Global Commerce Insider
How a small Canadian company that makes
tiny shims is selling to international giants
Special to The Globe and Mail
Published Tuesday, Oct. 18, 2016 4:50AM
Last updated Tuesday, Oct. 18, 2016
It's a company that redefines the
"small" in small business, but Shimco North America Inc. thinks big. A maker of
shims and spacers that are as thin as one-thousandth of an inch - just
one-quarter the thickness of a human hair - the Cambridge, Ont., company is
finding a market among the world's aerospace giants.
To do this, the company is employing
business strategies that are helping to differentiate it among the
international competition in the critical and lucrative sector for Canada.
"We are selling into every major
aerospace hub in the world," says Shimco president and chief executive officer
Peter Voss, who bought the company five years ago and has rebranded and
refocused it on aerospace, targeting global original equipment manufacturers
(OEMs) such as Embraer S.A. in Brazil, Boeing Co. in the United States,
Kawasaki Heavy Industries Ltd. in Japan and Airbus Group SE in France, as well
as the Tier-1 and Tier-2 companies that supply them.
Indeed, tiny Shimco, which has a staff
of 47 and is expecting to grow as much as 40 per cent this year, increasingly
counts itself among the Tier-1 and Tier-2 crowd, as the sector undergoes major
shifts. One of the big changes is that companies such as his must become
"preferred strategic partners," Mr. Voss says, while the industry changes to an
"integrator" model where a small number of firms play a more central role in
aircraft component assembly.
Shimco began 25 years ago in Markham,
Ont., making precision parts in materials including aluminum, titanium,
synthetics and composites. Mr. Voss, a chartered professional accountant,
physicist and economist, had a background working in corporate finance for
firms that acquired other companies. He decided in 2011 to buy Shimco, which
was then operating as "a glorified machine shop" and to turn it into a
"technology company" with potential for international growth.
He increased its aerospace business from
about 65 per cent of its market to 98 per cent today, and earlier this year
moved the company to a new high-tech plant in Cambridge that has vastly
increased production through greater efficiencies. In the next two years the
facility is expected to grow even more in size and incorporate a new centre of
excellence in advanced manufacturing technologies, working with local universities.
The company's shims and spacers are "
management solutions" that help manufacturers fit pieces that are machined with
plus-or-minus tolerances, Mr. Voss explains. These can be quite large, such as
the giant ring that goes into a helicopter rotor assembly, but are often
incredibly thin. They are also usually adjustable, made in layers that can be
peeled away as necessary, so an overall part, when it is bolted together with
the shims included, is exactly the right size for the aircraft assembly. "They
cannot finish the plane without us," he says. The volumes involved can be huge,
although only if Shimco is considered a "supplier of choice."
For example, it has just received a
major contract with Kawasaki to supply parts for the Boeing 777 and 777X wing
assemblies, which Mr. Voss hopes will lead to more work for the company. Such
deals take a long time to happen, with lengthy research-and-development, as
well as sales, cycles in the industry. "It's a long process," he notes, with
contracts that can last five to seven years.
The idea behind the "integrator" model
is that OEMs share the risk (and cost) of assembly with their suppliers, he
says. This means that companies such as Shimco must build trusted relationships
with major companies and have quality track records.
Moira Harvey, executive director of the
Ontario Aerospace Council, a not-for-profit trade association, says there are a
good number of international opportunities for smaller supply-chain companies
like Shimco to capitalize on. With a trend among the OEMs to push greater
responsibility down to Tier-1 and Tier-2 companies, it's important to partner
and collaborate on R&D initiatives happening in the industry, she suggests,
while emphasizing quality, reliability and safety.
"People are looking for the value add "
that is the real differentiator," she says, noting that this can mean improving
technology and processes, as well as reducing production turnaround times. It's
important to "know who the players are" and deal directly with them, especially
as "aerospace is a global business," she notes. "Certainly getting yourself
known out there is key."
Mr. Voss says a good deal of the credit
for Shimco's remarkable international showing goes to its associations with the
Canadian Trade Commissioner Service and Export Development Canada, which helps
the company appear larger in foreign markets. "It puts us on a different
level," he remarks. Other advantages for the company include Canada's lower
dollar, which helps to save costs as major customers look to trim as much as 15
per cent from their bottom lines.
Among Shimco's strategies is its website
- "You can't tell how big we are," Mr. Voss says - and moving into
higher-margin work, such as the space market. It has also brought on a local
agent in Brazil to boost the company's presence with Embraer and its large
suppliers. "The face-to-face contact is very important," Mr. Voss explains.
The ultimate goal is to add more
technology to its shims, such as special metal coatings that improve lifespans
and nanotechnologies that enhance the inherent intelligence of aircraft parts.
"If we only produce parts that compete on cost, eventually the company will be
dead," he adds.
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