SPECIAL REPORT ON INNOVATION
Publication Date: January 2016
Varitron, a fast-growing Québec tech industry gem, is about to celebrate its 25th anniversary in top shape.
The company, which now has more than 300 employees at its Québec facilities in Saint-Hubert and Granby, and also in the United States on the outskirts of Boston, has seen a meteoric rise in the past five years. During this time, the company has hired 150 new team members and its sales have more than doubled, climbing from $35 million to $75 million. Its production area has grown by more than 138%, reaching 107,000 square feet with the expansion of its Saint-Hubert facilities and the acquisition of a U.S. competitor in the Greater Boston area.
Varitron is now positioned as a world leader in the assembly of electronic products, serving the energy, telecommunications, aerospace, medical, military and automotive industries.
Things have not always been easy, however, for the senior executives of Varitron and their team members. In a world where electronics buyers constantly demand shorter delivery times and tighter profit margins, Varitron has had to revamp its business model. Development and implementation of a service-diversification strategy leave it better equipped now to face competition from emerging countries, retain customers and build new markets.
The complementary nature of Varitron’s co-leaders, Michel Farley and Martial Vincent, is what has enabled the group to redefine its strategy, propelling Varitron to new heights in the last five years.
An innovative approach, to guide customers in their growth
The world of microelectronics is complex, poised at the leading edge of technological innovation and changing quickly. To deal with low-cost competition abroad, Varitron has had to reinvent itself to move higher in its customers’ value chain. The company now provides a level of service previously reserved for the biggest electronics manufacturers while retaining the agility and flexibility that smaller assemblers are known for.
By rounding out its service offering through strategic partnerships, Varitron has been able to implement an innovative model that now prevails in the industry.
Varitron’s alliances with research centres such as C2MI, École de technologie supérieure and Université de Sherbrooke are other innovative ways of diversifying its service offering and setting itself apart. For example, through C2MI, Varitron is able to redesign the manufacturing strategies of customers who demand this, cutting their assembly costs dramatically and adding new features to their products.
The arrival of Investissement Québec as a Varitron shareholder and the creation of a board of directors have also provided a solid base the group can depend on as it deploys its new strategy.
To cope with emerging countries, innovation and technology can be game-changers
Innovation and automation are vital factors enabling Varitron to maintain a competitive advantage and to trigger a process of re-shoring the assembly operations of customers that had relocated production to emerging countries.
At Varitron, innovation relies on the ability of its senior executives and its team members to transform each situation into a genuine value-creation opportunity for customers.
Thus, in the field of smart grids, Varitron was able to reinvent itself to meet the needs of a major customer, a world-class leader in its field. To win a bid against one of the world’s biggest electronics manufacturers, Varitron had to propose an innovative manufacturing strategy relying on a complete redesign of circuit boards and automation of production so that it could lower its costs and shorten supply times. The impact was substantial for Varitron, a company based in Québec but nevertheless able to offer a total acquisition cost more advantageous than what China could provide. This productivity gain required an investment of $1.5 million in equipment and R&D, and it has helped create more than 50 jobs in Granby. To have a major impact and to build for the long term, innovation sometimes requires significant investment.
With its technologically advanced electronic assembly equipment, Varitron can now assemble flexible printed-circuit boards. This is currently the most advanced level of assembly on the market. The company also sits on the advisory committee of IPC, the main standards body in the electronics industry, enabling it to remain at the forefront of technological trends in its field. As such, the company has been able to handle key projects for one of its customers, a global leader in the optics industry, which was seeking expertise of a type rare in Québec to support POP assembly of its products.
Innovation needs to be maintained to remain effective
The productivity advantage conferred by Varitron’s equipment and technology could quickly be negated by bureaucracy and process inefficiency, if care is not taken.
To reduce manufacturing time, an optimized concept and a program for continuous improvement of manufacturing processes have been implemented. This program is tracked on a monthly basis by the company’s management committee. Participatory activities are also conducted regularly to eliminate process waste systematically. More than 90% of Varitron employees have taken training or have participated in workshops on optimized production.
Sustained investment in assembly-process enhancement is vital to continue providing customized service that can respond to advances in customers’ products. Customers are engaging heavily in R&D to remain leaders in their fields, and Varitron must be able to innovate continuously to anticipate and execute their next manufacturing strategy.
Finally, when it comes to continuous improvement, various tools are being used or instituted on both the production and administrative sides. 5S, poka-yoke, kanban and SMED all come to mind. The practice of continuous improvement is highly beneficial because it helps reduce delivery times of new products in an introductory phase on the market and helps eliminate non-value-added activities. The 5S tool is the cornerstone of kaizen and of optimized production principles. It is widely recognized as a vital element in any efficient organization. Varitron’s 5S approach was instituted carefully in its offices and production plants to standardize, organize and identify job positions more precisely.
A corporate culture that unites people to go further
Despite the many obstacles they had to overcome to transform Varitron, Michel Farley and Martial Vincent enjoy the unconditional support of their management team, the true architects of a new organizational structure that can to absorb the requirements for change dictated by the industry and its customers.
The Varitron management team has also succeeded in meeting the challenges of rapid growth. The company has tripled production capacity, developed new financing mechanisms, and recruited and trained new skilled staff on a massive scale in record time.
This experienced team has also dealt with the issues arising from Varitron’s first acquisition on U.S. territory, a necessary milestone in the group’s strategic growth.
Faithful to the group’s entrepreneurial and innovative culture, each day Varitron and its collaborators apply the company motto: “Together, we will do what is best for you”