Common productivity misfires

TORONTO—Regardless of the types of products they make, Canadian manufacturers experience many of the same productivity pitfalls.
These shortfalls hinder Canadian growth in an ever-changing, hyper-competitive global economy. So what are some common obstacles to a more efficient business?

For one thing, manufacturers often focus on work intensity, instead of productivity. But it’s not about working harder or longer, it’s about making your processes as efficient as possible, according to a report from the Conference Board of Canada.

Updating key technologies that boost output and streamline operations controls long-term costs more efficiently by producing value-added products that yield higher returns.

Slower productivity growth shackles a firm to low value, “commoditized” manufacturing. Specialized, value added manufacturing is more capital-intensive and technologically complex, leading to more desirable export products.

Productivity growth versus productivity levels

A lot of attention is spent on productivity growth rather than increases in productivity levels. Both are of equal importance.

Canada’s productivity level (dollar value of output per hour worked) was $35 in 2008, according to the Conference Board.

In contrast, the U.S. productivity level was $44—20 per cent higher.

Missing the boat on technology

The Board says Canada’s productivity gap reflects soft inward and outward foreign direct investment, lower R&D intensity and weak innovation.

Investments in technology have fallen 37 per cent in the last decade, according to the CBOC, indicating an epidemic of missing the boat on new technologies.

Excess capacity drops productivity

Getting a handle on runaway capacity issues is a major step to not only controlling costs, but establishing the foundation to make an operation more efficient.

Implementing a system that suits supply-and-demand needs not only helps improve efficiency and productivity through working smarter. It cuts costs by eliminating unnecessary inventory—cash that should be applied to capital investments.

Avoiding expansion and export opportunities

The Canadian government is doing a lot to improve trade regulations with developing nations around the world. Developing relationships with these economies showing significant recent growth is vital to boosting productivity at home.

More recently, the federal government has shown interest in Canada’s Eurozone relationships in an effort to improve market access.

These efforts demonstrate the sheer importance of competitiveness in global markets.

Not taking advantage of government subsidies

There are millions of dollars available, but only a handful of companies take advantage of generous subsidies and tax incentives for R&D and technology.

According to Canadian Plant magazine’s Business Outlook Survey 2012, only 26 per cent of its 367 respondents planned on using government tax credits to invest in technologies and R&D this year.

Click here to go back to the Manufacturing Leadership report on productivity.