Summarizes the lessons which you learned from case PRIMATERIA AB: SCALING UP AND PROTECTING IP about innovation and engineering consulting, operations and/or supply chain management consulting, the nature of change, change management, and the implementation phase in the consulting process at technology, engineering services and consulting organization such as Primateria.

X Page 2 W24938 IVEY Publishing advantages associated with the use of these high-tech coatings. Very similar coatings were sold under W24938 dissimilar brand names, which made it impossible to easily compare the offerings. To make matters worse, the full improvement potential for a given application could only be realized by optimizing the entire tooling system, including tool geometry, base material, surface characteristics, and a matching coating. Coating PRIMATERIA AB: SCALING UP AND PROTECTING IP suppliers and customers often lacked the necessary in-depth knowledge in all these areas to optimize the entire system. Much of the needed knowledge was distributed over several stages of the supply chain. Torsten Doering and Olle Wanstrand wrote this case solely to provide material for class discussion. The authors do not intend to PVD coatings, best known through the golden colour of titanium nitride, represented the state of the art in Wustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. cutting tools. The high-tech process to deposit these coatings had become commercially available in the 1980s. The coating process took place in a high vacuum environment around 800 Fahrenheit, and required high- This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights tech deposition materials, specialized vacuum process equipment, and sophisticated controls. The actual organization. 10 order copies of request permis producer By Publishing, Ivey Business School, Western coating materials, such as titanium alloys, had to be sputtered ("'sandblasted" with ions, solid) or evaporated University, London, Ontario, Canada, N6G ON1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveypublishing.ca. Our goal is to publish (boiled, liquid) to eventually form a plasma. The ingredients of this gas-phase plasma were accelerated toward technic University from 6/10/2022 to 8/9/2022. materials of the highest quality, submit any errata to publishcases@ivey.ca. the tool surface in an electric field and built up in molecular fashion over the course of several hours. PVD Copyright @ 2022, Ivey Business School Foundation Version: 2022-04-13 coatings had very desirable properties; they were about ten times as hard as regular steel and had a very low coefficient of friction (about a third of the friction between two steel substrates). The thickness of the coating was about 5 micrometres (0.0002 inches). For comparison, a human hair was between 50 and 100 micrometres "You may delay, but time will not." thick, meaning ten to twenty times thicker than a PVD coating. PVD coatings on hobs and other tools could it violation. Benjamin Franklin be thought of as a hard shell that protected the underlying tool surface (see Exhibit 3). Primateria AB (Primateria) was founded in November 2004 near Stockholm, Sweden, by Mats Larsson and Sustainability had emerged as another factor that could be improved with surface modifications and PVD Rickard Gablin. A third partner, Olle Wanstrand, joined the company in 2006. The start-up was immediately coatings. Traditionally, cutting metals required large volumes of coolants (water/oil mixture) to extract heat profitable. Big Swedish companies such as Sandvik AB, AB Volvo, and Atlas Copco AB were among its energy resulting from the metal cutting process, to reduce friction, to produce a better part surface, and to first customers. Primateria was started because the founders had noticed a lack of innovation and customer increase cutting speed and tool life. The additional systems to manage these coolants were expensive and Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022 focus in the evolving cutting tool industry. Gablin explained, "Starting Primatera was a challenge, as there required costly maintenance, and the coolants themselves posed environmental and health risks. Some of was no tradition of using consultants in this line of business, but it turned out above expectations." The the safety concerns for workers were related to respiratory problems, cardiovascular diseases, allergic cutting tools treated by Primateria lasted longer and could produce more parts in a shorter amount of time, dermatitis, and asthma. Further, the mineral or synthetic oil-containing fluids with additives degraded over thus leading to substantial economy of scale effects that were desperately needed in the mature automotive time and required constant maintenance, cooling, and eventually disposal. Some portion of the coolants industry. The main application of Primatera was the surface enhancement of gear cutting tools (hobs) to became airborne or adhered to the metal chips that occurred as a by-product of producing gears. Optimized produce automotive gears (see Exhibits 1 and 2). Almost 100 million automotive vehicles were produced high-performance cutting tool systems enabled dry machining, which avoided the use of coolants altogether globally in 2019, each containing one gearbox with several gears each. and thus reduced safety and environmental concerns as well as overall costs. Dry machining was not feasible without the use of PVD coatings. Primateria provided new and needed services in the supply chain for hobs and other cutting tools, acting as an intermediary between tool manufacturers and end-users. With revenues continuing to grow, the founders If done properly, expensive hobs could be reused many times in combination with surface treatments and needed to decide how to protect their unique intellectual property (IP) in terms of their surface treatment coatings. In some cases, it was possible to use two coatings with different colours, so that the tool could be processes. They discussed patents and non-disclosure agreements, and tested collaborative agreements with taken out of service when the colour changed and before the underlying tool became damaged. Fewer tools customers. They also discussed the very much related topic of time running out to find a way to scale up were needed through the service-life extension, in line with the circular economy philosophy. Pricing Authorized for use only by Manvinde the business. Primateria had to decide how to quickly grow internationally by offering its services closer to models such as renting, leasing, and costs-per-use rather than tool ownership could facilitate this closed its large customers' global production networks in an effort to simplify logistics and reduce turnaround loop approach. For example, Michelin offered tire pricing by the mile to operators of vehicle fleets. time. If the accessibility of the technology could not be established quickly, customers would not be able Michelin owned the tires and was thus interested in a long service life, so it offered training and to integrate Primateria's surface treatments in their processes. The best technology was not commercially reconditioning services to customers an overall win win scenario.] useful if it increased lead times, the risk of damage through transport, and other associated costs. There were advantages per part during gear production. While an 11 per cent cost reduction per unit due to the Primateria surface treatment when compared to a coating only did not seem substantial, the total savings INDUSTRY AND TECHNOLOGY could quickly add up to six- and seven-krona figures per gear due to the high volumes, an often-needed boost in profitability (see Exhibit 4). While there were cost advantages for high-performance coatings and Coating customers often had trouble understanding how to attain the full benefit of the application of dry-cutting, the cost advantage compared to uncoated hobs with use of coolants was much larger. Fixed physical vapour, deposition (PVD) coatings on their hobs. Moreover, the coating providers, who often focused on engineering details, did not make it easy for customers to gauge the substantial monetary 1.19594. " Walter R. Stahel, "The Circular Economy," Nature 531 (2016): 435-438, https:/www.nature.comews/the-circular-economy- O 18 DELL O W ENG O 11:15 AM US 2022-07-08X Page 3 W24938 Page 4 W24938 and overhead costs could be distributed over more parts than before, and more parts could be produced with Primateria could have possibly developed the technology and increased sales revenue faster if it had raised the same equipment in the same time (see Exhibit 5). venture capital. The drawback with this was of course that the owners would have lost a certain degree of freedom to develop the company as they wanted. Another issue with external investors was the pressure for Interestingly, tensions existed between tool manufactures and service providers. Tool manufacturers were action in combination with uncertain outcomes of a technology that still needed development time. Growing generally not interested in making their tools last longer with surface treatment and coatings, which reduced the business at a moderate speed and developing the technology at the same time provided a better basis the number of tools being sold. End-users, on the other hand, preferred high performance and longevity. This for exploring the technology and serving customers. This scaling approach was more resource-efficient, as misalignment of incentives led to the fact that end-customers were the main drivers for marketing performance it could avoid quick expansion into possibly unsuccessful avenues of technology. In summary, organic improvement services such as surface treatments and PVD coatings (see Exhibit 6). growth without the use of venture capital had paid off because it gave the owners full control, but it meant slower growth and a limited ability to invest in equipment, human, and other resources. During the economic downturn in the early 2010s, following the Great Recession of 2007-08, the owners reduced their PRIMA TERIA FOUNDING AND GROWTH own salaries and other costs, thus avoiding the pressure to satisfy bank obligations or reach return-on- income thresholds and managing to easily survive those economically difficult times. All three owners had similar educational backgrounds and had been working together for some time before hnic University from 6/10/2022 to 8/9/2022. starting Primateria, Their careers began as material science researchers at Uppsala University in Sweden, and they were all later employees of Oerlikon Balzers, a global surface technology company for metal OPERATIONAL ASPECTS AND THE SUPPLY CHAIN cutting tools and components. The founders' initial idea was to set up a surface engineering consultancy to support companies in the automotive and related industries to optimize cutting tool performance. This was From 2010 onward, Primateria put more effort into operational improvements and the development of to include advice on surface treatment, coating specification, geometry, and base material, among other automated processing equipment. This required different skills, presented new challenges, and took time factors. The early business model did not entail developing proprietary surface treatment methods or setting away from executing Primateria's day-to-day business in close contact with customers. The first internally up production. The response from Swedish customers was very encouraging, however, and it became clear developed semi-automated machines could be used for treating the surface of various types of metal cutting that the surface treatments necessary for optimizing performance could not be obtained from existing tools (drills, end mills, threading tools, etc.), but a growing application at that time was treating hobs. One service providers. Thus, the Primateria team pivoted and began to develop these missing surface treatments. unexpected issue was that production workers experienced back pain from repetitive handling of these At first, this was done on a small scale, mainly with pilot tests to verify performance. Customers started to heavy tools, leading to absences and employee complaints. As an intermediary fix, the founders decided to notice significant performance benefits with Primateria's new treatments. The team undertook further hire a massage therapist for a few hours every week to provide relief for workers. By 2013, a fully development to automate the new surface treatments processes and to offer them reliably at scale in a new Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022 Use outside these parameters is a copyright violation. automated machine was production-ready. The machine further reduced cost, improved tool consistency, Use outside these parameters is a copyright violation dedicated in-house production facility. In short, these newly developed processes precisely "polished" the and eliminated the undesired ergonomic side-effects of handling tools. tool surfaces before and, in some cases, after depositing thin and extremely hard PVD coatings. Gradually, the surface treatment business was growing, and by 2008 many industry experts had taken note that The next step was to open a second production facility (see Exhibit 8), which Primateria did in Koping, a Primateria was filling a void in the supply chain for much-needed, high-volume production cutting tools. small city in Sweden. Koping was the hub of gear wheel production in Sweden and therefore the perfect location for Primateria's facility. A new partner, Mathias Pettersson, who also had a long work history with Primateria's revenue grew slowly but steadily between 2005 and 2012, with a dip during 2009-10 as.a. Oerlikon Balzers, joined the team as co-owner of the new plant and to act as production manager. A PVD result of the 2007-2008 global financial crisis. At the end of fiscal year 2012, its gross sales revenue was coating machine was added to expand production capabilities. This was an important and exciting change, around 12 million kr." The sales revenue could roughly be divided into three streams of equal size. One since Primateria previously had to use external suppliers whenever customers called for PVD coatings. stream of income came from the consulting business, which had been the starting point of the company; a Primateria's annual purchasing volume of PVD coatings not only allowed for this change, but also made it second stream came from the licence payments of a limited number of cutting tool manufacturers who had profitable from the start. It was also much faster and more flexible to insource the PVD coating step. This acquired the right to use Primateria's proprietary surface treatment process; and a third stream of revenue Authorized for use only by Manvinder singh i change turned Primateria overnight from a significant PVD customer into a noticeable PVD coating came from Primateria's in-house production and service operation. The main customers were large Swedish competitor in the Swedish market. companies from the automotive, metal cutting, and tooling industries (e.g., AB Volvo and Sandvik AB) but also included a few equally large international companies from similar industries. (See Exhibit 7 for The Primateria team now recognized the complete surface treatment-including coating service for cutting Primateria's financial development between 2013 and 2017 in terms of gross sales revenue and earnings tools at their own production facilities as the main path to growth. The consulting business was before interest and taxes.) Twelve years after starting operations, Primateria, had sales revenues of 27 nevertheless an important avenue to pursue as a way to find new customers and develop new applications. million kr, and twelve employees. Primateria was not a unicorn but had grown organically and was Half of Larsson's and Wanstrand's time was spent on sales development and on direct customer contact. supported by internal cash flows. Besides the initial and relatively modest capital injections from the Finding new customers depended heavily on word of mouth. Gablin's function was being the "inside founders, no venture capital or bank loans had been used along the way. More expensive equipment, such man" taking care of administration, human resources, financial matters, and technical application as the necessary PVD coating machine, worth about US$1 million with peripheral equipment, was leased development. One stream of income for Primateria, as mentioned earlier, consisted of granting select tool and hence was not part of the company's assets. manufacturers (with whom Primateria had a trustful business relationship) a licence agreement under which the proprietary surface treatment technology could be used on the tool manufacturer's premises. This profitable and scalable business included a transfer of ownership of the proprietary process equipment, O 180 DELL O O O W ENG 11:15 AM US 2022-07-08X Page 5 W24938 Page 6 W24938 annual licence fees, recurring follow-up sales of specifically designed polishing agents, and training and had to be kept strictly confidential. For example, all employees and business partners would have to sign support through Primateria scientists. comprehensive non-disclosure agreements. A step-by-step business development process for hobs included several steps in the supply chain (see Exhibit 9). The process began with a tool producer or end-user of an expensive hob manufacturing THE ROAD AHEAD automotive gears that needed higher performance to gain a competitive advantage in this mature market. Primateria engineers then analyzed the application, materials, cutting speeds, etc. and suggested the best Since 2016, the question of how to expand the business and maintain momentum for long-term growth had surface treatment and coating. The tools, owned by the customer, were then sent to Primateria for surface been lingering at Primateria. Would it be possible to raise money and to expand globally, or would it be treatment, which took two to five days. Either the customer, Primateria, or a third party would then apply a more prudent to license the technology to a large supply chain partner who could incorporate the technology PVD coating. A final polishing step after PVD coating could be necessary depending on the application. in an already existing international infrastructure? This was a complex decision that depended not only on the known factors but also on trends, upcoming technologies, and other developments. Due to the many steps involved and the required cycle times, it was critical for service providers to be located in close proximity to the tool producers and end-users. The individual surface treatment production facilities nic University from 6/10/2022 to 8/9/2022. Technology and finance issues aside, the decision was strongly related to the best choice for IP protection, were typically rather small. Customers did not accept excessive transportation times over large distances for where the options were patents, trademarks, and trade secrets, or combinations thereof (see Exhibit 10). For production tools, which increased costs and risked tool damage. Perhaps more importantly, any delay could example, The Coca-Cola Company (Coca-Cola) faced a similar dilemma in the late 1800s while considering lead to a shutdown of an automotive production facility and cause substantial contractual penalties. whether or not to file for patent protection. A patent back then would have given Coca-Cola a seventeen- year monopoly in the United States in exchange for the public disclosure of its formula. Coca-Cola decided Establishing a global network of treatment facilities to appropriately serve large global customers created a to keep its formula a trade secret, and was therefore indefinitely at risk of a competitor independently challenge for Primateria, as it was used to acting in a familiar geographical market. Complex and time-consuming discovering the famous Coca-Cola recipe. As we know now, the strategy paid off in Coca-Cola's case.' But issues arose, such as finding suitable premises, hiring skilled people, getting local permits, and establishing good would it be the best option for Primateria? What if a large tool producer or coating company could reverse- relationships with customers in faraway markets. It was also quite capital-intensive to tram employees, prepare and engineer a similar surface treatment process? However, unlike in the case of patents, there was no expiration refurbish premises, and invest in machinery and equipment in anticipation of more business. date attached to trade secrets. The founding team was certain that its technology and services could be successful in other geographical Were patents the best option for this process technology? Having seen the 2008 movie, Flash of Genius,* Use outside these parameters is a copyright violation. markets. Many strategic discussions followed, to develop international scaling scenarios. The discussed Use outside these parameters is a copyright violation the famous patent lawsuits of Bob Kearns against Ford Motor Company, General Motors Corporation, and Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022. options included selling more licences to large offshore tool manufacturers, finding franchisees to run Chrysler Corporation about the intermittent windshield wiper -raced through Wanstrand's mind as he international Primateria operations, setting up owned in-house production facilities on the premises of considered the options. Ford Motor Company's defence against the inventor was that the patent was obvious larger international customers, and setting up more standalone Primateria-owned production facilities, and therefore invalid. Could this be a future scenario for Primateria if the surface treatment process were similar to the one in Koping. Germany, France, the United States, and other countries had significant patented? Primateria's production process could not be reverse-engineered by inspecting treated tools, automotive industry markets. which would favour trade secrets, but scaling up the business through collaboration would be impossible to implement without patents, since too many individuals would have to be trained in all process details. The owners discussed different combinations of the IP protection options. It was often the case that design Protecting a Materials Science Nest Egg patents and trademarks were used in conjunction with one another; could combining patents and trade secrets in a meaningful way be a solution for Primateria?' The global cutting tool industry was mature and highly competitive. Even though some cutting tool producers were large international companies with their own research and development labs, they could not Authorized for use only by Manvinder singh in The founders started ruminating over the options. Would it be possible for Primateria to defend its patent attain the level of tool performance and consistency that Primateria supplied. Many well-known tool against large tool manufacturers in court? Would the judge and jury even understand what this technology producers pressured Primateria to license the treatment technology to them or to make it available in was about and how much effort and skill it had taken to develop it? Would Primateria have to put an Primateria facilities around the globe. Negotiations with tool producers became part of the owners' daily exorbitant effort into battling large manufacturers in infringement lawsuits? Not only was this not what business, as well as internal discussions with patent attorneys on how to protect the company's IP. their business was about, but the founders were known for establishing trustful and long-lasting business partnerships. Primateria did not have a legal department with trained IP lawyers on staff. There were still One possible solution was to patent Primateria's unique process. But since patent rights were granted on a so many technical details and processes left to be improved, a task much more appealing to the Swedish country-by-country basis, Primateria would need to seek patent protection in each country where the materials scientists who had founded the company than getting involved in legal battles. invention or tools were being used. Since the production of automotive gearboxes was a global industry, this would require protection in all of Europe, North America, large parts of Asia (e.g., China, Japan, South 3 Ira Glass, "Original Recipe / Act One: Message in a Bottle," February 11, 2011, in This American Life, episode 427, podcast, Korea, India), and other industrialized countries such as Brazil and Mexico. This represented a major effort MP3 audio, 60:21, https:/www.thisamericanlife.org/427/original-recipe. in time, legal fees, and patent maintenance costs for a start-up. Another route was the "closed curtain," 4 "Flash of Genius," directed by Marc Abraham (Universal City, CA: Universal Pictures, 2008). which meant keeping the technology a trade secret. But in order to maintain a trade secret, the technology John Seabrook, "The Flash Genius," The New Yorker, January 3, 1993, https://www.newyorker.com/magazine/1993/01/11/the-flash-of-genius Orly Lobel, "Filing for a Patent versus Keeping Your Invention a Trade Secret," Harvard Business Review, November 21, 2013. O 180 DELL O O ENG O W 11:15 AM US 2022-07-08X Page 7 W24938 Page 8 W24938 EXHIBIT 1: MILLING TOOL (HOB) CUTTING A GEAR WHEEL EXHIBIT 3: CLOSE-UP OF CUTTING TOOL CROSS-SECTION WITH PVD COATING Most gear wheels for the automotive industry are manufactured by milling. This Cutting edge means that a cutting tool (hob) continuously removes small chips of metal from the PVD coating on tool surface workpiece that will eventually become a gear wheel. - cemented carbide Scanning electron microscope (SEM) image of a cutting tool cross-section Note: PVD = physical vapour deposition; um = micrometre. Source: Source: Created by the authors from company files. Company files. Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022 Use outside these parameters is a copyright violation. Use outside these parameters is a copyright violation Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022 EXHIBIT 2: GEAR WHEELS EXHIBIT 4: PRODUCTION COST FOR DRY-CUTTING PER GEAR (IN SEK) Gear wheels are used in many different Only PVD Primateria + Primateria + PVD mechanical constructions involving transfer of PVD + Speed* power from one shaft or axle to another. The Tool 1.02 0.61 automotive industry (cars and trucks) is one of 0.61 the main users of gears wheels globally. A Reconditioning (grinding) 0.45 0.31 0.31 Coating and surface treatment 0.91 1.39 1.39 gear wheel has teeth around its perimeter, and these teeth match the teeth of another Machine cost 13.75 13.75 1.45 gear wheel. When one of the mating gear Tool change costs 0.75 0.57 0.57 wheels is rotated, the other gear wheel is also Gear body 4.99 4.99 4.99 forced to rotate. In this way power is Total cost per part 21.87 21.62 19.32 transferred from one rotating shaft to another. Cost savings 1% 11% Note: SEK = Swedish krona; PVD =physical vapour deposition. *This column reflects an increase in cutting speed, i.e., shorter machine time. The managerial accounting approach in this example was conservative. Source: Created by the authors from company files. Source: Created by the authors from company files. O 180 O O 9 w ENG 11:16 AM US 2022-07-08. . X Page 9 W24938 Page 10 W24938 EXHIBIT 5: PERFORMANCE COMPARISON OF TWO PVD COATINGS FOR HOBS EXHIBIT 7: PRIMATERIA AB FINANCIAL RESULTS 2017 2016 2015 2014 2013 Hobbing: Increased service life Hobbing: Increased productivity GSR [thousand kr] 27,008 24,986 20,505 17,457 12,569 and service life GSR YOY 8% 22% 17% 39% Number of parts marufactored [pes.] Number of parts manufactured Ipos.] EBIT [thousand kr] 2,283 1,555 -515 1,258 643 +1209% 5,000 2.500 + 210% GSR [thousand US$*] 3,178 2,940 2,485 2,408 ,934 4.000 GSR YOY 8% 18% 3% 25% EBIT [thousand US$] 269 183 -63 174 99 1000 2000 Note: kr = SEK = Swedish krona; US$1 = 8.1655 on December 31, 2017. GSR = gross sales revenue; YoY = year over year; EBIT = earnings before interest and taxes. *Approximate average US$ to kr exchange rate during each fiscal year. Source: Created by the authors from company files. AITIN BALINIT" TWIN ALCRONA PRO CRONA PRO EXHIBIT 8: PRIMATERIA AB TIMELINE Polytechnic University from 6/10/2022 to 8/9/2022 Tool Hob, PM HSS Hob. PM HSS 0 90 mm $390 Workpiece Steel 1.7131 (- AISI 5120. -SMnC 4200-0 Steel 1.6526 (-AISI 8620. - SNCM 220 (H) 2004 Founding of Cutting data -200 m/mir TIAN: ALCRONA PRO: VB - 0.3 mm 1 = 3 mm 1, = 4 mm Primateria Primateria AB as a v. = 110 m/min v. = 146 m/min consulting firm dry with oil with oil Source Automobile manufacturer Automotive supplier Sweden Start of semi-manual Note: PM = powder metal; HSS = high speed steel; mm = millimetre; v = velocity; m = metre; VB = flank wear, f = feed. Recession production; 2008 Source: Company files. Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022 Use outside these parameters is a copyright violation global recession; first Use outside these parameters is a copyright violation. production employee EXHIBIT 6: PORTER'S FIVE FORCES ANALYSIS OF PRIMATERIA AB IN THE HIGH- hired PERFORMANCE CUTTING TOOL MARKET Fully automated (PLC) single 2011 purpose machine for surface Threat of New Entrants treatment of end mills in New surface treatment processes developed by large tool producers or users. operation New technology start-ups. Authorized for use only by Manvinder singh in Consulting client at Kwantle Supplier Power Cutting Tool Treatment Industry | Buyer Power Coating technology Many local and global coating Large automotive companies Implementation of 2013 suppliers (weak). companies in industrialized and their suppliers (strong). industrial robots to Existing third-party surface nations (weak). Medium-sized and smaller treat hobs treatment companies Specialized surface treatment automotive suppliers (new skills, risk) 2014 Second location in Koping, (weak). companies for high (moderate). Sweden with PVD coating Equipment providers performance tools (weak to Tool producers (strong). equipment (weak). non-existent) Growth phase; more 2016 customer projects Threat of Substitution: materialized through Increasing share of electric cars that do not need gearboxes. sales efforts 2017 Strategic planning for the New materials and coatings that reduce the impact of superior surface treatments. medium and long term; New chemical surface treatment processes. company growth to 12 employees Source: Created by the authors from company files. Note: PLC = programmable logic controller; PVD = physical vapour deposition. Source: Created by the authors from company files. O 18 DELL O 9 ENG O 11:16 AM US 2022-07-08X Page 11 W24938 EXHIBIT 9: TYPICAL SUPPLY CHAIN FOR A GEAR WHEEL CUTTING TOOL (HOB) Manufacturing of a milling The hob is surface treated and tool (hob): coated before using it again: Hobs are designed and ordered The hob is used to produce The hob is sharpened by This is typically done by an external by automotive OEM or Tier 1 gear wheels for automotive grinding the worn surfaces: PVD coating supplier. suppliers. transmissions by OEMs or Preparation includes removal of the - There are only about 20 hob Tier 1 suppliers: - Sharpening is mostly done in- old coating through a special chemical producers globally. house by the automotive OEM or or physicalprocess. - Most hobs are made of HSS and Depending on gear wheel size and Tier 1 suppliers. The cutting edges of the hob must be coated with a thin ceramic PVD material, a few hundred to a few An external tool sharpening pre-treated to improve the surface after grinding (Primateria). Authorized for use only by Manvinder singh in Consulting client at Kwantlen Polytechnic University from 6/10/2022 to 8/9/2022 Use outside these parameters is a copyright violation. coating. thousand gear wheels can be service (tool producer or third Typical price for a new HSS hob is produced before the hob must be party) can be used. - After coating, a special post-treatment US$1,000-2,000. reconditioned. Price for sharpening is US$40-80. may be used to make the surfaces Some specialized hobs are made smoother and to increase tool of cemented carbide instead of performance even more (Primateria). HSS at a much higher price point. - Price for coating is US$40-100 plus surface treament costs. A hob has a useful life of 10-20 reconditioning cycles Note: OEM = original equipment manufacturer, HSS = high speed steel; PVD = physical vapour deposition. Source: Created by the authors from company files. O 180 w ENG 11:16 AM US 2022-07-08