Canadian manufacturers showing optimism about future: study

Toronto—The majority of Canadian manufacturers are optimistic about the future of their business over the next two years despite a sluggish economic recovery, according to a new study.

Advisory firm KPMG’s third annual manufacturers study, Canadian Manufacturing Outlook 2012: Push and Pull—Reducing Costs and Investing in Innovation, found 85 per cent of Canadian manufacturers are feeling good about their prospects moving forward.

Manufacturers across the country are more optimistic than last year (up nine percentage points), according to KPMG, and share a more positive outlook than that of their global counterparts.

“Our survey tells us that Canadian manufacturers are confident in their business strategies, but investing in innovation, increasing efficiencies and managing risk are top-of-mind moving forward,” KPMG national industry leader in industrial markets, KPMG Laurent Giguere said in a release. “As smaller, niche players operating with a strong dollar, Canadian companies realize they need to innovate in order to compete with lower-cost global producers.”

Innovation to drive future growth

Canada has not seen disruptive, game-changing innovation, nor has it experienced process innovation that can revolutionize and drastically improve productivity in the manufacturing sector, according to KPMG.

Yet despite the lack of recent transformation, manufacturers do realize the impact innovation can have on their business and, more specifically, their bottom line.

The study found more than 60 per cent of Canadian respondents believe the next wave of transformational innovation is underway or will be within the next 12 to 24 months.

Doing more with less

Canadian manufacturers are striving to increase productivity and manufacture products at the lowest cost to stay competitive.

In today’s increasingly global market, labour costs continue to be a priority for Canadian companies.

According to KPMG, half of study respondents said reducing labour costs is the cost control method they expect to be most important over the next 12 to 24 months.

Coming in at number two is exiting unprofitable product lines and/or geographies (46 per cent).

Managing risk in an uncertain world

As the number of Canadian manufacturing companies doing business in emerging markets rises, their investment in risk management strategies should increase as well—however, the study found this is not the case.

Canadian respondents plan to spend relatively less on risk management than their global counterparts in 2012.

Currently, only five per cent of Canadian respondents use scenario/simulation planning to address aspects of risk management and 17 per cent of Canadian respondents “don’t know” how they’re going to identify risk in their supply chains over the next 12 to 24 months.

KPMG’s Canadian Manufacturing Outlook 2012 surveyed 150 participants from across Canada.

70 per cent of respondents were C-level executives and 79 per cent are responsible or significantly involved in developing their company’s sourcing/manufacturing strategy.

Companies with annual revenues of less than $100-million make up 62 per cent of the respondent base, and 4 per cent are companies with revenues exceeding $1-billion.