By Jessy Cavazos, Industry Manager
Mr. Nathan Sheaff
Nathan, a University of Waterloo graduate in Electrical Engineering, founded Sciemetric Instruments in 1981. He developed Sciemetric's innovative Signature Analysis technology, which is currently being used to detect and analyze defects in manufacturing processes across many sectors. Under Nathan's leadership, the company has grown from a few employees in one location to the current organization, which has subsidiaries in the U.S., Europe, and Asia, and boasts an impressive list of Fortune 500 customers worldwide.
Mr. Ron Pawulski
Ron has been an integral member of the Sciemetric Instruments team for more than a decade. Starting out as an applications engineer, he has steadily moved up through the ranks to his current leadership position. As director of the medical business unit for the company, Ron manages technical and sales functions for the division, including project delivery. His many years of hands-on experience solving customer quality challenges in his roles as sales engineer and business development manager provide him with the know-how and expertise to capably guide the members of his team.
For the past four-plus years, however, Ron has been delving deep into the medical field. He has been instrumental in creating systems that meet the unique challenges of medical customers and consider the industry-specific requirements of this heavily regulated industry. Along the way, he has developed an encyclopaedic knowledge of the compliance landscape, as well as of best practices in the manufacture of medical devices and pharmaceuticals.
Here in conversation with Jessy Cavazos, Industry Manager for the Test & Measurement Group at Frost & Sullivan, Nathan and Ron look back at factors that have led to the unprecedented success of its signature analysis technology and discuss the company's future prospects with the emergence of promising growth opportunities and newer application areas.
Can you share with our readers a brief on the genesis of Sciemetric Instruments, and the vision for its formation and its role in the process-monitoring and testing industry today?
Nathan Sheaff: We started working in automation and industrial quality in the mid-'90s. We began to work very closely with Ford Motor Company, and over a period of 10-15 years, we developed with them a brand new approach to an integrated quality system that really revolutionized the way they monitor, track and manage quality in powertrain builds. That really was the genesis of Sciemetric's current product and market vision.
At the root of it is the idea of integrating monitoring and testing into the assembly process, even in an eavesdropping mode and/or the introduction of special interim tests, so that by the time you get a product completely built, it is already virtually perfect because you have already monitored everything that conceivably could go wrong. We pioneered that with Ford as a long-term partnership and have automated many engine assembly lines around the world since then. And now, it has become the latest methodology and most advanced quality operating system there is in powertrain build, and we have expanded that footprint into other industries and areas.
Ron Pawulski: The key here, which brings out the genesis of Sciemetric's vision, is giving the customer an integrated quality solution. We are not looking at just parts of the manufacturing process. We are trying to give quality throughout the entire manufacturing line, which of course brings great cost-savings to our customers.
What is the unique value proposition that Sciemetric brings into the Test & Measurement market today? Could you highlight the key factors that set it apart from the competition?
Nathan Sheaff: At the center of the Sciemetric technology is what we call Process Signature Verification or Process Signature Technology, which is the idea that every process has a signature and every signature can be monitored. A great deal can be learned about the process to make sure it is under complete control if you have adequate detailed monitoring of those signatures. So what Sciemetric has built over the years is a flexible type of approach where any manufacturing process can be meticulously monitored at very reasonable cost. This leads into the whole idea of integrated quality, where we approach quality at the holistic level, meaning the entire enterprise or entire assembly line as opposed to just a station or a section. Sub-assemblies, components, materials or processes all lead to product quality. If you don't adequately monitor from end-to-end, things will escape your attention or you will be unable to make correlations and fix root causes.
Ron Pawulski: We are different because our competitors have a very narrow focus. For example, they might want to help a manufacturer improve their pressing operation. However, pressing is a very small part of what a manufacturing floor might do. Also, they just ship a box to the customer that does a specific operation and that is the end of the work with the customer. What Sciemetric does is work with customers on a strategic relationship where we understand their full manufacturing line—not just one small piece of it—and then we offer ideas and strategies to improve their overall quality. So we don't work on a transactional basis. A lot of customers see that as a key advantage of working with Sciemetric.
Our competitors are simply not able to tie all the different processes in the manufacturing process together. Sciemetric has a databasing solution that takes all the data from across the manufacturing line and ties it together, so the customer can mine that data to understand where in the manufacturing line quality problems are arising and where the bottlenecks are. Bringing all that data together in a central place and offering that data mining capability is something that most our competitors don't do. In fact, I can't think of one competitor that can tie all those pieces together.
In your opinion, what are some of the key trends in the industry, and how do you think they will shape tomorrow's manufacturing Test & Measurement marketplace?
Nathan Sheaff: A lot of manufacturing companies want to integrate the information that they have. Half of the battle is to collect the right data, and the other half is make sure that the data is properly analyzed and presented to people that can make a difference. The whole idea of integrating the information and making sure people get it, that's a trend that is starting to occur and one that we are supporting. We are making sure that our products are ahead of that curve.
Another one is a big focus on cost-reduction. It has always been important, but it is especially now due to a lot of changes that are taking place. In particular, with a lot of the manufacturing shifting to Asia, there is a much greater focus on the need for not only high quality but also driving the cost down.
Flexibility would be the third one. We have seen a lot of manufacturing companies try to design assembly systems that are agile and more adaptable, and instead of making product A, they can make product B with no change in cost or time, so they can be flexible when it comes to serving that market. The whole idea of agile assembly systems is a recent trend we've noticed of late.
Speaking of manufacturing shifting to Asia, can you elaborate on your target market? Do you see your customer base shifting to the Asia Pacific region?
Ron Pawulski: A lot of our customers tend to be Fortune 500 companies and these companies are taking advantage of manufacturing in Asia. Because we are close strategic partners with these large companies, we've had to move with them to the Asia Pacific region, as well as other emerging economies such as Latin America and Eastern Europe. We've found that we've actually been pulled along to these regions because of our close relationship with these customers.
Nathan Sheaff: Since we have worked a lot more in North America, what we've found is that new products and designs are created and decided upon here at headquarters so to speak. However, once a particular design and plans for how to manufacture a product have been defined, these plans spring up in other jurisdictions. Usually, the decision-making and the innovation and assembly processes are embedded here in North America, so that's where most of our work gets done. We work closely with our customers to architect a better assembly technology, and once that gets defined, it can be cloned anywhere else in the world.
How important is marketing strategy in an intensely competitive market such as the Test & Measurement marketplace? Could you comment on some of the changes Sciemetric has witnessed over the past year with regards to the same?
Nathan Sheaff: Our whole approach to that is to prove it with high volume, multi-billion dollar Fortune 500 companies. A lot of the work that we have done with Ford has certainly been in that vein, where we've proven the technology and developed it. Once we have a solid footing, undeniable success, and a proven track record, then we can look to clone it in the marketplace. Our strategy is to first prove it and then look to expand it horizontally or vertically once that foundation is in place.
Ron Pawulski: Sciemetric is different from the traditional Test & Measurement companies. We work with customers for much longer time periods to develop an idea of what they want to measure and to offer value. It's not transactional like other companies, so our marketing strategies are also different.
We provide not only support but engineering expertise as well. A lot of our customers already know they have a manufacturing problem or they have a business commitment to make, such as reducing cost by 15 percent in a particular business unit. However, they don't necessarily know how to approach that, so by contacting Sciemetric and getting our engineers to work with them, we can help them identify quality bottlenecks in their manufacturing line where the savings they are looking for can be realized.
How would you rate Sciemetric's performance in 2009, taking into consideration the global economic climate? Did you a witness a reduction in demand for your offering?
Nathan Sheaff: Actually not, although that would be expected considering that we do have a lot of automotive customers. However, a vast majority of our automotive customers are strong, growing and profitable, and we are very fortunate to have done very well despite the downturn. In 2009, we showed double-digit revenue growth and even more dramatic earning growth. So we really had a great year. Our customers realize the high value and high return on investment of our technology, so the last thing they want to do is to do without it, even though times are tough. A lot of our customers have cash paybacks in less than 12 months, if not six months, in terms of the technology implementation. When something can save money so quickly, it always gets financial support.
Ron Pawulski: The one thing that the automotive industry does not want to skimp on, considering this period of retrenchment, is technology that can help them reduce costs, because that's the area that they are able to gain in competitiveness.
Sciemetric has traditionally been strong in the automotive end-user segment. What are some of the other existing and emerging industry application markets that Sciemetric is pursuing?
Ron Pawulski: As Nathan mentioned, we got our start early on with automotive customers, and we feel very confident in that market. We first considered getting into the medical industry in the early 2000s. Our target customers are usually those who make high-value products in high quantity. So the medical device industry is a natural fit for us. However, when we ventured out of automotive, and particularly in the medical industry, we found that the requirements were quite different. Medical is a highly regulated industry, and we've had to adapt to that.
Nathan Sheaff: We went after the medical devices industry a number of years ago; however, we've really increased our focus and our energy into developing new solutions for that market in the last two or three years. Apart from that, we've also targeted pharmaceutical and aerospace, but in the short-term our main focus has been on growing the medical devices segment. All the work we've done in high-volume manufacturing for the automotive industry is portable to that industry. The processes change, and the products change but the theme is very much the same.
Ron Pawulski: The medical devices industry is a very highly regulated industry with the Food and Drug Administration (FDA) and European authorities. As a result, the medical devices industry has a great appetite for technology that will give them a better quality product at a reduced cost. A lot of the manufacturing processes that go into medical devices, or even pharmaceutical for that matter, are quite different from automotive, but the technology behind it and understanding of how a process can induce defects remain the same. We actually found it easy to shift from automotive applications to medical devices and pharmaceutical applications. It was just a different environment, and we had to understand the regulatory concerns of our customers in the medical devices industry, but, overall, we do offer the same value that we offer to our automotive customers.
The medical industry has been in fact very receptive. We've been winning big deals in the medical industry. A lot of the big medical and pharmaceutical companies understand that process signature is going to be a major part of the new regulatory requirements that are forming in the industry. As such, when they're making decisions about our technology, it's not just a one-off thing. They are looking at Sciemetric technology as more of a system to put in place in their various business franchises, as a long-term strategic partnership across many divisions. The medical devices industry gets what we are selling and sees real value in it.
What were your biggest challenges in 2009, and how have you realigned your strategies to overcome them? Going forward, what do you expect from 2010 and beyond?
Nathan Sheaff: I think the biggest challenge for us has really been about managing growth. We've had such high demand from customers in various industries that keeping up with those demands has been challenging. We didn't need to make any changes to our strategies, plans or vision. The hardest challenge is to focus the company and not get too distracted because there are so many applications to this technology that it would be easy to get lured into different industries. We have been really focused and concentrated, and that's one of the reasons for our success.
Ron Pawulski: One of the risks you run when you are successful is being drawn into industries that may not make the most sense. Our focus on particular industries and particular strategic customers and continuing to maintain that focus is our biggest challenge.
How are you as an organization keeping yourself on your toes to better understand your customer requirements from their perspective? What process do you adopt to identify them, and how are you addressing them?
Nathan Sheaff: We are a strategic partner, meaning we have good relationships with our customers, and that's something we really strive to do. A number of our key technical and senior management personnel are regularly and intimately reviewing manufacturing processes and products to really understand what is keeping our customers up at night and where we can add technology innovation and value to help them. We keep close contact and proximity with our customers, and we use the knowledge we gain from walking hundreds of assembly lines to develop ideas on how to accelerate a solution or improve the way a problem is approached. That's what leads to innovation.
A growing trend among manufacturing industries is reducing cost, managing quality and optimizing yield. Does Sciemetric see similar opportunities in emerging markets? What are your plans regarding geographic expansion?
Nathan Sheaff: We deal with a lot of Fortune 100 companies, and they have a significant geographic footprint. Once we develop solutions that make sense for a particular product, we necessarily have to support that customer globally, whether it is North America, Europe or Asia Pacific. We have set up Sciemetric services globally so that we are in the position to give them such support. We also have good partnerships with many companies throughout the world, such as machine tool builders that can help both build and support assembly lines once they are built. In terms of managing that global requirement, we've been doing that for many years in the automotive sector and now more recently in the medical sector.
Ron Pawulski: Because of the regulatory framework that governs the production of medical devices, a lot of it is kept within the sphere in which they are sold, unlike the automotive industry, which outsources a majority of the production. Medical devices, for which the largest market is the United States, tend to be manufactured in the United States, and the same with Europe. However, we do see a long-term trend of devices starting to be made in a different region from where they are sold, such as in east Asia or Latin America. As this trend progresses, Sciemetric will be well-positioned to support customers in these areas. We keep in touch with our customers so they can let us know where their manufacturing is being moved, and we move that way because we're flexible.
You have already mentioned a few of Sciemetric's partners, but could you highlight some of the company's specific partnerships or alliances made in the past year? What can we expect on this front going forward?
Nathan Sheaff: Over the past 12 months, and in the coming 12 months, we will focus on partnerships at the IT level, where we would integrate our software technology with other ERP and manufacturing execution systems. We see the need to make sure that the information we collect can be rapidly disseminated with the right analytics behind it to all the consumers in an organization. A natural partnership for us is to couple up with ERP or MES systems so that we put the information at their fingertips, because their systems do not have access to this kind of information. They don't have access to the data mining that our software is capable of doing, so it is quite natural for us to build a bridge between the two.
Finally, what are the products that you have introduced recently? Can you share some insights on future product announcements?
Nathan Sheaff: Over the past year, we have widened the footprint and scalability of the technology. We have come out with a new lower-cost process signature device, which is part of the sigPOD platform. A lot of our customers in the past have said that they love the technology but would like it to be a little more affordable so that they can deploy it on a larger scale within their factory. Every machine should have a signature, and we have now come out with a product that makes that a reality. It's economically practical to put hundreds of sigPODs on an assembly line and therefore allow customers to assimilate the data on the quality process from end to end into one database. This not only refers to data from a signature but also data that can be extracted from other devices that already exist on the line.
We also released a flexible version of our software that makes it more deployable by our customers. We call it Process Signature Verification (PSV). A customer can use a sigPOD and program it themselves to acquire a signature and analyze it in real time. Over the next 12 months, we will have a new dashboard that makes it easier to use the technology. Anybody in the organization, whether they are from the technical, manufacturing, quality teams or from the business end, can get the data that they need rapidly. Getting data of sufficient precision is very important. But once you have the data, analyzing it is the next step, and once it is analyzed, pushing it to the right consumer in the organization is the next step. If you don't do all three steps in concert with each other, the information can be quite useless. We're working hard now to make it simpler to consume the information and act on it in an organizational sense.
Ron Pawulski: In the medical industry, especially, we are working on a couple of new applications that we hope to roll out to the wider market. Among these is a predictable and accurate way of measuring weld performance. Right now, welding is performed on a product and then tested by destructively pulling the sample apart. We are working on a product that could detect weld quality, in-line, and that is not destructively applied. So the cost-savings for customers would be enormous.
Another one is in plastics extrusion. We are looking to release the products that monitor the quality of plastics in real time to get away from end-of-line batch testing, where you have operators looking at extruded products to make sure the extrusion was of good quality.