representative of the sector because the respondents provide a good representation
of the spectrum of firms operating in the province. The respondents are fairly evenly distributed
in terms of geographic location, number of employees, product type, scale and sophistication of
operations. The respondents also comprise firms that are generally considered to be the most
active, with business lines specifically oriented to machining and metal work.
3.5 Sector Profile
The quantitative results corresponding to the closed questions are summarized and presented
in Appendix C. The qualitative results from the open-ended questions have been combined with
the quantitative responses. A profile of the sector is presented in the following sections. To
assist the reader, key words and important response rates and trends appear in bold font.
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3.5.1 Establishment and Certification
The survey results demonstrate that on average, New Brunswick machine shops and metal
fabricators have been operating for 20 years with 4 companies established at least 30 years
ago, and 2 companies are less than 6 years old.
All the respondents are privately owned companies; 68% were incorporated, 16% were held as
a partnership, and the balance were held as a sole proprietorship.
95% of the total respondents do not have subsidiaries, but one claimed to have another
facility in a different city.
63% of the respondents possess one or multiple industry certifications (CWB, CSA, ISO
2000-9001, etc.).
80% of respondents have no formal succession plan, and 53% have a current strategic
plan.
3.5.2 Workforce
53% of the respondents have 11 to 30 employees, 21% have less than 10 employees and
26% of the companies have more than 30 employees including full-time, part-time, seasonal
and temporary positions.
37% of the respondents have only full-time employees whereas the rest of the respondents
have a work force comprised of full-time, part-time, temporary and seasonal employees. 53% of
respondents reported that more than half of their employees are skilled or professionals.
78% of respondents report that management staff comprise between 10 to 20% of the
workforce, but 22% of respondents have no management team (except the owners). The
average age of the workforce in the surveyed companies is approximately 50 years; 73% of
respondents have a workforce in the 35 to 50 year cohort, and 27% have a younger workforce
(under 35 years of age on average).
The average hourly rate paid to experienced workers ranges from $15 to $40; for semi-skilled
workers it varies between $12 to $20 and for entry-level employees falls between $8 to $16.
Historically, 56% of respondents maintained a stable work force, 31% have seen growing
employment and 13% have experienced a declining trend. 74% of the companies surveyed
are considering hiring more employees in the near future.
32% of respondents confirmed problems in retaining employees, mainly due to non-
competitive wages and better opportunity elsewhere. 58% of respondents have problems
recruiting employees and the main issue is lack of required technical skills and
experience.
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87% of respondents have a neutral attitude towards hiring immigrants; only 13% are
positive about hiring immigrants. 87% are not aware of the process for hiring immigrants.
Less than half of respondents have a formal workforce training program in place.
3.5.3 Sales and Operating Costs
53% of respondents have $1 to $5 million annual sales, and 21% generated more than $5
million in sales last year.
63% of respondents primarily serve provincial and regional markets, but within this group,
four firms have 25% of their sales generated within Canada. 21% of respondents target
national markets (primarily Quebec, Ontario and Alberta) or international markets (primarily
U.S.A.). The two major factors for export success are high quality products and maintaining
customer loyalty.
Operating costs have followed the upward trend in energy and raw material costs. The share of
labour cost to the total operating cost ranges widely from 15% to 65%. Less than 20% of the
costs were attributed to energy; raw material costs vary from 25% to 73%. While freight
costs are less than 5% of operating costs, 79% of respondents consider freight costs to be an
issue affecting competitiveness in non-local markets.
Table 3.4 summarizes the distribution of average operating costs.
Table 3.4 Average Operating Costs
Category %
Labour 38.7
Energy 5.6
Raw Material 36.7
Freight 4.7
Miscellaneous 14.3
Total 100
3.5.4 International Trade
63% of respondents have been involved in either import or export or both activities, and of those
who export, 30% have witnessed a declining trend in export sales, 30% have seen an increase
in export sales, and 40% have seen no change when compared to the past.
For respondents who export, 50% have 10% to 20% of their annual sales generated from
international markets, and 20% of have more than 50% of the annual sales generated from
international markets. These exporters consider quality of services and products to be the
competitive advantage for international trade. Most metal fabricated products and services are
destined to the US.
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42% of respondents are actively pursuing international markets in the U.S., Western Europe,
and Mexico. 58% of respondents are focused on regional markets due to the expected boom in
energy-related projects.
When asked about the barriers to pursuing international trade, local machine shops and metal
fabricators confirmed three disadvantages:
lack of marketing knowledge and export experience;
high value of Canadian dollar; and
high freight costs.
3.5.5 Productivity and Innovation
95% of respondents have no R&D budget, and minimal knowledge of tax benefits for innovation
activities. 71% of respondents have instituted efficiency measures to improve productivity or
reduce costs.
3.5.6 Infrastructure, Facilities and Equipments
87% of respondents consider the condition of the facilities, computers and other technology
equipment to be good. 13% claimed their facilities and equipments are in excellent condition.
37% of respondents indicated they are currently at 90% of facility space and capacity; 15%
are using 76-90%; 33% are using 51-75%; and 15% are using less than half of their space and
capacity.
42% of respondents intend to invest more on facilities and equipment in the future, while 42%
will maintain historic levels of investment. 63% of respondents are not planning to expand in
the next 12-18 months.
When asked to comment on the costs of access to markets and transportation networks, 53% of
respondents rated the cost of access as fair, and 26% consider it too expensive.
3.5.7 Financing
More than 50% of respondents do not have a written financial/business plan, but most of the
respondents have access to financial advisors to address concerns and problems.
32% of respondents experienced difficulty in raising funds to accommodate expansion in
sales, work force, equipment or facilities. The main reason identified was the costly, rigid and
time-consuming process dealing with traditional financial institutions. 47% of respondents
indicated they would consider equity financing to finance business growth.
58% of respondents have experienced challenges in cash flow management due to slow
payments for accounts receivable. More than 60% of respondents have a contingency plan
for financing unexpected cash flow needs.
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3.5.8 Other Issues
The major factors hindering growth include:
negative impact of currency exchange rates;
lack of skilled workforce;
lack of market share; and
lack of networking and market exploration opportunities.
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4.0 MARKET ENVIRONMENT
4.1 Domestic Activity
The projected economic environment in Canada sheds some light on growth potential for
regional and provincial business. The Economic & Financial Market Outlook released by the
RBC Group predicted that Canadian economy will weather the U.S. slowdown in the first half of
2008 and experience a rebound into 2009 due to: the expected mild recovery of U.S. economy;
elevated export prices for a number of key commodities produced in Canada; and strong
demand from emerging economies such as China.
Manufacturing activity across most Canadian provinces has weakened dramatically in the past
five years. However, good growth in Newfoundland and Labrador, and New Brunswick
enhanced the overall performance of Atlantic Canadas manufacturing sales. New Brunswick
saw an annual growth of 22% in manufacturing sales during 2006-2007.
GDP in the fabricated metal products manufacturing sector and machinery manufacturing sector
increased from $20.8 billion in 1997 to $28.7 billion in 2007, representing a 3.3% compound
annual growth rate. (Statistics Canada, 2008).
4.2 International Markets
From 1997 to 2005, the total value of exports from the Atlantic region rose from $10.8 billion to
$18.8 billion. Over the same period, a dramatic increase in export values was observed for New
Brunswick, from $5 billion in 1997 to $10.4 billion in 2005, representing 47% of the GDP. Export
value continued to increase to $11.2 billion in 2007 due to higher refined petroleum prices in the
latter part of the year. 88% of provincial exports are destined to the US markets, followed by
Belgium, UK and Spain. Exports to China and India, though modest, also climbed in 2007.
(Industry Canada, 2008)
Some 10% of metal fabricators and machine shops in New Brunswick are exporting or actively
pursuing international markets and in 2007 they contributed a total of $141 million to the
regional economy (Industry Canada, 2008). Most exports are destined to the U.S. However,
market expansion in New England is slowing down as it is becoming saturated. In the southern
States and the mid-Atlantic area, New Brunswick firms are less competitive due to higher labour
and freight costs.
New Brunswick metal fabricators/machine shops are more inclined to pursue regional markets
in anticipation of expected investment activity in the region. Firms are cautious about expanding
to international markets due to barriers such as the uncertainty of returns, elevated insurance
requirements / costs, high value of Canadian dollar, border security issues, and lack of market
information.
4.3 Productivity, Innovation and Technology
Currently, several groups are working closely together to assist SMEs improve innovation and
productivity in the Atlantic region. These organizations include NRC-IRAP, ACOA, Dalhousie
Sector Study
Final Report
August 11, 2008
University, University of Moncton and University of New Brunswick. Twenty-five Industrial
Technology Advisors (11 in New Brunswick, 10 in Nova Scotia, and 4 in Prince Edward Island)
work collaboratively to enhance products in many industries.
Labour productivity in the metal fabrication sector in Canada has exhibited an overall upward
trend between 1997 and 2006 (Figure 4.1). Productivity increased at a compound rate of 4.7%
per annum between 2003 and 2005, and a compound rate of 1.8% per year during the period
1997 to 2006.
Figure 4.1 Labour Productivity for the Metal Fabrication Sector in Canada
35.00
36.00
37.00
38.00
39.00
40.00
41.00
42.00
43.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: Statistics Canada, 2006
However, a comparison with other Canadian provinces shows that productivity in the Atlantic
region ranks the lowest. New Brunswick firms are less automated compared to Quebec and
Ontario, the two largest competitors in all markets. While most of the metal fabricators in the
province have shearing capabilities, only a few of the larger firms have high-technology
production techniques, including robots, computers, and programmable equipment. Non-CNC
plate cutter, press brake, power/hydraulic press, rolls, machine slitter, welding sets, pipe
bender, automatic pipe forms, sand/shot blast machines, shop/yard/mobile cranes and fork lifts,
manual lathe, turret lathe, radial drill, horizontal and vertical milling machines, surface and
cylindrical grinders, horizontal and vertical boring mills are popular equipment utilized in
production. Only a very few machine /fabrication shops are equipped with NC/CNC machining
centres. (MWANB, 2007)
The major obstacles to innovation are the high cost of adopting new technology, and the lack of
skilled workers. Constrained by financial resources, local companies find it difficult to finance
capital investment to accommodate innovative products. Further frustrated by the difficulty in
retaining high-skilled employees, New Brunswick manufacturers are conservative in adopting
new technology, which to them is too risky and too slow a return.
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August 11, 2008
4.4 Human Resources and Training
Population ageing and labour force shortages are the key business issues facing Canada and
New Brunswick. From 1997 to 2006, total employment in the machine/fabrication sector in New
Brunswick saw an increase of 2.18% per annum. However, over the latest reported years, the
number of employees has decreased by 6.3%, which was somewhat mitigated by improvement
in labour productivity. Technology advances stimulate strong demand for skilled workers. A
report on metalworking human resources and training needs analysis released by the New
Brunswick Department of Education identifies the growing need for millwrights, boilermakers,
welders and other highly qualified workers within this diverse sector (Kersey and Associates,
1999).
Inadequate skilled labour is the major impediment to innovation and technology adoption. Most
NB firms provide their entry-level staff with on-the-job training and access to training programs
at local colleges (NBCC) and trade schools. Skills training opportunities relevant to the sector
available in New Brunswick are presented below (Service Canada, 2008):
Mechanical Engineering: Accredited programs for Mechanical Engineering: University of
New Brunswick (Fredericton campus and Saint John campus) and University of Moncton
(French only).
Mechanical Engineering Technologists and Technicians: Training programs for
Mechanical Engineering Technologists and Technicians are available in English at
NBCC Saint John campus and in French at CCNB Bathurst campus.
Steamfitters, Pipefitters and Sprinkler System Installers: Available at NBCC Saint John
campus and CCNB Bathurst campus and two private institutions: UA/MCA Joint
Apprenticeship & Training Committee of New Brunswick Inc. and the New Brunswick
Apprenticeship and Certification Branch of Department of Post-Secondary Education,
Training and Labour,.
Ironworker: NBCC Moncton campus and the New Brunswick Apprenticeship and
Certification Branch of Department of Post-Secondary Education, Training and Labour.
Welders and Related Machine Operators: Apprenticeship courses are available from
NBCC in Moncton and CCNB in Bathurst (French), which offers a combination of on-the-
job training and related classroom training designed to produce fully qualified
journeyman welders.
Construction Millwrights and Industrial Mechanics: Available at NBCC Miramichi and
NBCC Saint John, and at CCNB Bathurst (French).
Because of labour shortages, SMEs face production stoppages, increasing workloads for
existing staff, cutting back on staff training and holding back on pursuing new business
opportunities and adopting new technologies. The ageing population presents another looming
challenge for the fabrication/machine shop sector. According to the 2006 Canadian Federation
of Independent Businesses (CFIB), 34% of small and medium sized businesses will be facing
ownership transition due to retirement of owners in the next 5 years.
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August 11, 2008
4.5 Competitiveness
The competition is only a mouse-click away. It is important to respond rapidly and efficiently to
the changing and diverse needs of the customers in order to compete with international firms.
However, local firms are prevented from achieving these business objectives in fast-paced
dynamic markets due to the lack of resources, lack of sufficient technical capabilities to be
flexible, and lack of effective management for better productivity and competitiveness. Lower
labour rates are a two-edged sword creating room for price reductions, but causing human
resource retention problems. As energy prices escalate, transportation costs become another
burden when competing internationally.
The New Brunswick fabrication/machine shop sector is characterized as high-quality low-
volume manufacturing. On the one hand this allows local firms to be flexible and cater to loyal
customers, but on the other hand, low quantities increase the chances for error, frequent
production line changeover, and inefficient and costly use of equipment and labour between
product runs.
The survey results indicate that about 63% of New Brunswick metal fabricators have industry
certification and formal or in-house safety programs. This helps to maintain a higher quality
product, but brings with it an extra cost burden and competitive disadvantage when competing
in a price conscious market. However, it can be viewed as an advantage for New Brunswick in
the long run.
Most of the local companies pursuing international markets claimed that the competitiveness of
Canadian products is challenged by the dramatic appreciation of the Canadian dollar. This
could be offset by outsourcing some aspects of production to decrease the price sensitivity of
Canadian fabricated metal products. The sector could adopt increased lean manufacturing
technology and focus on reducing operational costs (over-production, defects, delivery delays,
unnecessary inventory, and staff turnover).
4.6 Financing
According to the Survey for Financing SMEs, manufacturers currently experience significantly
lower financing approval rates (64% approval rate in 2004, down from 78% in 2000) due to the
declining bank profits, shrinking lines of credit and increased service fees. These factors
significantly curtail the ability of New Brunswick metal fabricators and machine shops to invest in
innovation and market expansion.
In its Corporate Plan Summary 2008-2012, the Business Development Bank of Canada
developed Manufacturing Plus to assist businesses take full advantage of emerging
opportunities by providing additional financing based on reasonable feasibility studies (BDC,
2007).
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August 11, 2008
The Government of Canada responded to these issues by increasing the Capital Cost
Allowance from 30% to 50% in 2007 till the end of 2008 for machinery and equipment used in
manufacturing and processing, allowing manufacturers a two-year write-off of eligible machinery
and equipment against taxable profits. This temporary measure may induce profitable
manufacturers to make greater investments in Canada before 2009.
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August 11, 2008
5.0 MARKET TRENDS
5.1 Regional Opportunities
Most of the metal fabricators and machine shops consider the Atlantic region as their primary
target market due to access convenience, low freight cost, and long-term customer relations.
Local firms expect a lucrative market environment for the next 5 years, particularly with major
construction projects in the pipeline. The escalating demand generated by Alberta oil sands
projects has displaced competitors from Quebec and Ontario out of the Atlantic region, making
NB companies more optimistic about the regional market potential.
The energy sector in the region provides local metal fabricators and machine shops with
significant market opportunities. Structural steel, pipes, heaters, pressure vessels, pumps,
safety valves and other fabricated metal products are in high demand. For the period 2007-
2008, energy-related projects in Atlantic region are valued at about $42 billion. In New
Brunswick, these projects include Point Lepreau Nuclear Plant Refurbishment, new Saint John
Refinery and a potential second Nuclear Power Plant. Local firms will have an advantage in low
freight cost, competitive labour rates, high quality and easy access when competing in this
market. A detailed list of energy-related projects in the Province with estimated costs and
timelines is presented in Table 5.1.
The upward trend in mineral exploration in New Brunswick implies more market opportunities for
the provinces fabricated metal products and machineries. Mining exploration companies are
staking claims in the province for uranium, zinc, indium and copper. The demand for potash is
also growing as the worlds need for food and biofuels continues to increase. The Potash
Corporation (PC) is expanding production at its mine near Sussex from 800,000 tones to two
million tones. The project is valued at $1.7 billion and is expected to create 600 jobs during
construction and 140 new jobs during operation. The reason for the expansion is the proximity
of the Port of Saint John which serves South America as a key market for potash. Driven by
these activities, demand for mining machinery coal breakers, mine cars, mineral cleaning
machinery, concentration machinery, drills, and cutters will grow accordingly (APEC, 2007).
A vibrant construction sector in the province will stimulate the demand for fabricated metal
products such as structural steel, aluminium and alloy products, stamped, pressed and coated
metal products. A list of major projects in the other Atlantic Provinces is shown in Table 5.2.
With these projects in the pipeline, companies may be able to carve out a niche for themselves
in fabricating tubular sections, mainly structural steel and pipe for the energy, waste
management, and quarry industries. Construction activities also indicate an upward demand for
structural steel.
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August 11, 2008
Table 5.1 Major Projects, Energy Sector, NewBrunswick
Project Name $Value Ends Detail
On-going
Point Lepreau Nuclear Plant
Refurbishment
$1
billion
2009 Replacement of 380 fuel channels.
Reconditioning the generator and turbines.
Upgrading safety equipment to extend the life
of the facility by 25 years.
Canaport LNG Project $750
million
2008 A partnership between Irving Oil and Repsol
YPF, to build a liquefied natural gas terminal
in Saint John.
Irving Oil Refinery
Environmental Upgrade
$35
million
2009 New environmental technology to decrease
sulphur emissions at Irvings refinery.
Natural Gas Distribution $334
million
2010 An additional 565 km of natural gas
distribution pipeline throughout the province
will be built till 2010.
New Projects
Refinery in Saint John $5-7
billion
2013 A 4-year project that is to set up a new
refinery that will produce a number of
petroleum products including diesel fuel,
gasoline and petroleum coke.
Second nuclear reactor $2
billion
A new nuclear reactor near Point Lepreau
that would have a projected output of 1085
MW of electricity and a 60 year operating life.
Natural Gas Pipeline Expansion
in NB
$250
million
2010 Maritimes and Northeast Pipelines are
planning to boost capacity on natural gas
pipeline by setting up new compressor
stations to increase the flow rates.
Brunswick Pipeline $350
million
2008 A 145 km pipeline from the Canaport LNG
facility in Saint John and connect with U.S.
portion of the Maritimes & Northeast Pipeline
at the border.
Source: Major Projects Inventory 2007, Atlantic Provinces Economic Council.
5.2 National Opportunities
Expansion in the oil and gas industry in the West provides a significant opportunity to
develop new export markets for New Brunswick-made quality products and services. The
demand for fabricated components from Alberta is simulating new entrants to the supply chain.
New Brunswick metal fabricators/machine shops participation in National Buyer/Seller Forums
indicates the provinces initiative to meet with Tier One Alberta buyers to do business.
The on-going bitumen upgrader project in the Greater Edmonton Area (GEA) creates
opportunities for non-Alberta based companies. The growing demand for two products,
structural steel and pressure vessels, in Alberta will make it a primary target market for metal
fabricators and machine shops in New Brunswick and the Atlantic region. The upgrader projects
in the GEA will expand the market of fabricated metal products and machinery by some $21.5
billion. Table 5.3 presents the key financial estimates for metal products and machinery
manufacturing (QGI, 2007).
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August 11, 2008
Table 5.2 Major Projects in Other Atlantic Provinces
Newfoundland and Labrador
Project $Value Begins Ends
Humber Valley Resort, Phase II $858 million 2006 2012
Offshore Exploration $819 million 2007 2012
Medium-High Probability
Voiseys Bay Full Scale Nickel Processing
Facility
$800 million 2009 2012
White Rose Expansion $600 million 2007 2010
Lower Churchill River Hydroelectric Development $6-9 billion 2009 2018
Placentia Bay Oil Refinery $5 billion 2008 2011
Hebron/Ben Nevis Oil Field $3-5 billion 2010 2013
LabMag Iron Ore Project $3 billion 2008 2011
Labrador Wind Farm $2.5 billion 2008 2011
Voiseys Bay Underground Mine Development $825 million 2018 2018
Nova Scotia
Project $Value Begins Ends
Bedford West Development $1 billion 2007 2027
Offshore Exploration $900 million 2003 2010
The Ravines of Bedford South $600 million 2003 2017
Keltic Petrochemical and Maple LNG Project $4.5 billion 2007 2011
Deep Panuke Natural Gas Development $700 million 2008 2010
Table 5.3 Financial Estimates - Metal Products and Machinery Manufacturing
Fabricated Metal
Products ($ billions)
Machinery
($billions)
Alberta 2006 demand, est. $8.03 $13.45
Share % %
Alberta Fabricators and manufacturers share of
Alberta demand, est.
36 22
Inter-provincial imports, est. 22 7
International imports, est. 42 70
Total 100 100
Source: Statistics Canada and QGI Consulting, 2007.
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Final Report
August 11, 2008
Calculated from the above estimates, New Brunswick will have an opportunity to compete with
other Atlantic provinces for a $1.77 billion market for fabricated metal products and $0.94 billion
for machinery.
Fabricated metal products like structural steel, pressure vessels, heat exchangers, pumps,
compressors, valves, and piping will become primary products for metal fabricators in North
America. Table 5.4 presents the estimated key inputs and expected suppliers by market share.
Table 5.4 Expected Sourcing of Oil Sands and Upgrader Inputs by Market Area
Key Inputs Alberta % Other Canada % US % Offshore % Total %
Heat Exchanger 15 20 50 15 100
Pressure Vessels 70 15 2.5 12.5 100
Pumps & Compressors - 2.5 55 42.5 100
Valves - - 50 50 100
Structural Steel 60 10 20 10 100
Piping (Pipe Spools) 75 15 10 - 100
Source: QGI Consulting Greater Edmonton Area Bitumen Upgrader Supply Chain Report
As fuel prices continue to escalate, higher shipping costs erode New Brunswick suppliers
competitive position enhanced by lower labour costs. Metal fabricators could accommodate
increased shipping costs by consolidating bulk shipments and exploiting economies of scale.
5.3 International Opportunities
KPMGs 2006 Guide to International business Costs, indicates Atlantic Canada is more
competitive compared with most U.S. regions and European countries. Table 5.5 lists a
comparison among several representative cities.
Canadian aerospace firms are leaders in the global market for manufacturing and maintenance
of aircraft, jets, helicopters, small gas turbine engines, flight simulators, and landing gear. The
aerospace and defence industry in the Atlantic region is a relatively small but dynamic and
growth orientated sector. However, there are many opportunities created by Local Economic
Benefit (LEB) and industrial offset programs which could be exploited, particularly in
Maintenance, Repair and Overhaul (MRO) activities for the defence sector. The presence of
CFB Gagetown, the largest military base in geographic area in Canada and its associated
approximately 25,000 square kilometres of air space, coupled with the as yet undeveloped
Aerospace and Defence Park near the Fredericton International Airport represent a competitive
advantage that needs to be pursued. This aerospace and defence industry is highly competitive
on a global basis and requires marketing savvy, critical mass and high quality production
capacity. This is a sector that is difficult for the machine shop and metal fabrication sector in
New Brunswick to penetrate, due to the many small firms and is one promising area where
government assistance could reap large rewards.
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Final Report
August 11, 2008
Table 5.5 Comparative Business Costs Index* - Aerospace Industry/Aircraft Parts
Manufacturing
Country City Cost Index
Germany Frankfurt 108.3
U.K. London 106.8
France Paris 98.1
U.S. Average 100.0
Seattle, WA 104.5
San Diego, CA 104.2
Dallas, TX 101.3
North Virginia, VA 99.5
Atlantic Canada St. Johns, NL 92.6
Halifax, NS 91.2
Moncton, NB 90.5
Charlottetown, PE 90.1
Sydney, NS 91.6
Truro, NS 88.7
Source: Competitive Alternatives: KPMG, 2006
*Business costs are expressed as an index, with the United States
average being assigned to 100. A cost index of less than 100 indicates
lower costs than those in the U.S.
As indicated in Table 5.5, business costs for aerospace industry/aircraft parts manufacturing in
New Brunswick are comparatively lower than that in the U.S. and some major European
countries. For Atlantic companies in this sector, the biggest market is United States, which
accounts for 54% of total Atlantic exports in the aerospace industry. The United Kingdom is the
second largest market (19%) followed by the Czech Republic (10%) and European countries
such as Italy, France, Norway, and Ireland.
Currently, New Brunswicks biggest international market is the United States. New Brunswick
manufacturers of construction and building products pursuing New England market will face
fierce competition from U.S. based and off-shore producers. As the NE market becomes
saturated, it becomes more difficult for new suppliers to enter. Due to the slow accounts
receivable collection and high bad debts ratios the expansion of existing market participants has
been hampered. In the southern U.S. market, New Brunswick suppliers are less competitive due
to that areas easy access to developing countries such as China or India who offer high value,
high quality products at lower cost. The mid-Atlantic region offers a very lucrative market for
Canadian building products due to their uniqueness, efficiency and price competitiveness,
however, transportation costs, the appreciation of the Canadian dollar and inadequate
promotional abilities of Canadian suppliers are identified as the limits to Canadian market
penetration.
The prospect of continually increasing demand for metals and minerals is driving investment in
mining worldwide, which is indicative of tremendous growth potential for New Brunswick firms
involved in the metal fabrication and machine shop sector.
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Final Report
August 11, 2008
The Argentine mining sector is identified as an emerging market for Canadian suppliers of
mining products and services as it is projected to grow at 2.5 - 3% annually to 2010. As
Canadian suppliers already dominate this market, there are ample medium-term opportunities
for Canadian suppliers of mining equipment and services. Table 5.6 demonstrates the top six
Canadian exports to Argentina (Industry Canada, 2007).
Table 5.6 Top Six Canadian Exports to Argentina, 2005
Product Value (000 $)
Power boiler and heat exchanger 11,405
Telephone apparatus 10,133
Petroleum refineries 9,437
Radio and television broadcasting and wireless communication equipment 8,405
Aerospace products and parts 7,237
Construction machinery 6,862
Total 53,488
Source: Industry Canada Trade Data Online http://strategis.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php
Kazakhstan is another potential market opening up new opportunities for machinery sales.
Though Canadian mining equipment is not well known in this market, the current favourable
exchange rate and increased investment in the mining sector could offer a competitive
opportunity for Canadian companies. Some barriers to entering this market include language,
culture, financing, certification, tariffs, and local legislation (Industry Canada, 2007).
Canadian imports to Iceland have been climbing steadily since 2002, reaching $212 million in
2006, accounting for 2.1% of the total imports of the country. Key imports from Canada were
non-ferrous metals, machinery for industries, fish, transport equipment, reinforcing steel, metal
claddings, structural steel and electrical and plumbing materials. The Atlantic Provinces
account for the largest source of Canadian exports to Iceland due to the easy access to the
market through the Port of Saint John. The Iceland market, which is characterized by a positive
business environment, well trained labour force, and diplomatic ties, offers significant potential
for New Brunswick (Industry Canada, 2007).
Sector Study
Final Report
August 11, 2008
6.0 CONCLUSIONS
The machine shop and metal fabrication sector in New Brunswick is very active and enjoying
high levels of success. From many perspectives that sector is generally at or close to capacity.
In order to advance beyond current levels of activity and product mix, the sector needs to
consider:
Increased Lean Manufacturing.
Enhanced export market development and collaboration.
Market-oriented training and incentives that root the workforce in New Brunswick.
Plant modernization and technology adoption to be competitive.
Strategic positioning in the value chain.
Creative leadership and effective coordination.
Lean Manufacturing: focusing on waste elimination and Supply Chain Management (SCM),
improves speed and flexibility in responding to changing customer demand and maximizes
product quality and profits with lowest cost. New Brunswick metal fabricators and machine
shops should maintain close relations and continuous communication with suppliers to facilitate
information sharing and maintain inventories at minimum levels. Information technology needs
to be upgraded in local companies to facilitate efficient communication, effective operation, and
eliminate redundant tasks. Programs to promote lean manufacturing already exist. Government
could assist small companies with limited time for forward planning to actively pursuing lean
manufacturing.
Invest in Competitiveness: To sharpen their competitive edge, firms should consider
outsourcing overseas to achieve lower costs, increase quality to become less price-sensitive,
and invest in innovation, people skills, marketing and sales. Related actions could include:
Make market analysis a permanent activity and provide the required resources and
information.
Encourage innovative approaches geared to market demand.
Promote the awareness and use of tax credits such as the Scientific Research and
Experimental Development (known as SR&ED) programs.
Establish financial assistance and support for investment in on-site training programs
relevant to specific locations, operations and equipment
Foster alliances and collaboration among small companies to allow bidding on large
tenders. .
Recruit and Retain Local Workforce: Firms need to develop and implement human resource
plans that address recruitment, hiring, retention, employee training and development, for both
residents of New Brunswick and new immigrants. On-site / on-the-job training programs, with
consistent curriculum, bridge the skill gap between recent graduates and the specific production
requirements, improve worker safety and increase productivity. These activities could be
augmented by workforce adaptability programs and co-op/internship opportunities targeted at
Sector Study
Final Report
August 11, 2008
local talent near the shops and fabricators. Attention should also be directed to retaining
educated workers at the beginning of their careers so as to establish roots in the province.
A well-trained work force reduces operating costs and accelerates the innovation process. With
an ageing work force, two dominant issues are incentive programs to encourage seniors to
participate in upgrade training and work longer as well as mechanisms to facilitate the transfer
of business ownership from retirees to younger management.
Quality Assurance: New Brunswick metal fabricators and machine shops produce high quality
products that result in loyal customers and repeat business. To maintain superior product quality
in the future systematic product quality measures, formal certification to internationally
recognized standards, and promotion of service integrated products should be considered.
Safety: Due to increased litigation and heightened public awareness, customers are demanding
high standards of safety from their suppliers. The machine shop and metal fabrication sector
should make safety the highest priority, by: establishing licensing and regulatory programs to
protect public health, safety, and the environment; promoting the sharing of operational
experience to enhance decision-making; and conducting safety oversight programs, inspections
and enforcement to monitor performance.
International Markets: Faced by high costs and barriers to international markets, the machine
shop and metal fabrication sector needs assistance and direction for overseas market
expansion. Related actions could include: establishing international entrepreneurship
programs; promoting outsourcing to reduce costs; building strategic alliances, networks and
collaborations to improve collective capacity and developing new ideas; and using technology to
reduce constraints on profitability and identify and target customers with specific interests, A
simple immediate measure would be to establish an on-line bulletin board for business
information sharing.
Transportation Costs: As high shipping costs become a barrier for companies to compete in
remote markets, economies of scale are possible by shipping in bulk rather than small
consignments, through consolidating brokers and freight contracts that allow a partial shift of the
cost to the customer (FOB contracts).
Financing: The predominant small size of sector firms hinders access to financial support; a
key factor for growth and development and access to larger markets. Financial institutions need
to recognize the value of investing in innovation, human capital, and technology. Investment tax
credits and other tax structures could enhance sector investment in improving both tangible
assets and supporting resources.
Sector Study
Final Report
August 11, 2008
7.0 REFERENCES
ACOA. 2006. Aerospace and Defence in Atlantic Canada.
Angel, Robert. 2005. Bridging the Gap-Manufacturing Leadership Roundtable, Report on
Executive Panels and Roundtable Discussions, Access Group.
Atlantic Provinces Economic Council. 2007. Major Projects Inventory 2007: Is Atlantic Canada
on the Verge of an Investment Boom?
BDC Corporate Plan Summary. 2008-2012.
BDC Perspective. 2008.
Canadas International Market Access Report, Foreign Affairs and International Trade Canada,
2003, 2006 and 2007.
Canadian Manufacturers & Exporters. 2007. Challenges Facing Manitoba Manufacturers,
presentation slices.
Canadian Welding Bureau website. 2007. Membership directory.
Equinox Management Consultants Ltd. 2002. Gaps in SME Financing: An Analytical
Framework.
Government New Brunswick. 2008. The New Brunswick Economy.
Government of Canada. 2006. Key Small Business Financing Statistics.
Industry Canada. 2001. Performance of Canadas Manufacturing Sector.
Industry Canada. 2004. Regional Economic Observer.
Industry Canada. 2008. Economic and Market Research/Statistics.
Industry Canada. 2008. Trade Data Online, http://www.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag ,
(Accessed: April 2008).
International Trade Canada Trade Commissioner Service. 2006. Market Briefs.
J.D. McNiven, J.E. Plumstead, and B.R.Russel. 1997. Atlantic Canada and the Future: Trends,
Challenges and Opportunities, North American Policy Group.
Kersey and Associates. 1999. A Report on Metal Working Human Resources and Training
Needs Analysis.
Sector Study
Final Report
August 11, 2008
Metal Working Association of New Brunswick. 2007. 2006-2007 New Brunswick Directory of
Metal Working Companies.
New Brunswick Canada Business Directory.
Oilweek Magazine. 2006. iCOSMO.ca acts as matchmaker.
QGI Consulting. 2007 and 2008. Greater Edmonton Area Bitumen Upgrader Supply Chain
Report.
RBC Group. 2008. Economic & Financial Market Outlook.
Scotts Directories.
Service Canada. Labor Market Information http://www.labourmarketinformation.ca/ (Accessed:
June 2008).
Statistics Canada. 1996-2006. Monthly/Annually Survey of Manufacturing, Analytical Paper
and Database.
Statistics Canada. 2006. A Profile of Canadian Exporters 1993-2005.
Statistics Canada. 2006. International Merchandise Trade, Annual Review.
Yellow Page on-line Business Directory.
APPENDIX A
Inventory
(Available under separate cover)
APPENDIX B
Questionnaire
(Available under separate cover)
APPENDIX C
Survey Results
Sector Study
Final Report
August 11, 2008
TE81026-Sector StudyMetal Fabrication Final Report-Aug 11 08-jp-cjy Page C1
Sector Study on Metal Fabrication/Machine Shops
Questionnaire Results
I. General Information
1. What makes your business successful in the local, regional, national or
international market?
0
5
10
15
20
25
30
35
40
S
h
i
p
p
i
n
g
Q
u
a
l
i
t
y
C
u
s
t
o
m
e
r
S
e
r
v
i
c
e
P
r
i
c
e
U
n
i
q
u
e
n
e
s
s
E
x
p
e
r
i
e
n
c
e
/
S
k
i
l
l
s
D
i
v
e
r
s
i
f
i
c
a
t
io
n
A
v
a
i
l
a
b
i
l
i
t
y
/
F
l
e
x
i
b
i
l
it
y
%
2. What is the companys ownership status?
0
10
20
30
40
50
60
70
80
90
100
Privately owned Publicly held
%
Sector Study
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August 11, 2008
3. What is the companys legal status?
0
10
20
30
40
50
60
70
Sole Proprietorship Partnership Corporation
%
4. When was the company started?
0
5
10
15
20
25
30
Before
1969
1976-
1980
1981-
1985
1986-
1990
1991-
1995
1996-
2000
After
2001
%
Sector Study
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August 11, 2008
5. Any Parent/Subsidiaries/Divisions?
0
10
20
30
40
50
60
70
80
90
100
Other Division No Parent/Subsidiaries/Divisions
%
6. Is there a formal succession plan?
0
10
20
30
40
50
60
70
80
Yes No
%
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August 11, 2008
7. Is there a current strategic plan?
42
44
46
48
50
52
54
Yes No
%
8. Has your company received or is your company pursuing any industry
certifications?
0
10
20
30
40
50
60
70
Yes No
%
Sector Study
Final Report
August 11, 2008
II. Workforce Information
9. Total number of employees currently:
0
5
10
15
20
25
30
35
40
45
0-10 11-20 21-50 51-100
%
10. Historical employment trend:
0
10
20
30
40
50
60
Increasing Staying the same Declining
%
Sector Study
Final Report
August 11, 2008
11. How many more employees you plan to hire over the next 2 years?
0
5
10
15
20
25
30
35
40
45
0 1-5 6-10 11-20 >20 Unknown
%
12. Component of workforce:
0
5
10
15
20
25
30
None 0%-20% 20%-50% 51%-75% 76%-90% >90%
Skilled/Total Workforce
%
0
5
10
15
20
25
30
35
40
45
None 0%-20% 20%-50% 51%-75% 76%-90% >90%
Semi-Skilled/Total Workforce
%
(a) Skilled/Total Workforce (b) Semi-Skilled/Total Workforce
0
5
10
15
20
25
30
35
40
None 0%-20% 20%-50% 51%-75% 76%-90% >90%
Entry-Level/Total Workforce
%
0
10
20
30
40
50
60
70
None 0%-20% 20%-50% 51%-75% 76%-90% >90%
Management/Total Workforce
%
(c) Entry-Level/Total Workforce (d) Management/Total Workforce
Sector Study
Final Report
August 11, 2008
13. Average hourly workforce wage (less benefits)
0
5
10
15
20
25
30
$15-17 $18-20 $20-22 $22-25 >$25
Average hourly wage-Skilled
%
0
10
20
30
40
50
60
70
$20-25 $18-20 $16-18 $14-16
Average hourly wage-Semi-skilled
%
(a) Skilled (b) Semi-Skilled
0
10
20
30
40
50
60
$10-12 $12-14 >$14
Average hourly wage-Entry-Level
%
(c) Entry Level
14. Describe the age of the majority of essential personnel:
0
20
40
60
80
100
120
Under 35 35-50 Over 50
%
Sector Study
Final Report
August 11, 2008
15. Do you have problems retaining employees?
0
10
20
30
40
50
60
70
80
Yes No
%
15-1. How many employees left your company in the last year?
0
5
10
15
20
25
30
35
40
45
50
None 1-5 6-10 >10
%
Sector Study
Final Report
August 11, 2008
15-2. What are the reasons (that the employees left your company)?
0
5
10
15
20
25
30
35
Wages non-
competitive
Lack of
spousal
employment
Better
opportunity
elsewhere
Mismatch
between
employee
and position
Other
%
15-3. How is your company addressing these issues?
0
10
20
30
40
50
60
In-house training Local college
training
Stop hiring Raise Salary
%
Sector Study
Final Report
August 11, 2008
15-4. Are these measures successful?
0
10
20
30
40
50
60
70
80
Yes No
%
16. How do you recruit new employees:
0
5
10
15
20
25
30
35
W
e
b
s
i
t
e
s
N
e
w
s
p
a
p
e
r
s
W
o
r
d
o
f
m
o
u
t
h
P
r
o
f
e
s
s
i
o
n
a
l
r
e
c
r
u
i
t
e
r
A
d
o
n
t
h
e
p
r
e
m
i
s
e
s
W
a
lk
-
i
n
s
J
o
b
f
a
ir
e
s
S
t
u
d
e
n
t
C
o
-
o
p
p
r
o
g
r
a
m
s
S
t
u
d
e
n
t
in
t
e
r
n
s
h
i
p
p
r
o
g
r
a
m
O
t
h
e
r
%
Sector Study
Final Report
August 11, 2008
17. Does your company have a written human resources attraction strategy?
0
10
20
30
40
50
60
70
80
90
Yes No
%
18. Do you have any problems recruiting employees?
0
10
20
30
40
50
60
70
Yes No
%
Sector Study
Final Report
August 11, 2008
18-1. What are the issues?
0
5
10
15
20
25
30
35
40
L
a
c
k
o
f
r
e
q
u
i
r
e
d
t
e
c
h
n
i
c
a
l
/
p
r
o
f
e
s
s
i
o
n
a
l
s
k
i
l
l
s
L
a
c
k
o
f
p
e
o
p
l
e
s
k
i
l
l
s
E
x
p
e
r
i
e
n
c
e
l
e
v
e
l
W
a
g
e
c
o
m
p
e
t
i
t
i
v
e
n
e
s
s
L
a
c
k
o
f
l
o
c
a
l
t
a
l
e
n
t
(
n
o
t
e
n
o
u
g
h
a
p
p
l
i
c
a
n
t
s
)
U
n
k
n
o
w
n
O
t
h
e
r
%
18-2. What is your company doing to address these issues:
0
5
10
15
20
25
30
35
40
45
50
I
n
t
e
r
n
s
h
i
p
A
d
o
n
i
n
t
e
r
n
e
t
L
o
o
k
i
n
g
o
u
t
s
i
d
e
t
h
e
a
r
e
a
K
e
e
p
e
x
i
s
t
i
n
g
e
m
p
l
o
y
e
e
s
T
r
a
i
n
i
n
g
P
r
o
g
r
a
m
N
o
t
h
i
n
g
%
Sector Study
Final Report
August 11, 2008
18-3. Are these measures successful?
0
10
20
30
40
50
60
70
Yes No
%
19. Which technical or people skills does your company have difficulty
attracting?
0
5
10
15
20
25
30
F
i
t
t
i
n
g
E
n
g
i
n
e
e
r
i
n
g
C
r
a
f
t
s
m
a
n
M
a
c
h
i
n
i
s
t
s
M
a
r
k
e
t
i
n
g
W
e
l
d
i
n
g
W
o
r
k
E
t
h
ic
s
%
Sector Study
Final Report
August 11, 2008
20. What is your attitude towards hiring an immigrant?
0
10
20
30
40
50
60
70
80
90
100
Positive Negative Neutral
%
21. If Negative, what seems to be the barriers to hiring/accommodating an
immigrant?
N/A
22. Do you know the process for hiring an immigrant?
0
10
20
30
40
50
60
70
80
90
100
Yes No
%
Sector Study
Final Report
August 11, 2008
23. Do you have a formal workforce training program in place?
0
10
20
30
40
50
60
70
80
Yes No
III. Sales and Cost Information
24. Annual sales range:
0
10
20
30
40
50
60
<
$
5
0
0
,
0
0
0
$
5
0
0
,
0
0
0
-
$
9
9
9
,
9
9
9
$
1
M
-
$
5
M
$
5
M
-
$
1
0
M
$
1
0
M
-
$
2
0
M
%
Sector Study
Final Report
August 11, 2008
25. Annual operating cost range:
0
10
20
30
40
50
60
<
$
5
0
0
,
0
0
0
$
5
0
0
,
0
0
0
-
$
9
9
9
,
9
9
9
$
1
M
-
$
5
M
$
5
M
-
$
1
0
M
$
1
0
M
-
$
2
0
M
%
26. Historical sales trend:
0
5
10
15
20
25
30
35
40
45
50
Increasing Same Decreasing
%
Sector Study
Final Report
August 11, 2008
27. Please identify the source of your sales by percentage:
0
5
10
15
20
25
30
35
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of sales-Provincial
%
0
5
10
15
20
25
30
35
40
45
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of sales-Regional
%
(a) provincial (b) regional
0
5
10
15
20
25
30
35
40
45
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of sales-National
%
0
10
20
30
40
50
60
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of sales-International
%
(c) national (d) international
28. Please identify the source of your supplies by percentage:
0
5
10
15
20
25
30
35
40
45
50
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of supplies-provincial
%
0
5
10
15
20
25
30
35
40
45
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of supplies-regional
%
(a) provincial (b) regional
0
5
10
15
20
25
30
35
40
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of supplies-national
%
0
10
20
30
40
50
60
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Source of supplies-International
%
(c) national (d) international
Sector Study
Final Report
August 11, 2008
29. Please indicate in percentage how much you pay for the operating cost in
a typical business year.
0
10
20
30
40
50
60
70
80
90
100
None Under
10%
11%-50% 51%-75% 76%-99% 100%
Operating cost-labor cost
%
0
10
20
30
40
50
60
70
80
90
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Operating cost-energy cost
%
(a) labor cost (b) energy cost
0
10
20
30
40
50
60
70
80
90
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Operating cost-raw material
%
0
10
20
30
40
50
60
70
80
90
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Operating cost-freight costs
%
(c) raw material (d) freight cost
0
10
20
30
40
50
60
70
None Under 10% 11%-50% 51%-75% 76%-99% 100%
Operating cost-other
%
(e) other
Sector Study
Final Report
August 11, 2008
30. Do you consider freight cost is an issue competing in non-local markets:
0
10
20
30
40
50
60
70
80
90
Yes No
%
IV. International Trade Information
31. International trade status
0
5
10
15
20
25
30
35
40
45
Import Export None N/A
%
Sector Study
Final Report
August 11, 2008
32. Historical export sales trend:
0
5
10
15
20
25
30
35
40
Increasing Same Declining N/A
%
33. What are the primary products/services your company exports?
0
5
10
15
20
25
30
Stainless
Steel &
Products
Equipment
and
Machineries
Machine
Shop
services
Boat
Hatches and
aluminum
products
Misc.
%
Sector Study
Final Report
August 11, 2008
34. Export sales range:
0
5
10
15
20
25
30
35
40
45
50
<$500,000 $500,000-
$999,999
$1M - $5M $5M-$10M
%
35. To which countries do you export?
0
10
20
30
40
50
60
70
80
90
U.S. Mexico Europe Jamaica
%
Sector Study
Final Report
August 11, 2008
36. Do you have an international market plan?
0
10
20
30
40
50
60
70
80
Yes No
%
37. What is your competitive advantage in international trade?
0
5
10
15
20
25
30
35
40
Market
niche
Price Service Product
quality
Unknown None
%
Sector Study
Final Report
August 11, 2008
38. Are you pursuing any international market?
0
10
20
30
40
50
60
70
80
Yes No
%
39. What are the barriers that your company faces to international trade?
0
5
10
15
20
25
L
a
c
k
o
f
k
n
o
w
l
e
d
g
e
o
n
.
.
.
L
a
c
k
o
f
k
n
o
w
l
e
d
g
e
o
n
r
e
.
.
.
L
a
c
k
o
f
e
x
p
e
r
i
e
n
c
e
U
n
c
e
r
t
a
i
n
t
y
F
i
n
a
n
c
i
a
l
i
s
s
u
e
s
E
x
c
h
a
n
g
e
r
a
t
e
B
o
r
d
e
r
i
s
s
u
e
s
F
r
e
ig
h
t
c
o
s
t
s
O
t
h
e
r
%
Sector Study
Final Report
August 11, 2008
V. Productivity and Innovation
40. Has your company instituted any efficiency measures to improve your
productivity or reduce costs?
0
5
10
15
20
25
30
35
P
.
V
.
A
/
A
m
e
t
u
s
E
l
im
i
n
a
t
e
w
a
s
t
e
R
e
d
u
c
e
t
i
m
e
p
r
o
c
e
s
s
M
o
n
i
t
o
r
i
n
g
B
a
t
c
h
r
u
n
T
r
a
in
i
n
g
%
41. Do you have an R&D budget?
0
10
20
30
40
50
60
70
80
90
100
Yes No
%
Sector Study
Final Report
August 11, 2008
VI. Infrastructure, Facilities and Equipments
42. What is your primary equipment and technologies used in production?
0
5
10
15
20
25
W
e
ld
i
n
g
m
a
c
h
i
n
e
s
C
N
C
m
a
c
h
in
e
s
C
u
t
t
i
n
g
e
q
u
i
p
m
e
n
t
C
r
a
n
e
s
S
c
r
e
w
m
a
c
h
in
e
s
B
r
a
k
e
a
n
d
s
h
e
a
r
L
a
t
h
e
s
M
i
l
li
n
g
m
a
c
h
i
n
e
%
43. Condition of facilities, computers and other technology equipment:
0
10
20
30
40
50
60
70
80
90
100
Excellent Good Fair Poor
%
Sector Study
Final Report
August 11, 2008
44. How much of your facilitys space and capacity are you currently using?
0
5
10
15
20
25
30
35
40
More than 90% 76-90% 51-75% Less than 50%
%
45. Compared with the past 18 months, what are your future investment
intentions for your current facility:
0
5
10
15
20
25
30
35
40
45
50
%
Sector Study
Final Report
August 11, 2008
46. Compared with the past 18 months, what are your future investment
intentions for your current equipment:
0
10
20
30
40
50
60
%
47. Are you planning to expand in the next 12-18 months?
0
10
20
30
40
50
60
70
Yes No
%
Sector Study
Final Report
August 11, 2008
48. How do you rate your access to markets, transportation network cost
wisely?
0
10
20
30
40
50
60
Expensive Fair N/A
%
VII. Financial Access
49. To accommodate growth in sales, workforce, equipment or facility
expansion, did you have difficulty in raising funds? And what was the
difficulty (s)?
0
10
20
30
40
50
60
70
80
N
o
d
i
f
f
i
c
u
l
t
y
C
o
s
t
l
y
t
o
f
i
n
a
n
c
e
n
e
e
d
s
T
o
o
m
u
c
h
p
a
p
e
r
w
o
r
k
R
i
g
i
d
t
e
r
m
s
b
y
t
h
e
b
a
n
k
H
a
r
d
t
o
f
i
n
d
s
u
p
p
o
r
t
U
n
a
b
l
e
t
o
d
e
m
o
n
s
t
r
a
t
e
.
.
.
%
Sector Study
Final Report
August 11, 2008
50. Would you consider equity financing to finance growth?
0
10
20
30
40
50
60
70
Yes No
%
51. Do you have a written financial/business plan?
44
45
46
47
48
49
50
51
52
53
54
Yes No
%
Sector Study
Final Report
August 11, 2008
52. Have you experienced challenges in your day to day cash-flow
management? And what are the challenges?
0
5
10
15
20
25
30
35
40
45
50
Never Lack of work Delayed
Payment
Exchange rate
%
53. Do you have a contingency plan for financing unexpected cash flow
needs?
0
10
20
30
40
50
60
70
Yes No
%
Sector Study
Final Report
August 11, 2008
54. Which issue, if resolved, would have the biggest impact on your growth?
0
5
10
15
20
25
N
o
i
d
e
a
F
a
s
t
e
r
b
i
l
l
c
o
l
l
e
c
t
i
n
g
E
x
c
h
a
n
g
e
r
a
t
e
S
a
l
e
s
g
r
o
w
t
h
L
o
n
g
t
e
r
m
f
i
n
a
n
c
i
a
l
a
c
c
e
s
s
S
k
i
l
l
e
d
w
o
r
k
f
o
r
c
e
T
r
a
n
s
p
o
r
t
a
t
io
n
c
o
s
t
%
55. What type of networking opportunities would be advantageous for your
company?
0
10
20
30
40
50
60
70
N/A Marketing
network in other
industrial sectors
Trade
shows/web sites
Labor market
networks
%

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