COVER

LESSONS IN HOW TO SURVIVE

FIRMS FIND NEW PATHS TO PROFITS

BARBARA WICKENS,ANN WALMSLEY August 12 1991
COVER

LESSONS IN HOW TO SURVIVE

FIRMS FIND NEW PATHS TO PROFITS

BARBARA WICKENS,ANN WALMSLEY August 12 1991

LESSONS IN HOW TO SURVIVE

COVER

FIRMS FIND NEW PATHS TO PROFITS

In business, there are many paths to international success. Some companies become leading world competitors by developing innovative products. Others stick with tried-and-true products, but find new and more efficient methods to make them. Either way, the results are the same: higher sales and improved export potential. Three case studies:

As the adage goes, “If someone builds a better mousetrap, the world will beat a path to the door.” One small Quebec manufacturer, Dutailier Inc., has built a better rocking chair. Traditional rocking chairs tend to scuff floors and provide an uneven ride—and the rocker must continuously propel himself. But Dutailier’s Glider Rocker, which retails for between $150 and $600, depending on the model, eliminates those drawbacks. Its base stays in place while the chair itself moves smoothly back and forth with a minimum of effort. And, proving the saying about mousetraps, the world has started knocking on the company’s door in St-Pie-deBagot, 50 km east of Montreal. According to Pierre Cloutier, Dutailier’s vice-president of sales and marketing, the company has 3,500 customers—75 per cent of them outside Canada. Most of the firm’s exports go to the United States, where such major retailers as Sears Roebuck sell the chairs. Last year, Dutailier began exporting to France and the United Kingdom as well. The results are so encouraging, says Cloutier, that the firm now plans a major push into the other 10 European Community membercountries. He adds: “There are 350 million educated consumers there. We want to be a part of it.”

As a result of narrowly focusing its manufacturing while it develops a global marketing vision, Dutailier is thriving in the competitive furniture industry. For the first 12 years after Fernand Fontaine, a former accountant, founded the company in 1976, Dutailier also made liv-

ing-room and bedroom sets. But in 1988, the company eliminated those fines and began concentrating solely on the rocking chairs. Says Cloutier: “That was the turning point. Before that, we were like everybody else in the Canadian marketplace—trying to be all things to all people.”

As a private company, Dutailier keeps confidential its financial figures, but there is little doubt that specialization has worked. Dutailier currently has 550 employees—up from fewer than 200 in 1988—in four manufacturing plants.

As well as winning numerous design awards during the past three years, Dutailier also picked up a 1991 award for production and marketing from the Montreal-based Quebec Chamber of Commerce. The Glider Rocker is now available in 35 models, with 12 different finishes, from plain, varnished pine to each season’s most fashionably colored lacquers.

Shoppers can also choose among 60 chair coverings, from printed fabrics suitable for the nursery to sophisticated Italian leathers. A recently upgraded computer system for managing distribution also monitors consumer tastes. As a result, the selection of finishes and fabrics is modified twice a year. Says Cloutier:

“You create demand by producing a product the consumer wants.” For Dutailier, making the better rocker has had a proverbial result.

BARBARA WICKENS

It looked like a game of hot potato, but it was really a demonstration of just-in-time delivery. Thirteen workers at the Boeing Canada Technology Ltd. plant in Amprior, Ont., sat in a room passing small aluminum discs back and forth. Some participants stuck colored tabs to the discs; others peeled them off, but only after receiving a signal from the next person along the assembly line. The discs represented airplane parts, and the removal and application of the tabs represented work done in the factory. The object of the exercise was to teach employees to refrain from working on a part until a customer receives a shipment and generates new demand. “If you are working without authorization [demand], you are building unnecessary inventory,” warned Michael Chateauvert, the course supervisor.

The disc-shuffling game is a key training session in the plant’s effort to improve its productivity—and its competitive position in a highly volatile industry. Although Boeing Canada Technology is a division of Seattle-based Boeing Co., the Arnprior plant, 50 km west of Ottawa, must compete against European, Japanese and other competitors for contracts from the parent company. Currently, the factory employs 660 people and does $60 million in business a year, servicing Canadian military helicopters, fabricating sheet metal and manufacturing and assembling parts for several Boeing aircraft models.

Until 1988, company officials say, the Arnprior plant frequently failed to win contracts because of high costs and late deliveries. Indeed, the on-time-delivery performance rate was just 30 per cent. But the plant’s performance began to improve in December, 1988,

Dutailier Inc. mÊÊtÊÊÊÊÊÊÊmÊÊÊÊÊmmÊÊiÊÊÊÊKÊÊÊÊÊÊÊÊÊÊm HEAD OFFICE: St-Pie-de-Bagot, Que. MAJOR PRODUCT: Rocking chairs EMPLOYEES: 550 1990 REVENUES: $40 million 1990 PROFITS: N/A ESTABLISHED: 1976

Boeing Canada Technology Ltd. HEAD OFFICE: Winnipeg MAJOR PRODUCTS: Airplane parts EMPLOYEES: 2,100 1990 REVENUES: $207 million 1990 PROFITS: N/A ESTABLISHED: 1954

when Boeing Canada Technology president James Sawyer introduced a computerized planning system known as Manufacturing Resource Planning II. According to Boeing officials, MRP II goes beyond merely tracking inventory. It makes it possible for employees at all levels of the company to monitor the entire production system to avert bottlenecks. But despite the system’s apparent advantages, Sawyer says that he had difficulty convincing his bosses in Seattle to adopt it. A first attempt at using it failed in 1986 because, he says, the company did not involve its employees. “Fat-cat CEOs lack the commitment to new tools,” says Sawyer, who joined the company

as an apprentice machinist in 1964. “I eat in the cafeteria and walk the floors,” he added, “and it has taught me that you cannot bring new concepts in through the side door.” Now that nearly every employee has taken a course about the new planning system, the company says the plant’s on-time-delivery rate is 98 per cent and raw material inventory has been halved to $2 million. Because of that success, it is phasing in MRP II at its larger Winnipeg plant. Still, some of the Arnprior facility’s difficulties remain. It has quality-control problems, says general manager Robert McDonald. But he adds that as the just-in-time inventory system spreads throughout the operation, workers will be forced to make quality checks at each stage. That will involve them even further in the production process, affirming Sawyer’s belief that without employee participation, new concepts are doomed.

ANN WALMSLEY

Perseverance has proved to be an effective competitive weapon for Vancouver-based MacMillan Bloedel Ltd. The forest-products company spent 20 years and $250 million developing a new super-strong building product known as Paraliam—a beam that is manufactured by bonding, under high pressure, long strands of wood veneer with an adhesive resin. Company officials say that Paraliam is a key component in their strategy to compete in the North American market for building products. At a time when lumber from large, mature trees is increasingly scarce and expensive, Paraliam offers builders a cost-effective alternative: a wood-based product

that can replace steel in some circumstances. In 1989, after testing about 9,000 different versions of the product, MacMillan Bloedel began production of Paraliam at a plant on Annacis Island, 30 km south of Vancouver. That facility has since been expanded to employ 90 people who produce a million cubic feet of Paraliam a year, 15 per cent of which is exported to the United States. Last year, the company opened a second factory, in Colbert, Ga., that is designed to turn out twice the volume of the Annacis plant. But penetrating the huge U.S. market is a major challenge, said Arthur Schmon, Parallam’s marketing manager. For that reason, MacMillan Bloedel plans to join forces with an established U.S. building-products manu-

facturer, Trus Joist Corp. of Boise, Idaho, to produce and sell Paraliam across North America. “Market share was not growing fast enough to keep the plants operating at capacity,” Schmon adds. “We had to find a way to accelerate the process.” Even as Paraliam is being positioned to tackle the U.S. market, Schmon is eyeing new opportunities in Japan—where partner Trus Joist already has a foothold—and in Europe as well. Clearly, working in partnership has rapidly expanded the horizons of the Canadian product.

DEIRDRE McMURDY

Paraliam Division of MacMillan Bloedel Ltd. HEAD OFFICE Vancouver MAJOR PRODUCTS: Resin-bonded wooden beams EMPLOYEES: 300 1990 REVENUES: N/A 1990 PROFITS: N/A ESTABLISHED: 1987