PROFILE
A working
relationship
Father-son Kudu founders Robert and Ray Mills have incorporated lean thinking
and weathered the tests of a volatile industry together
by Deborah Jaremko
Build it like you own it. Those are some of the first words one sees when walking into the manufac-
turing shop of Kudu Industries’ Calgary headquarters. It’s a subtle reminder of father-son founders
Robert and Ray Mills’ business strategy—one that, among other features, seeks to allow employees a
personal connection to their work.
“Most people want to do a good job,” says Ray Mills, the younger of the
two and now the company’s chief executive officer. “You just have to
put the tools in place to let them.”
Kudu is, of course, a major supplier of progressing cavity pumps
(PCPs) to the energy industry. The company has gone from what was
essentially a science project at the family home (“The neighbours
were not impressed with the things starting to come in and out of the
garage,” says Ray), to a venture with annual sales of about $30 million
and operations around the world. However, there have been some sig-
nificant bumps along the way, including one bump so big that the two
call it their “near-death experience,” which would forever change their
operating strategy.
Robert Mills, who is chairman of Kudu, was reportedly one of the
first people in Canada to start working with oil well progressing cavity
pumps, the first of which went into service in 1979.
“In 1977, I had the misfortune of being a part owner and operator of
heavy oil wells that were problem sand producers. I got the idea to use
PCPs,” he explains, adding that the pumps were already being used to
transfer tank bottoms. “They are excellent sludge pumps.”
The roots of the PCP go all the way back to the 1920s, when a French
aerospace engineer named Rene Moineau envisioned a screw compres-
sor designed to increase engine power. Basically, it looks like a carefully
and consistently twisted steel pipe inside a cylinder attached to a motor.
Material enters through the bottom, and when the cylinder is filled, the
bottom closes. The material then travels up the twisted steel as it turns
and moves to the surface. Its original application was to aid in produc-
tion of heavy oil.
“Heavy oil producers immediately recognized this as a solution,” says
Robert Mills. “The technology started a wave of development.”
110 | Oilsands Review | September 2008
The two Mills formed Kudu in 1989 to target this market, but it is not
the sector that launched its quick success.
“Our growth ironically happened in medium and light gravity oil,”
Ray Mills notes. “We had a pump that was much larger capacity than
what anyone else had in the market.”
What this allowed was production of marginal, high water-cut
medium and light oil, reducing capital and operating costs.
“[Producers] were able to pump those wells very hard. We stepped
into a vacuum in the industry,” says Ray Mills, adding that there are wells
on PCP production today that are 99.5 per cent water cut, and pumping
cost effectively.
At about half of Kudu’s domestic business, heavy oil still represents
a significant portion of the bottom line. The technology is also used
for light crude oil with high aromatic content, dewatering gas wells,
coalbed methane production, and in directional wells. Kudu is also
embarking on a new PCP for high temperature steam assisted gravity
drainage (SAGD) wells.
“We’ve replaced a lot of pumpjacks,” says Robert Mills with a smile.
He explains that the average pumpjack has a production limit of about
600 barrels per day. “We can go to 6,000 barrels per day with a machine
that is very small.”
In addition to increased production, the Mills say PCPs have increased
reserves-in-place over the life of each well—from two to three years to
seven to eight.
“PCPs are having a significant impact on reserves in Canada. It is such
an effective pump, it takes half the power to pump the same amount of
fluid,” Ray Mills says. “The pragmatic impact is jobs. These extra reserves
keep the employment going in small communities.”
He says those benefits are something the company is proud of.
 PHOTO: JOEY PODLUBNY

Ray and Robert Mills co-founded Kudu Industries in 1989.

OilsandsReview.com | 111
PROFILE
“It’s certainly nice to think that what you do for a living makes a dif-
ference in the world.”
Between 1989 and 1998, business “boomed” for Kudu—then the price
of oil crashed and the “near-death experience” occurred. Oil was selling at
about $10 per barrel, and producers with marginal wells were in trouble.
The Mills turned to a National Research Council initiative called the
Industrial Research Assistance Program (IRAP) and an advisor named
Chuck Harrison, who introduced them to the concept of lean. Basically,
this is described as “maintaining a much smaller volume of ready materi-
als and products, in order to reduce overall operating costs.”
“It’s really a whole business philosophy, which is easiest to see on the
shop floor,” notes Ray Mills. “It turns the Western thinking of managing
a business on its head.”
The concept of lean comes from Japanese car manufacturers who,
after much was destroyed in World War II, knew they had to reconfigure
the way they did business. Ironically, the Mills say, the Japanese came to
the United States and studied the business practices of Henry Ford. Lean
is really about insourcing and continuous loops of manufacturing and
Henry Ford was an early champion of the strategy, which propelled him
to great financial success.
Conventional thinking goes like this:
“As a business gets bigger, controlling the business becomes para-
mount, [and it can] become departmentalized to the point where we
forget what we are actually building,” sums up Ray Mills. “What [lean]
really speaks to is how to communicate most effectively as a company.”
Examples of the way lean works at Kudu come from its shop floor.
The company has not had a shop foreman for almost two years. There is
no purchasing department—that is done by “the guys on the shop floor,
who have the same credit card that you and I do,” Ray Mills says as he
turns to his father. “We expect people to make decisions.”
The shop floor itself is divided up into different “value streams,” or
product lines that essentially create teams for each product rather than
separating out each individual task conducted into its own group.
“Because they are organized that way, they can move to where the
bottlenecks are,” Ray Mills explains, adding that productivity is meas-
ured by the finished product rather than a calculation of a task, such as
the number of welds conducted over a certain period of time.
Visual tools such as bins and carts are incorporated to reduce inven-
tory. When a bin or cart containing one element of the manufacturing
process is empty, the worker knows that they need to get more of said
element. There are also two bins so that there is always something to
work on.
“Lean teaches you to build on demand,” says Ray Mills. “If you’re
building to a forecast, you’re kidding yourself.”
A little bit about Robert Mills
Person who has influenced you most:
My mother, of course, because of her teaching of ethics. My father,
as a close second, because of his teaching of tolerance.
Greatest achievement so far:
Kudu, especially our culture of teamwork and mutual respect.
Words to live by:
I have never met anyone from whom I did not learn something
valuable.
Kudu’s greatest influence:
Chuck Harrison, an industrial technology advisor with the National
Research Council. He taught us the organizational concepts of lean
enterprise and the value of quality.
Why blue as the Kudu colour:
I just like it. I chose a colour called “safety blue.”
112 | Oilsands Review | September 2008
A little bit about Ray Mills
Person who has influenced you most: My dad.
Greatest achievement so far: Helping build Kudu to where it
is today.
Words to live by: Communicate, communicate, communicate!
On the company’s website, Robert Mills explains that Kudu does not
stockpile inventory on the shop floor.
“We have overhead bridge cranes to move inventory as needed.
Consequently, we have freed up significant space. Now that we have room
on the floor, instead of contracting out our machining, we purchased our
own machine tools, we’ve trained people, and are doing it ourselves.”
Kudu has seen substantial improvements since incorporating lean. For
example, in 1997, the company had 250 lost sales (“That’s one basically
every business day,” Ray Mills notes). In 2004, he says Kudu had double
the number of sales, but the number of lost sales had dropped to five.
Moving to lean has been a success for Kudu, but the process was not
easy, nor is the evolution over. Ray Mills recalls that the initial restructuring
demanded 18 months of weekly meetings, and the staff feared downsizing.
Why the name Kudu:
The Kudu is a southern African antelope about
the size of an elk. It has helical horns like the
impellers of our progressing cavity pumps.
“We made a promise that we would not lay off anyone as a result
[of the change],” he says. Instead, the Mills retrained their staff to fit the
new company profile.
The new approach has had an effect on the Mills’ personal lives.
“It took a lot of stress out, and a lot of hours out of the day,” says Ray
Mills. “[Before], I had these huge Excel spreadsheets running, trying to
forecast more accurately. I’d be busy for an entire week doing forecast-
ing. It was a ridiculous exercise in hindsight.”
However, he admits that changing so drastically is “a bit nerve-wracking
at first.”
On another personal level, when asked what it is like to work side by
side, Robert Mills laughs and says, “We had to learn to do that. We have
different personalities so we cover different bases.”
Ray adds, “We had our differences at the beginning. We had to
literally sit down and ask, ‘What are our strengths and what are our
weaknesses? It was not so much our different personalities as much as
it was our different skill sets that complemented each other when we
first started Kudu. Later, as Kudu had more employees, our different
personalities became more important to the managing of Kudu; our dif-
ferent perspectives on understanding people have helped us become
better managers.”
Robert Mills officially retired at the end of last year, but still does a lot
of long-distance travel for the company to areas that Ray Mills says are
difficult for him to reach because of the commitments of a young family.
“He’s really the ambassador of the business.”
When he’s not doing that, Robert Mills likes to sail and spend time
with family. As for Ray—“I chase my children in most of my discretionary
time,” he says, adding the family likes to ski.
Is the third Mills generation being prepped to join the company? Ray
Mills says this is not something that is pushed on them, and he is sur-
prised when his children show interest.
“Through osmosis they begin to start thinking about the business.” SR