Woodbridge, Ont.—Long distance relationships are difficult, no doubt. But that doesn’t mean manufacturers east of Alberta have to forego oil sands contracts.
Fabricators such as Alps Welding Ltd. (Woodbridge, Ont.) are proving the business can be won, mainly through subcontract work and a flexible shop floor.
“In the oil sands industry, this kind of flexibility is important, because a lot of the equipment is unique.”
Alps Welding has about 55 skilled employees, who are cross-trained to work on a range of projects. The plant was set up to be configurable, and can produce various sizes of modules, piping systems and related equipment.
Oil sands contracts usually come in from engineers and designers serving project owners, but these subcontract deals are also leading to direct business.
“For us to be able to do that work, the end user has to approve us as a subcontractor…Whether it’s Exxon or Suncor or ConocoPhillips, they’ll come to our facility and usually spend a day or so doing a quality audit.”
The audit leads to Alps Welding joining the approved vendor list, meaning it’s pre-qualified to do subcontract work, but can also receive requests for quotes directly from project owners.
“We wouldn’t compete with our customers, but it might be some other type of equipment that the end user would need,” he explains.
Pre-qualifying isn’t easy though. Before the site visit, the company must file a 10 to 20-page survey covering safety and insurance records, and capabilities. Each project owner has a different survey or web portal, so it can be time-consuming.
“If we could register on one web site; say it was an Alberta oil sands supplier web site…that would be great,” he reflects.
What else is on his wish list? Some help matching oil sands buyers with capacity outside Alberta.
“A lot of Alberta fabricators are very busy and they’re offering long deliveries. Buyers may not know they can go to Ontario to get [supply] and I’m sure they could go to Quebec, New Brunswick…But that kind of integration across the provinces isn’t really happening.”
Without a physical presence in Alberta, it’s hard to learn about opportunities, and conversely, end users don’t know about eastern capabilities.
He’s reluctant to set up a shop in Alberta though, due to the province’s shortage of welders and fitters. Plus, Ontario already has the capacity, and despite the distance to market, transportation isn’t a big hurdle.
“We often talk to customers who assume shipping our product from Ontario is cost-prohibitive, given the large sizes and weights involved. However, transportation is a relatively small proportion of the cost, and when we’re given an opportunity to quote, our customers find that even with transportation included, we are competitive with Alberta fabricators,” Dussin says.
Shorter lead times
Costs are kept reasonable by Ontario’s relatively cheaper labour rate. Available capacity means better lead times, he adds. Clearly, there’s a strong business case but the challenge is getting the word out.
“It’s incumbent upon us as a supplier to try to find a way to have a presence in that market. Events such as the Buyer Seller Forum are a good idea, and I would hope that the Ontario and Alberta governments could help us in some way by matching customers with suppliers.”
Dussin predicts modularization will unlock more opportunities outside Alberta. With a shortage of construction and skilled labour in Alberta, it’s getting harder to assemble plants in the field.
“We’ve seen an increase in demand for skid-mounted equipment that can be built and assembled in the comfort of a fabrication shop and then delivered on a truck to the site…This will allow companies operating in the oil sands to take advantage of manufacturing capacity further from their location.”
As these trends unfold, Alps Welding will continue to cultivate the nascent East-West energy supply chain, maintain its rapid growth trajectory, and foster the flexibility and quality standards that have brought it so far.
This article is part of the new Manufacturing Growth & Innovation Centre—for small industrial companies on the move!