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Topics: Company News; Corporate Finance
Source: Financial Times
Aglance at a "toroidal winder" does no more to reveal its function than does its name. It has the characteristics of any piece of modern industrial equipment: ultra-complex, hyper-specialized and super-shiny.
But the machine embodies the metamorphosis and adaptation of Plitron Manufacturing Inc., a Toronto manufacturer of transformers.
Plitron's new investment represents the recognition of a new reality for Canadian manufacturing and an acceptance that sub-optimal economic forces are enduring.
After almost 30 years in business as a designer and producer of high-end transformers for audio-video components and medical equipment, Howard Gladstone, the company's president, is familiar with the comforts of high economic growth and a weak loonie.
"You could still be very successful and be very inefficient," he said. "But those days are gone."
But after the global recession deflated demand and the dollar marched up to parity with the U.S. greenback, the company, which is primarily an exporter, realized its margins would not ensure its success.
So, after weathering the downturn, improving productivity through reinvestment became the mantra for 2010.
"We have to improve our business if we're going to survive as a Canadian manufacturer," said Steve Nolan, general manager. "We're prepared to do what we have to do now to compete at a par dollar."
Machinery upgrades would be essential, both to boost margins and to maintain Plitron's reputation for quality.
Despite the esoteric aesthetics, the task of a toroidal winder is comparatively simple: to wrap coils of magnet wire and insulation around a disc-shaped core. The end product converts electrical power from one voltage to another. The technology itself is 19th-century, but a key to manufacturing modern transformers for high-tech equipment is precision.
The specific voltage of the transformer dictates the number of times the winder needs to wrap wire around the core. A transformer destined for an amplifier produced by Peterborough, Ont.-based Bryston Ltd., for example, needs 163 turns of two wires. One extra turn, or one fewer, can throw off the voltage.
The core also needs to turn at just the right speed to ensure the wire is spaced properly.
All those tasks are handled dreamily by the new SMC-4 winder. And since Plitron bought the machine from a Connecticut-based manufacturer, it was relatively cheap as an import, the flipside to the detriments of a high loonie.
That all translates to higher quality, faster production, less waste and, with digital, programmable controls, less downtime, Mr. Nolan said. "We've been using it to do current transformer windings and it's been beautiful. Fantastic quality and very, very fast."
In addition, the new winder can produce much larger transformers than Plitron's existing machines, allowing it to supply makers of wind turbines.
Expanding the company's product line and entering new markets are also crucial to Plitron's growth strategy, in addition to improving productivity.
It is in the process of introducing a line of lighting control systems designed to manage lighting power in parking lots, factories and stores. Applied to its own factory, the product is saving Plitron 30% on its electricity bill.
Further, early in the year, the company earned ISO 9001 certification, qualifying it to supply the medical-equipment market. Its transformers are ideal for X-ray and MRI machines because they are compact, reliable and operate quietly.
They also offer superior protection against power surges from lightning strikes, Mr. Nolan said.
In its core audio-video market, in addition to supplying other manufacturers, Plitron installs its own transformers in a line of power conditioning components it sells under its retail line, Torus Power.
"Power conditioning takes the voltage out of the wall and it cleans all the noise out of it, so you can plug in your high-end audio-video equipment and it's nice, clean power. You get a cleaner picture and clearer sound," he said.
But building those transformers was becoming more difficult on the machines it accumulated over the past three decades, Mr. Gladstone said.
"The older machines were showing their age, our quality was not improving and our efficiency was not improving," he said. "Times were looking fairly dire."
But success mandated renewal, he said. So in addition to the new acquisition, Plitron decided to upgrade its existing machines, the newest of which was about 10 years old. "They were dinosaurs that needed to be turned into iPads," Mr. Gladstone said.
The old equipment still had value but was no longer being serviced by the German manufacturer. So it decided to gut the outdated winders, replace gears and chains with servo drives, commonly used in factory automation, and apply touch-screen control systems.
Once all the upgrades are completed, the company will be able to network the machines and digitally monitor performance metrics on each winder. "That's a level of management of capacity and management of productivity that we just can't do today," Mr. Nolan said.
All told, Plitron spent more than $200,000 on productivity improvements in 2010, with more expenditures planned for the new year.
While that's hardly a huge investment for an outfit of its size, the upgrades were vital in helping the company post sales growth of 25% this year, Mr. Nolan said. Plitron is aiming for a similar pace of expansion in the coming years.
The reinvested money is already shaping up to be worthwhile, with an expected return on investment in excess of 150%. And lead times between the receipt of an order and delivery, once at five to six weeks, have been cut to three weeks.
"It just makes perfect sense for companies to consider reinvesting," Mr. Gladstone said.
Copyright 2010 CanWest Global Communications Corp, Source: The Financial Times Limited
Source: DJ : Dow Jones, FTIW : Financial Times Intelligence Wire, FTNP : Financial Times Newspaper, RT : Reuters, ZP : Zephyr, AP : Associated Press
