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Manufacturing focus shifts to on-shore

For the past eight years, manufacturers in Canada have been fighting an uphill battle. From the downturn of the U.S.
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Laurie Bissonette, FCPA, FCA, is a partner with KPMG Enterprise. She can be reached at 705-669-2521 or lbissonette@kpmg.ca

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. However, according to KPMG’s new Canadian Manufacturing Outlook 2014 Survey, times are finally moving in a direction that helps manufacturers.

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 3 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. better able to provide these goods and services domestically. Reasonable energy costs and the quality and consistency of products offered here at home have also driven Canadian manufacturers to look on-shore.

This shift to North American sourcing, along with the strengthening U.S. economy and a dollar working to their advantage, allows Canadian companies to move past simply surviving and focus efforts on increasing revenue, which the survey identified as 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.

Another key insight from the survey is that although there is no shortage of workers in Canada, people must 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.

According to the survey findings, 75 per cent of Canadian manufacturers engage in incremental innovation, enhancing existing products and services. To remain competitive, these traditionally risk-averse companies should push further and make breakthrough innovation a part of their company culture.

Finally, the survey highlighted that leading manufacturing companies, realizing they must spend money to make money, 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 take advantage, Canadian companies should leverage their proximity to the U.S. market, the market’s tightened lead times and ability to reduce energy costs that our geographic location offers. Adjusting activities here at home will help manufacturers capitalize on the industry’s shift from off-shoring to on-shoring.

Manufacturing in Canada has undergone a period of survival of the fittest. The strongest companies have withstood tough times and are now well positioned to compete locally and globally. Canadian manufacturers are the busiest they've been in many years, and it is essential for these companies to remain focused on future success.




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