Innovation

Are Canadian Manufacturers on the Right Track?

New survey shows that sales are the top priority, beating out cost-control and risk management

Written by Deborah Aarts

Manufacturing in Canada is a tough gig. Faced with relentless cost pressures, volatile input prices, erratic currency exchange rates, sky-high fixed equipment and labour expenses and ever-changing global competition, even the most successful players must contend with challenges no entrepreneur would envy.

That’s why it may surprise some to discover what’s really keeping Canadian manufacturers up at nights.

A new survey from KPMG reveals that the top concern of Canadian manufacturing executives—most of which represent small- to mid-sized operations—is not reducing cost structures, nor improving cash flow, nor risk management.

It’s boosting revenue.

Nearly three-quarters of respondents—74%—say that sales growth is a top strategic priority. That’s far more than the percentage that cite cost-cutting (56%), research and development (34%—perhaps further evidence of Canada’s innovation lag?) and boosting cash flow from operations (30%).

There’s only a half-and-half chance they’re looking to find that sales growth within Canada. By contrast, 71% plan to use U.S. clients as a springboard to better sales. And while interest in emerging markets is growing, only a few expect to tap into these countries, with 20% planning to achieve major sales growth in China, 11% in Mexico, 6% in India and 4% in Russia.

Read: PROFIT’s Export Wire: The Latest News You Need to Grow Your Business Globally

Top cost-control strategies

On the cost-control front, more than half of respondents say reducing labour costs is a top priority. But that’s far from the only strategy at play. An even 40% say they’ll trim expenses by quashing unprofitable or non-core product lines, suggesting that there will be more specialization going forward. Some 30% intend to acquire suppliers in order to stabilize input costs, while 26% plan on sharing functions or facilities with other organizations.

Even though cost-control is not the top priority of Canadian manufacturers, Laurent Giguère says it’s still a strategic imperative. “The tough economic climate during the past four years forced many manufacturers, including the smaller, niche players in Canada, to reassess their plans, focus on the bottom line and control costs,” says Giguère, who is KPMG’s national industry leader for industrial markets in Canada.

Read: Expert Cost-Cutting Tips

R&D realities

When it comes to improving R&D, Canadians are feeling cautious. Nearly 80% of respondents aim to innovate in their businesses by enhancing existing product lines and services; only 15% intend to pursue disruptive technologies.

Yet this doesn’t mean manufacturers are pessimistic about innovation; on the contrary, 62% agree that it’s faster to bring new R&D projects to market than it was five years ago. Only 48% of manufacturers globally feel the same.

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The survey—called Canadian Manufacturing Outlook 2013—surveyed 173 manufacturing executives across Canada, two-thirds of which represent companies with less than $100 million in revenue.

Originally appeared on PROFITguide.com