Focus shifts from off-shore to on-shore in the Canadian manufacturing industry

KPMG LLP

From survival to success, companies move from controlling costs to driving growth

TORONTO, July 21, 2014 /CNW/ - For the past eight years, manufacturers in Canada have been fighting an uphill battle. From the downturn of the US 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 US 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 US 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.

QUOTES

"The manufacturing sector in Canada has undergone a period of survival of the fittest over the past decade. The strongest companies having withstood tough times are 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, thinking ahead rather than simply fighting to survive."

• Laurent Giguère, National Industry Leader, Industrial Markets, KPMG

"Canadian companies should leverage their proximity to the US market and the tightened lead times and reduced energy costs our geographic location offers. Manufacturers must adjust their focus to activities here at home in order to capitalize on the industry shift from off-shoring to on-shoring."

• Don Matthew, National Sector Leader, Diversified Industrials, KPMG

LEARN MORE

CMO Report Website
KPMG - Industrial Markets
@KPMG_Canada - #CMO2014
KPMG on LinkedIn

About KPMG's Canadian Manufacturing Outlook

The Canadian Manufacturing Outlook is an annual survey based on the KPMG International Global Manufacturing Outlook survey. One-hundred and fifty-four senior manufacturing executives from across Canada were surveyed in early 2014, representing a range of industries including: industrial products, machinery and equipment; automotive; transportation; food, beverage and consumer goods; technology and electronics; pharma and biotech; metals; forestry; aerospace and defense. Seventy-three per cent of respondents indicated that they have revenues of less than $100 million, with 15 per cent in the $100-$250 million range, and five per cent greater than $1 billion. To access the full survey report, please visit www.kpmg.ca/cmo2014.

About KPMG

KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 155,000 professionals, in 155 countries.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

Video with caption: "Video: Canadian Manufacturing Outlook 2014: Leveraging Opportunities, Embracing Growth". Video available at: https://www.youtube.com/watch?v=96FuNPxM0ns#t=59

SOURCE: KPMG LLP

Kira Froese
National Manager, Communications
KPMG in Canada
416.777.8928
[email protected]