Manufacturers that plan and invest are higher performers: report
Study calls for increased market diversification and closing the gap on the continuing shortage of skilled labour.
small and medium sized businesses
MONTREAL — Quebec-based manufacturing SMEs that make significant investments in strategic planning, equipment and R&D are higher performers, according to findings in STIQ’s annual Baromètre industriel québécois.
The study also highlights the need for manufacturers to diversify their markets and address the continuing shortage of skilled labour.
The Baromètre, which surveyed 400 Quebec manufacturing SMEs, highlights inadequate levels of investment made in equipment and R&D while showing that companies with above-average investments perform better.
In 2014, companies that invested heavily in equipment (more than 5% of their revenues) were twice as likely as those that invested a lesser amount (less than 2% of their revenues) to have increased their revenues by more than 20%. Meanwhile, 53% of those that invested significantly in R&D were selling internationally, while this was true of only 21% of respondents that reported lower levels of investment.
The report concluded that the considerable gap confirms the decisive role investment plays in improving competitiveness.
Only 57% of respondents had conducted a strategic planning exercise in 2014, which has been little changed since since 2010. The percentage is relatively low when considering that a company that implements a strategic plan is almost twice as likely to successfully expand into foreign markets, and 25% more likely to attribute a significant proportion of their revenues to new customers.
SMEs that planned strategically have also invested more and established a greater number of partnerships.
STIQ’s study also reveals that Quebec-based companies face challenges with finding new customers. For a fifth consecutive year, six out of 10 companies saw less than 10% of their revenues generated by new customers.
Thirty-three per cent attributed at least 50% of their revenues to their three largest customers. To safeguard against fluctuations in the economy, they must diversify by developing business in new sectors or focus on exports, a potentially valuable avenue of growth at a time when domestic demand is almost stagnant.
The industry has for several years sounded the alarm regarding the problem of labour shortages.
The STIQ survey reveals that the situation is now becoming critical: in 2014, 74% of respondents experienced significant problems with regard to recruitment in 2014, compared to 66% in the previous year.
“The lack of workers is the largest obstacle to the expansion of our business. We have the capital to buy machines, the space for them, in addition to customers and orders. The only thing we are lacking is human resources,” said Jean Blanchet, director of Megatech, a Quebec-based SME that has turned to international recruitment to address the shortage of skilled labour.
STIQ is a multi-industry association that represents Quebec’s manufacturers based in Montreal.