How investments resulted in huge productivity gains for this equipment manufacturer
When Dave Couture and Vincent Tourigny decided to invest in new equipment, the timing seemed far from ideal.
It was the fall of 2015 and the Canadian dollar had fallen to US$0.75. That made their investment 25% more expensive than they’d initially expected.
Many companies would have decided to put off the investment, hoping for a stronger Canadian dollar to return.
But the owners of Sipromac, a manufacturer of equipment for the food industry, decided to go for it. They reasoned that even if they paid 25% more for the equipment, the return on investment would be significant once the equipment was up and running.
“Our machines were stuck in the ’80s,” Tourigny says. “Our competitors were delivering within four weeks, while our delivery times were six weeks. We had to push forward.”
An investment that pays off
Sipromac, which Tourigny and Couture bought in 2011, manufactures vacuum packaging and food processing equipment in Drummondville, a manufacturing town in central Quebec. With two later acquisitions, the entrepreneurs created the DaVinci Compass group of companies.
After weighing the pros and cons of the investment, the two entrepreneurs decided to go ahead with the purchase of a laser-cutting machine and two pieces of digital equipment for machining parts. The bill? US$764,000 or around C$1 million.
Was it worth it? “Every cent of it,” says Couture, President, CEO and co-owner of DaVinci Compass, with Tourigny, the group’s Vice President. “The investment will pay for itself within three years.”
Huge gains in productivity
Couture and Tourigny’s decision to buy the equipment shaved two weeks off the company’s delivery times to customers—a huge gain in productivity.
“We are delivering in four weeks instead of six,” Tourigny says. “Now that we’re able to deliver faster, our sales have gone through the roof. We’ve seen 23% sales growth since the installation of the new equipment.”
What’s more, the new equipment allowed the company to eliminate subcontracting, bringing all work in house. That’s allowed Sipromac to not only cut costs but also improve quality.
It no longer has to pay subcontractors and can better control the purchase price of raw materials, primarily metal. Doing away with subcontracting has also allowed the company to reuse scrap and save on material costs.
“Our manufacturing costs went down by 5%,” Tourigny says.
Continuous improvement that leads to growth
Since 2011, Couture and Tourigny have frequently invested in machinery and equipment to make the company more productive and efficient.
Thanks to these investments, and efforts to improve Sipromac’s operational efficiency, the company has grown 25% to 35% per year and taken market share from competitors—quite a feat in a mature industry.
In 2014, Tourigny and Couture decided to buy a second company, Picard Ovens, a maker of pizza ovens and kitchen equipment with facilities in Victoriaville, an hour northeast of Drummondville.
A second acquisition, Lambertson, a Nevada manufacturer of stainless steel products for the food industry, was made in 2015. That allowed DaVinci Compass to add a distribution network on the U.S. West Coast, benefitting all three companies in the group.
DaVinci Compass generates over $20 million in sales and sells approximately 2,000 machines a year through a network of dealers that sells them to clients in the food industry and to restaurant and grocery chains, such as IGA and Metro in Canada, and Whole Foods in the U.S. About 55% of its sales are in the U.S., and 15% in other countries outside Canada.
Becoming world leaders
Couture and Tourigny have big plans for each of the companies in the group. They want to be world leaders in their markets.
“We are up against companies from the U.S., Europe and around the world, most of whom make their products in China,” Tourigny says. “We chose quality and customer service. If we don’t invest to update our technology, we can’t win. If you don’t have the tools to compete, your business has no future.”
3 ways to put investment at the core of your business
- Take the time to evaluate your business’s efficiency. A good way to do this is by benchmarking your performance against similar companies in your industry.
- Look at your business closely to identify the improvements that will have the biggest impact. Consider hiring an operational efficiency expert to help you.
- Make it happen. Whether it’s machinery, equipment, technology or your employees, investing is a crucial ingredient for ensuring growth and staying competitive.