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Manufacturing advantage

Canada’s manufacturers can forge global challenges into opportunities, says Luc

In 2004, Canada’s economy was marked by three factors: a strong appreciation in the Canadian dollar compared to the U.S. dollar, high oil prices, and China’s ever-expanding growth in importing and exporting activity. To respond to these economic factors, many manufacturing companies will have to prepare for several challenges that lie ahead. All manufacturing companies, whether they operate in the forestry, automobile or other industries, will have to react quickly and adopt strategies that will enhance their efficiency and help them compete in an increasingly competitive marketplace.

Canadian manufacturers must be prepared to handle the pressures
Luc Martin is in a perfect position to understand how important it is for manufacturers to begin implementing new strategies. A graduate from the École des Hautes Études Commerciales (HEC), Luc has been providing consulting and assurance services to manufacturing clients for over 25 years. Since January 2005, he has been serving as Deloitte’s national leader for the manufacturing sector and leading a team of 15 partners.

“Most Canadian manufacturers export their goods and, as such, they are facing pressures from all sides. On one side, their operating costs are rising due to higher oil prices, and on the other side, retail prices are dropping due to a weak U.S. dollar and extremely low prices being offered by Asian competitors,” Luc explains. “To remain competitive, companies must be able to offer new, attractive products, develop more efficient production methods, recruit and retain future generations of manpower, and conquer new markets.”

Outperforming the competition through innovation
From Luc’s perspective, the best way to respond to these pressures is through innovation. “We provide manufacturers with a wide range of services that can help them get the most from their investments through R&D tax credits,” he says. “In addition, we also enjoy a unique expertise in R&D and innovation, because, unlike other firms, our team is made up of many engineers. Our engineers speak the same language as our clients’ engineers. They can better grasp the definitions of research activities, they can see where innovation is being used in processes, and, therefore, they can maximize the tax credits to which clients are entitled. We are the only firm that has so many engineers on our team, which helps us claim and retrieve more money for our clients,” explains Luc.

Service and quality: Two ways to stay in the game
To succeed, a company must be able to offer innovative, high-quality services while developing high productivity based on an optimal cost structure. “The Chinese economy is fine, but it’s very far away,” says Luc. “A lot of companies that are trading with China are encountering a fairly serious problem: sea traffic. Merchandise is delayed in ports for days on end, resulting in serious consequences for companies with very tight production or distribution timelines,” he notes. “Canadian companies can use this disadvantage to their advantage. They can gain ground by offering products that are guaranteed to be delivered on time and that boast higher quality, even if those products are slightly more expensive than their Chinese counterparts.”

In fact, this measure of product and service quality has become essential to companies that wish to survive. “In the coming years, we expect many manufacturing companies to experience difficulties, and we should see the emergence of two trends,” says Luc. “First, we expect to see a rise in consolidation activity and in mergers and acquisitions. Second, manufacturers will want to reorganize their production processes and improve their productivity.”

Another daunting challenge: recruitment and retention
As with most other sectors, companies in the manufacturing sector are facing serious recruiting challenges. To compensate for the loss of specialized employees due to retirement, manufacturers must engage in public relations initiatives aimed at attracting talent. “Heads of manufacturing companies must apply human resource solutions and improve perceptions about their sector among today’s youth,” says Luc. “Contrary to public opinion, the manufacturing sector is not old and void of opportunity. In fact, it is ripe with possibilities, it uses cutting-edge technologies and applications, and it offers enormous opportunities for international careers. Manufacturing leaders must underscore these benefits to attract today’s youth and keep them by offering continuous development programs.”

Global opportunities
According to Statistics Canada, imports from China have doubled in the past three years. In 2004 alone, imports from China posted a 30% increase. China has definitely established itself as a new market player, and Canadian companies must respond in kind and seek out new markets. “China does pose a threat, but at the same time, it poses a major opportunity,” says Luc. “The Chinese market is a market of approximately one billion consumers that has opened up to companies around the world. Those who can see the opportunities will take advantage of the situation, while those who fail to recognize them will not survive. Other regions of the world are enjoying exceptional growth as well. Such is the case for Eastern Europe and South America. Both areas, in fact, represent highly attractive markets in which Canadian companies must make inroads,” explains Luc.

Is your manufacturing company prepared to face the challenges?
These days, fads are short-lived and products become outdated in no time at all. “For manufacturers, this frenzied pace poses a major problem, because the ratio of a product’s development costs to its lifespan is constantly on the decline,” observes Luc. Today, it’s virtually impossible to develop a product and hope that it enjoys a market stay of 10 years or so. And that’s why innovation and development have become so crucial to manufacturers.

  1. Are you looking for ways to lower your production costs or improve your production processes?
  2. Would you like to conquer new markets, but don’t know where to begin?
  3. Would you like professional assistance with your recruitment and retention strategy?