Jeff Brownlee, VP of Public Affairs, Canadian Manufacturers & Exporters, Ottawa
On the Idea: The question to stay domestic or go overseas is a debate for many manufacturers today. Many believe that the road to profitability means outsourcing to countries like China or India. For many, it works. For many others it doesn’t. Innovequity needs a specialized solution that I think can be found in Canada, most likely at a very competitive price.
Red Flags: The critical success factor is doing their homework and researching who, if anyone, can fulfil their needs. Finding that company or manufacturer in a developing country is daunting, but not impossible. And it does come with many risks, including intellectual property theft and quality standards.
Next Steps: I think this is an example of what the future of Canadian manufacturing will look like: not mass production, but mass customization – niche manufacturing. Outsourcing may make sense down the road. But at this stage of the game, the company should look within Canada to find that customized solution. They’ll know what they are getting in terms of quality, logistics is less of an issue, and price, in this economic climate, will likely be comparable.
Robert Maze, Vice-President Manufacturing, PTI Group Inc., Edmonton
On the Idea: It is important for the company to understand the volume of product sales. Sales volumes will influence how the manufacturing is done and determine the amount of investment in tooling and eventually the finished product costs.
Red Flags: The company should be cautious about entering into a manufacturing contract without a proven design. Prototype shops are expensive and changes to designs after manufacturing starts cost money. The company is likely better off to spend more time up front to prove the prototype designs will work and review design plans for manufacturing and assembly. Build a robust product that has few quality issues and is easy to service and maintain from the start.
Next Steps: Stick with North American manufacturing to start. There are a lot of challenges overseas that will distract from the basic business plan.
Carl Gravel, National Director, Manufacturing, Business Development Bank of Canada, Montreal
On the Idea: Manufacturing, while important, is high risk and capital intensive. Given the firm’s limited resources, several factors favour domestic production, including relatively low production targets, a plan to begin distribution in a specific region and innovation. The manufacture of early stage, innovative products demands quality control. So it’s better to have manufacturing facilities close by.
Red Flags: Once sales volume has risen, it may be advantageous to transfer abroad the production of certain parts. However, final assembly should remain in Canada. That would give Innovequity’s employees the time to master logistics and build relationships of trust and confidence with foreign partners, while ensuring quality control and managing the risk of intellectual property theft. The firm may need to send an employee abroad or hire a third party to ensure quality control.
Next Steps: Once Innovequity has matured enough to explore new markets abroad, it could either build a plant in Canada or the U.S. or make use of a partner’s plant. To do the latter, it will need a mutually beneficial relationship with their partner and a trusted foreign legal adviser.
Category: Project Start-Up, Start-Up Episode 05
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