Canadian manufacturers shifting focus from off-shore to on-shore: KPMG

Fewer Canadian firms are preoccupied with cost-saving and outsourcing production to nations like China and more are focused on growth, according to a new report from consulting firm KPMG.

The finding is just one piece of good news from the report. Another: Canada’s manufacturing sector is finally poised for a true recovery after spending almost 10 years simply trying to survive.

The report, based on a survey of 154 senior industry executives, found only 14 per cent of manufacturers planned to source from China, compared with 31 per cent in a 2013 survey. As well, only three per cent said they planned to source from India, as opposed to 12 per cent last year.

“Rising energy and transportation costs, along with added pressure on lead times and increased inflation in China have made Canada and the U.S. more competitive as sourcing nations,” KPMG said. “Reasonable energy costs and the quality and consistency of products offered here at home have also driven Canadian manufacturers to look on-shore for their sourcing strategies.”

The report also cites the strengthening U.S. economy and weaker loonie as other factors working to the benefit of Canadian factories, which in February experienced the highest monthly growth since before the recession, with revenue rising 1.4 per cent across the sector.

The report is also largely positive about the availability of skilled workers for manufacturing. Companies still cite trouble finding workers, it noted, but also said colleges and universities are turning out more young people with the right skills for the sector, and companies themselves are putting greater focus on training and retaining employees.

The KPMG report noted that, despite its troubles, manufacturing is still among Canada’s most important and dynamic sectors. In 2013, about 80,000 manufacturing firms generated revenues of close to $600 billion and employed about 1.8 million Canadians.

“The manufacturing sector in Canada has undergone a period of survival of the fittest over the past decade,” said KPMG’s Laurent Giguere. “The strongest companies having withstood tough times are well positioned to compete locally and globally. Canadian manufacturers are the busiest they’ve been in many years, and it is essential for these companies to remain focused on future success, thinking ahead rather than simply fighting to survive.”