Canadian Manufacturers Running Out of Options for Profitability?



    Grant Thornton LLP stresses productivity as a key strategy for achieving
    bottom line health and profits in the nation's mid-sized manufacturers.

    TORONTO and HALIFAX, March 27 /CNW/ - Chances are if you have been
reading the daily news on Canada's manufacturing sector you have seen reports
of optimism about the prospects for improved sales and a shortage of skilled
manpower and reasonably conclude that the sector is strong. It would be
surprising to discover that despite an improvement in top line sales, many
Canadian manufacturers are struggling to maintain profitability.
    The pressure currently being exerted on profits is due to many reasons.
These include pressure on pricing as a result of the appreciation in value of
the Canadian dollar, the diminishing returns associated with years of
intensive cost cutting and demands for Canadian manufacturers to find new
approaches to improving profitability in their operations. According to Grant
Thornton LLP, a renewed focus on productivity offers the best opportunity to
restoring health and profits.
    The Grant Thornton LLP white paper, Profitability via Productivity sheds
light and offers advice on the biggest challenge to face Canada's
manufacturing sector in recent decades. The paper points to options available
to Canada's vibrant private mid-size manufacturing sector - one long
recognized for its resilience, creativity and "bootstrapping entrepreneurial"
spirit.
    Despite years of struggling to deliver cost efficiencies, in response to
the roller coaster value of the Canadian dollar in relation to our largest
market, the US, and pressure from foreign competitors, Canadian manufacturers
continue to be faced with the challenge of decreasing profitability. Mr. Jim
Copeland, National Leader of Manufacturing and Distribution, Grant Thornton,
suggests manufacturers need to rigorously assess their operations and adopt a
productivity improvement mindset to improve profitability.
    Mr. Copeland noted that the health of this sector is of utmost importance
to the economy. "Canada's mid-sized independent manufacturing sector accounts
for as high as 18% of the nation's gross domestic product or $612 billion
dollars in annual shipments. It is the country's largest single business
sector employing 2.1 million Canadians with wages at levels that are 22% above
the national average."
    Mr. Copeland noted, "There is a natural reluctance to see outsourcing or
off-shoring of services as a strategy to improve productivity, because most
manufacturers have evolved through business environments and marketplaces that
encouraged and rewarded in-house management and production. Unfortunately,
critically evaluating your supply chain and considering outsourcing or
off-shoring opportunities as viable alternatives for non-core activities is
often ruled out or viewed as a last resort." He added, "This thinking must
change for companies competing in a truly global market in which there will be
pressure on profits that demand new efficiencies and improved productivity."
    The white paper recognizes there are a wide variety of factors that must
be used in considering whether the right choice is to continue with in-house
resources or to explore external options. The one undeniable fact is that
Canadian manufacturers must become more productive to be able to return to and
sustain acceptable levels of profitability. Mr. Copeland suggests that this
will require a thorough analysis of all elements of the supply chain and an
informed decision to retain and improve the activity or consider external
options. If external options make sense, they must be implemented in a way
that allows them to be seamlessly integrated into the manufacturing operation
to increase overall productivity, reduce costs and, ultimately, improve
profits.
    Grant Thornton LLP conducts one of Canada's most comprehensive annual
studies of independently owned Canadian manufacturers. Along with the annual
Manufacturing Insights study, Grant Thornton LLP publishes white papers on
strategic management trends and unfolding challenges and opportunities in the
manufacturing sector that offer fact based best-practice insights and advice
to the sector.

    Grant Thornton LLP is a leading Canadian accounting and consulting firm
focused on serving entrepreneurial organizations. We deliver Results-Driven
Advice(TM) through proactive teams using unique diagnostic tools, fact-based
insights and commitment to exceptional client service. Together with the
Quebec firm Raymond Chabot Grant Thornton, Grant Thornton in Canada has more
than 2,700 people in offices across the country and annual revenues of more
than $361 million. Financial Post 500 recently rated them together as among
Canada's top five largest accounting firms. Grant Thornton is a Canadian
member of Grant Thornton International, which has over 585 offices worldwide
and is represented in 111 countries.





For further information:

For further information: or to arrange an interview, please contact:
Peter Mumford, Compass Communications Inc., t. (902) 455-3307 x 55, c. (902)
488-5155


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