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Canadian Manufacturing Shifting Focus from Off-Shore to On-Shore

Posted July 22, 2014

For the past eight years, manufacturers in Canada have been fighting an uphill battle. From the downturn of the U.S. economy and the rising Canadian dollar, to skilled labour challenges and off-shoring trends - manufacturing here has faced tough headwinds. Today, times are finally moving in a direction that helps rather than hinders manufacturers, according to KPMG’s Canadian Manufacturing Outlook 2014, released yesterday.
KPMG Manufacutring Outlook 2014
“Canadian companies have the opportunity to respond to the growing demand among their customer base for more and better products delivered faster, and gain competitive advantage by investing in R&D and increasing speed to market,” the report says.

The report reveals that Canadian companies are increasingly turning away from off-shoring as a cost-saving solution. In 2014, only 14 percent of manufacturers planned to source from China, compared with 31 percent in 2013 - likewise, plans to source from India were at three percent this year compared to 12 percent last year. Rising energy and transportation costs, along with added pressure on lead times and increased inflation in China have made Canada and the US more competitive as sourcing nations. 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 manufacturing sector in Canada has undergone a period of survival of the fittest over the past decade. The strongest companies having withstood tough times are well positioned to compete locally and globally,” says KPMG’s Laurent Giguère, one of the report’s co-authors.  “Those manufacturers who are still around are resilient – they have some tailwinds because we have a stronger U.S. dollar that is favouring our exports and Canadian manufacturers, 78 percent of those exports are to the U.S.”

This shift to North American sourcing, along with the strengthening U.S. economy and a dollar that is working to their advantage, allows Canadian companies to move past survival mode and focus their efforts on increasing revenue – the top priority for 81 percent of manufacturers. Earlier this year, the sector experienced its highest monthly growth in Canada since 2008, with revenue increasing 1.4 percent across the sector. Given the current economic climate, the time is right for manufacturing companies to tap into current trends and seize industry opportunities to ensure continued growth and future success.