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Manufacturers' prospects are looking up

Canadian manufacturers see the economy picking up over the next three years and they are preparing for business expansion with plans to hire, and invest in process improvements, facilities, technology, training and innovation, according to a survey of senior plant executives.


December 16, 2010
by PLANT STAFF

TORONTO: Canadian manufacturers see the economy picking up over the next three years and they are preparing for business expansion with plans to hire employees, invest in process improvements, facilities, technology, training and innovation, according to a survey of senior plant executives.

The Business Outlook 2011: Innovation Advantage survey conducted by Canadian PLANT with sponsors Grant Thornton LLP and the Italian Trade Commission attracted 384 responses from mostly small to medium-sized enterprises (SMEs) that are optimistic about the coming year and beyond.

Respondents are concerned about economic conditions, but 64% are expecting more orders next year, 63% say sales dollars will increase, 43% are counting in higher profits and 31% say their prices will go up.

Forty-four per cent of them intend to hire over the next three years, 33% are adding new lines of business, and 33% plan to enter new geographic markets. Forty-six per cent are investing in process improvement next year, 39% in training and 37% in machinery and equipment.

This year’s survey looked at competitive issues, including manufacturers’ efforts to innovate and improve productivity. Eighty-six per cent of respondents consider innovation to be an important part of their game plan, but when asked to identify their competitive advantages, quality was the top choice (24%) with innovation appearing well down the list (6%).

That’s not to suggest manufacturers are not innovating. Spending on research, development and commercialization of new products is growing steadily, with a rate increase of about 10% expected for 2011, but 49% are not taking advantage of the SR&ED tax credit offered by the federal government.

Productivity is a major issue for 77% of the respondents, and looking at their workforces, they identified the need for further improvement in technology, innovation, creativity, management and teamwork.

This concern shows in their investment plans, which lean towards process improvement before new machinery and equipment and technology, but there is also recognition that skills must be improved and many are turning their attention to more training.

Those considering new markets will be focused more on North America, but some plan to see what the rest of the world has to offer and intend to venture into Europe, South America and the BRIC countries.

“There is clearly a shared optimistic view amongst most Canadian manufacturers that the industry is in expansion mode,” said Jim Menzies, national leader, manufacturing and distribution with Grant Thornton LLP in Toronto.

Although they realize expanding to new geographic markets will open up significant opportunities to increase their revenues, Menzies said the uncertainties that come with foreign expansion, such as transportation and logistics issues, foreign currency fluctuations and a lack of knowledge and experience in that foreign market, can make it an anxious proposition.

“They also realize that they need to focus on longer term strategy and risk management, however many of them have been focused primarily on ensuring that the company continues to operate in the near term, hampering their ability to truly focus on their longer term objectives,” Menzies said.

The survey was conducted in September and October. The margin of error is +/- 4.1%, 18 times out of 20.

Click here for a copy of the survey results and a roundtable discussion of key points.
PLANT