28 July 2014

After eight difficult years, the Canadian manufacturing sector is on its way to real recovery, according to KPMG.

In its recent Canadian Manufacturing Outlook survey, KPMG took the pulse of 154 executives from the Canadian manufacturing industry:

• 81% of manufacturers are focusing on increased sales
• 49% will be devoting their efforts to cost reduction
• 14% of manufacturers plan to source from China–compared to 31% in 2013
• 3% plan to source from India–12% last year

Clearly, more and more Canadian companies are abandoning off-shoring to emerging economies as a strategy to reduce their costs. We are witnessing a sudden relocation of production to North America, due in particular to a hike in energy and transportation costs, tightened lead times, rising inflation in China, and the superior quality of products made here.

Encouraging indicators

Sourcing to a greater extent from the on-shore market, Canadian companies will bolster their momentum and at the same time help create a context for increased sales.

Canada’s manufacturing industry is already showing encouraging signs: in February 2014 it had its highest monthly growth rate since 2008, with revenues up by 1.4%. In May, sales increased by 1.6% compared to those in April, the fourth rise in five months.

Opportunities to seize

In its report, KPMG proposes steps that Canadian manufacturers can take to support their growth, including:

• Develop new product lines and reduce marketing lead times
• Increase supply chain visibility
• Identify and manage the risks associated with sustainable development issues in the company’s activities and those of its supply chains
• Improve the quality of cost data to more accurately measure product profitability
• Invest in breakthrough innovation as well as incremental innovation.

Source: KPMG