Focus shifts from off-shore to on-shore in Canadian manufacturing
July 21, 2014 - For the past eight years, manufacturers in Canada have been fighting an uphill battle. From the downturn of the U.S. economy and the rising Canadian dollar, to skilled labour challenges and off-shoring trends - manufacturing here has faced tough headwinds. Today, times are finally moving in a direction that helps rather than hinders manufacturers, according to KPMG's Canadian Manufacturing Outlook 2014, released today.
The report reveals that Canadian companies are increasingly turning away from off-shoring as a cost-saving solution. In 2014, only 14 per cent of manufacturers planned to source from China, compared with 31 per cent in 2013 – likewise, plans to source from India were at three per cent this year compared to 12 per cent last year. Rising energy and transportation costs, along with added pressure on lead times and increased inflation in China have made Canada and the U.S. more competitive as sourcing nations. Reasonable energy costs and the quality and consistency of products offered here at home have also driven Canadian manufacturers to look on-shore for their sourcing strategies.
This shift to North American sourcing, along with the strengthening U.S. economy and a dollar that is working to their advantage, allows Canadian companies to move past survival mode and focus their efforts on increasing revenue – the top priority for 81 per cent of manufacturers. Earlier this year, the sector experienced its highest monthly growth in Canada since 2008, with revenue increasing 1.4 per cent across the sector. Given the current economic climate, the time is right for manufacturing companies to tap into current trends and seize industry opportunities to ensure continued growth and future success.
• Skilled labourers and the Canadian workforce – There is no shortage of workers in Canada, but do the people have the skills for the world of manufacturing? With an international shortage of skilled manufacturing workers, Canada has the potential for an enviable home-grown skilled workforce. Schools, governments and businesses need to continue investing in the right kind of training to generate much needed on-shore talent.
• From incremental to disruptive innovation – Three quarters of Canadian manufacturers engage in incremental innovation, enhancing existing products and services. To remain competitive, it is time for these traditionally risk-averse companies to push further and make breakthrough innovation a part of their company culture.
• The cost and return of new technology – Leading manufacturing companies realize they must spend money to make money and are introducing new robotics to the shop floor. But the potential of new technologies doesn’t end there; data and analytics technology offers invaluable supply chain insight, and may lead to new ways of producing and providing goods and services.
Manufacturing has a significant influence on Canada’s overall economic prosperity and with the Canada-EU Trade Agreement less than two years away and expected to add $12 billion to Canada’s GDP, manufacturers must capitalize on opportunities in preparation for the even greater role they are certain to play in the years to come.
To access the full survey report, please visit www.kpmg.ca/cmo2014.