U.S. protectionism concerns otherwise optimistic Canadian manufacturers

TORONTO — Canadian manufacturers are optimistic about their prospects in 2018, but they’re also concerned that U.S. president Donald Trump administration policies and other disruptive factors might affect their businesses, according to a new survey of senior manufacturing executives.

PLANT Magazine’s 2018 Manufacturers’ Outlook study shows 44 percent of senior company executives are optimistic about the coming year, although most (50 percent) qualify their optimism with caution.

They’re either very or somewhat concerned about what’s going on in America. U.S. protectionism is worrying 92 percent of executives followed by global protectionism (90 percent), U.S. President Donald Trump’s impact on nation-to-nation relationships (89 percent) and the NAFTA (North American Free Trade Agreement) renegotiation (88 percent).

The survey, in partnership with Grant Thornton LLP, SYSPRO Canada and Machines Italia with the Italian Trade Commission, is based on 495 replies from senior manufacturing executives.

“In today’s uncertain world, exporters must be deliberate and agile especially with policies like NAFTA hanging in the balance,” says national manufacturing industry leader Grant Thornton LLP’s Jim Menzies. “With or without NAFTA, Canadian manufacturers will always do business with our neighbor to the south. However, the existing NAFTA uncertainty does provide added incentive for manufacturers to look beyond the United States to leverage the strong manufacturing reputation Canada has earned in the global marketplace.”

Despite their concerns, manufacturers are demonstrating their confidence with plans to make significant investments in their businesses.

Top choices for investment over the next three years are machinery, equipment and technology (79 percent of respondents) and training (68 percent). Average investment is more than CDN $1 million.

More than half of the senior executives are expecting orders and sales to increase (averaging 12 percent and 13 percent); but costs will also increase by six percent. Pricing will stay the same for 48 percent of companies but 43 percent expect increases of five percent. Thirty-nine per cent see profits rising eight percent.

Controlling costs tops the list of challenges for 66 percent of respondents, followed by pressures on prices (53 percent) and improving productivity (49 percent).

Companies lag in the adoption of advanced measures and technologies that would improve productivity. Only 36 percent make use of automatic data access, analysis and review to measure and monitor productivity; 46 percent do it manually; 18 percent don’t measure; and 59 percent do not plan on a digital production transformation involving Industry 4.0 and Industrial Internet of Things (IIoT) over the next 12 months.

Respondents demonstrated limited engagement with IIoT, which connects and optimizes machines via the internet. Only nine percent are applying IIoT capabilities, 33 percent are not familiar with these capabilities and 29 percent said they were not applicable.

“Canadian manufacturers have a real opportunity to embrace disruptive change in this global economy,” says SYSPRO Canada vice-president of sales James Weir. “The results indicate that more than half of those surveyed are manually measuring and monitoring their productivity levels, or not at all. Investing wisely in automation (and innovation) should not be a scary notion for companies, but rather a strategic business approach that is embraced. Companies that do so are more likely to increase production volume, reduce costs and improve the quality of delivering goods to meet customer demand.”

Other highlights from the 2018 Manufacturers’ Outlook survey:

• 62 percent of companies report revenues from Canada, the U.S. (36 percent) and Mexico (13 percent). After North America, 23 percent report revenues from Western and Central/Eastern Europe, with much smaller percentages from other regions.
• Companies entering new markets over the next three years are favoring the same regions: the U.S. (29 percent), Canada (26 percent) and Western Europe (13 percent) are their top choices.
• 45 percent of executives cite a growing risk of cyber attacks aimed at industrial targets as a medium concern. Less than half are very prepared for a variety of attacks. Twenty-five per cent are least prepared for targeted external attacks.
• 54 percent of respondents see innovation as very important to their business strategies. Top areas of focus are products for 66 percent, processes (65 percent) and technologies (51 percent).
• The average innovation spend for 2018 will be 4.9 percent of revenue and 55 percent plan to increase their investment over the next five years while 41 percent will invest at current levels.
• 75 percent indicated they were very or at least somewhat engaged in the reduction of carbon emissions, but 44 percent do not include carbon reduction as a part of a formal business strategy.

The survey, conducted by Toronto research firm RK Insights, has a margin of error of +/- 3.6 percent, 19 times out of 20.

Most of the surveyed companies (64 percent) fall into the small business category (under 100 employees); 34 percent are medium-sized (under 500); and 12 percent are large (500 or more).

Download a copy of the Manufacturers’ Outlook 2018 report, which includes an executive roundtable discussion at https://www.plant.ca/wp-content/uploads/2017/12/PLT_Outlook-2018_DE.pdf

About SYSPRO Canada
SYSPRO is a global, independent provider of industry-built ERP software designed to simplify business complexity for manufacturers and distributors. More information at https://ca.syspro.com.


About Grant Thornton LLP
Grant Thornton LLP is a leading Canadian accounting and business advisory firm providing audit, tax and advisory services. More information at www.grantthornton.ca.

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