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Canadian Manufacturing Sector Poised for Growth

January 14, 2014, 06:55 AM
Filed Under: Manufacturing

The cautiously optimistic manufacturing sector is investing in the future and pursuing new business, according to PLANTMagazine’s Manufacturers’ Outlook 2014: Pursuing opportunities for growth, sponsored by Grant Thornton LLP. The survey suggests that business prospects are improving for manufacturers.

“What’s clear from the results is that Canadian manufacturers believe their industry is in growth mode,” says Jim Menzies, National Leader, Manufacturing and Distribution, Grant Thornton LLP. “They’re looking to invest in new employees, new lines of business and new geographic markets, while also focusing on improving sales, controlling costs and increasing productivity. However, we’re also seeing that Canadian companies just don’t seem to be getting their share of some of the real growth that’s going on in places like South East Asia.”

The report is based on a survey of 450 responses from senior executives from leading Canadian manufacturing operations conducted by Bramm Research. In addition to the research results, PLANT Magazine and Grant Thornton LLP organized a roundtable of manufacturing leaders to discuss the results and their own views on the prospects for Canadian manufacturers for 2014. The roundtable discussion, featured in the Manufacturers’ Outlook 2014, provides unique perspectives and personal stories that support and augment the survey results, and make for fascinating case studies.

Key highlights from the survey include:

  • Almost two-thirds of the respondents (64%) expect orders to increase as well as the dollar value of sales (62%), 44% are expecting higher profits and 32% anticipate higher pricing.
  • One of the leading priorities over the next three years is investment in machinery and equipment (76%). Of those looking to invest, 62% say they are trying to improve productivity for growth. More than half of the respondents intend to invest just short of $1 million.
  • Other significant growth plans include pursuing new customers in North America (56%), investing in new product development (46%) and developing new supplier relationships (40%). Other priorities are training (55%) and hiring staff (49%). Thirty-two per cent are investing in research and development and are allotting 1% to 3% of revenues.
  • Skills shortages continue to impact manufacturing. Leading the list is production skills (53%), followed by general labour (35%), management (29%), engineering (28%), R&D (20%) and production support (19%).
  • More than two-thirds of the companies are looking internally to meet their skills needs, 37% are using agencies, 30% are hiring from other companies, 29% are making use of apprenticeship and other programs and 23% are networking. Sixty-nine per cent say they will deliver training through coaching and mentoring, and 68% will run in-house workshops. Much farther down the list for 36% is training from third-party providers.
  • More companies anticipate hiring over the next three years (58% compared to 54% in 2013), and adding new lines of business (43% from 39%). Although the majority of companies continue to trade close to home, 36% plan to enter new geographic markets and 33% intend to expand their plants.
  • One of the biggest challenges continues to be increasing sales (61% compared to last year’s sample of 57%), controlling and reducing costs (58%) and improving productivity (47%), which is a top investment priority for 44%.
  • Access to external financing continues to be the biggest growth constraint according to 49% of the respondents, while 71% intend to finance using internally generated cash flow. The ability to engineer and customize is seen as the top competitive advantage by 67%, closely followed by leaner manufacturing and a focus on continuous improvement, and the use of innovative technologies (56%).
  • Sixty-two per cent of companies are currently making most of their sales in Canada and 27% in the US, but business is going up by nano steps in other regions and countries such as Western Europe (2.6%) and China (almost 2%). Over the next three years 40% plan to pursue new markets in the US, 39% in Canada, 16% in Mexico, 13% in Brazil and 13% in other South American countries.
  • Survey respondents listed their top five competitive advantages as: the ability to engineer and customize (67%), leaner manufacturing and focus on continuous improvement (64%), use of innovative technologies (56%), flexibility (53%) and unique product offerings (38%).

The Manufacturers’ Outlook 2014 also contains an economic forecast that points to stable inflation and taxation as positive economic factors for manufacturers, though the panel did note some concern over uncertain provincial corporate tax levels, particularly in Ontario and Quebec. While the US exchange rate is an important issue for manufacturers, the Outlook predicts a stable 90 cent to parity dollar for the foreseeable future.

“The survey results show Canadian companies are stepping up their game as they anticipate better business to come,” said Joe Terrett, Editor, PLANT Magazine. “The leaders of Canadian companies are not suffering from diminished confidence, and they’re looking ahead to capitalize on better times. However, there’s still work to be done, notably stepping out from their Canada/US comfort zone.”

To download the full PLANTMagazine’s Manufacturers’ Outlook 2014, click here.

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