Special to The Globe and Mail
Published Tuesday, Oct. 18, 2016 4:50AM EDT
Last updated Tuesday, Oct. 18, 2016 5:39AM EDT
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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Source: THE GLOBE AND MAIL