Manufacturing Challenges in Canada - Canadian Manufacturers ...

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Manufacturing Challenges in Canada

The Challenge of

CHANGE Canadian manufacturers are at a critical crossroads. They face a number of current market challenges. They will face even greater challenges over the next five to ten years as the business of manufacturing evolves rapidly in response to the development of new technologies and new competitive pressures.

For Canadian manufacturers, the most pressing challenges they face in a rapidly changing business environment are:

CME’s 2003 Management Issues Survey asked manufacturers to identify current and future challenges that will fundamentally change the nature of their business over the next five to ten years. About 500 companies responded to the survey.

Increasing international competition;

The impact of a stronger Canadian dollar; Increasing competition from China; Changing patterns of customer demand; Escalating business costs; The availability of skilled personnel; Problems in commercializing new products and new technologies;

Implementing process innovations; The impact of higher taxes and increasing regulatory compliance costs; Keeping up with the pace of technological change;

FUTURE BUSINESS CHALLENGES

Managing innovation and growth;

STRONGER CANADIAN DOLLAR INCREASING COMPETITION FROM CHINA CHANGING PATTERN OF CUSTOMER DEMAND

Taking advantage of international market opportunities;

HIGHER BUSINESS COSTS AVAILABILITY OF SKILLED PERSONNEL BRINGING NEW PRODUCTS ONTO MARKET INCREASING COMPETITION FROM OTHER COUNTRIES

Securing a reliable and cost-competitive supply of energy; and,

PROCESS INNOVATION HIGHER TAX & REGULATORY COSTS TECHNOLOGICAL CHANGE OVERCAPACITY

Competing for investments and product mandates.

MANAGING GROWTH ACCESS TO FOREIGN MARKETS AVAILABILITY & COST OF ENERGY COMPETITION FOR INVESTMENT & PRODUCT MANDATES 0

10

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30

40

50

60

PERCENT OF MANUFACTURERS

MANUFACTURING CHALLENGES IN CANADA

1

Currency

APPRECIATION The Canadian dollar has appreciated sharply in U.S. funds since the beginning of 2003. The dollar jumped from US$0.63 in January 2003 to US$0.78 in December, before settling back to the US$0.75 range in February and March 2004. Most economists forecast that the Canadian dollar will top US$0.80 by the end of 2004.

Most Canadian exporters price their exports in U.S. dollars. For Canadian manufacturers who now depend on international markets for more than 55% of their total operating revenue, the appreciation of the Canadian dollar has been like a 15% price cut on export sales over the course of a few months. Canadian companies have never experienced such a rapid rise in exchange rates or such volatility in currency markets before. There are, however, some benefits from a higher Canadian dollar. It reduces the cost of imported goods, technologies, and capital equipment. It lowers labour costs if paid in U.S. dollars. And, it makes it easier for Canadian companies to invest in new products, intellectual property rights, and skilled workers around the world.

THE CANADIAN DOLLAR 0.80 0.78 0.76 0.74 U.S. DOLLARS

changed that much against the yen, euro, or pound sterling, but it has risen sharply against the currencies of many emerging markets like China, Mexico, Chile, and Brazil, which are either pegged to or which have depreciated against the U.S. dollar.

0.72 0.70 0.68 0.66 0.64 0.62 0.60 23

05

17

29

12

24

06

18

28

10

22

03

28

16

09

19

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p

Au

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04 20

02 20

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02

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02 20

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The strength of the Canadian dollar really reflects the weakness of its U.S. counterpart, which fell against other major currencies by 12% or more over the course of 2003. The exchange value of the Canadian dollar has not

For most manufacturers, however, the appreciation of the Canadian dollar has had a significant negative impact on profit margins, cash flow, and competitiveness. It is forcing companies to restructure their internal operations, their supply chains, their marketing strategies, and their pricing policies in order to retain customers, cut costs, and boost productivity performance.

MANUFACTURING CHALLENGES IN CANADA

2

Competition From

CHINA China is the world’s new industrial powerhouse. It is also a large and rapidly growing market for raw materials, industrial goods, capital equipment, and consumer products.

With average labour costs about 1/40th of those in Canada, China has become a major competitor in investment and industrial markets around the world. China’s liberalization has produced rapid economic growth, rising standards of living for the Chinese, and a boom in both foreign investment and industrial output.

China is now a leading manufacturer, not only of textiles and consumer products, but of increasingly sophisticated electronic equipment, software, and other technologies as well. It is competing increasingly on the basis of high-end value-added products, as well as costs, using some of the world’s best technologies and drawing from a pool of highly skilled talent. China has also become an integral part of manufacturers’ global supply chains – a manufacturing hub for the rest of the world, but also a major source of demand for high-end, more capitalintensive products.

MANUFACTURING CHALLENGES IN CANADA

3

Competition From

CHINA Faced with the rapid expansion of low-cost production capacity in China, manufacturers around the world are experiencing competitive pressures as never before.

Canadian manufacturers are losing market share in domestic markets, in the United States, and in other countries to Chinese imports. China’s excess industrial capacity and cost advantage have dramatically lowered the price of manufactured goods being sold around the world. At the same time, however, shipping costs have risen dramatically, while escalating demand for raw materials in China is driving up the price of commodities from lumber and coal to scrap metal and chemical feedstocks. Problems with products being dumped into the North American market at prices that are even lower than production (and sometimes materials) costs, as well as with counterfeit products and fraudulently marked imports from China, only compound the difficulties that manufacturers are experiencing.

At the same time, China is a source of dynamic market growth and for manufacturers a means of cutting production costs, improving supply chain efficiencies, buoying up profits, and lowering prices for customers. For many companies, there are significant opportunities to be gained by outsourcing to China and, in some instances, locating production there to serve not only the Chinese market but as part of a larger global supply chain. Some Canadian suppliers may have no choice but to locate production in China, because their customers have already done so. Yet, gaining access into the Chinese market or operating there poses other difficulties that have to be effectively managed. China will be the most significant factor determining the long-term future of manufacturing in this country. Its emergence as a global industrial power – and as an integral part of global supply chains – will change the nature of economic activity in Canada, across all of North America, and around the world. It is already forcing businesses to reassess what part of their activities – what type of jobs – are likely to remain in Canada in the future.

MANUFACTURING CHALLENGES IN CANADA

4

Key Facts: China is the world’s 7th largest economy – 40% larger than Canada’s – and was valued at US$1.4 trillion in 2003. Manufacturing accounts for 53% of the Chinese economy, amounting to US$783 billion in value added activity in 2003 – about four times larger than Canada’s manufacturing sector.

China is the world’s fastest growing market for raw materials, energy, consumer products, cars, and electronics.

The Chinese economy has grown at an annual average rate of 7.5% since 1999.

China produces over 60% of the world’s microwaves, half of all DVD players and digital cameras, 50% of it textile production, 40% or its refrigerators and computers, and a fourth of its mobile phones, colour televisions, washing machines, dryers, and car stereos.

In 2003, China accounted for 16% of the world’s economic growth.

Chinese labour costs average 1/40th of those in Canada.

Chinese exports amounted to US$380 billion in 2003 and have grown by 900% over the past ten years, giving China 6% of the world export market.

China graduates 325,000 engineers per year. The third largest university in China graduates more engineers than Canada and the United States combined.

China imported US$370 billion in goods from the rest of the world in 2003.

China ran a US$125 billion dollar trade surplus with the United States and a $5 billion dollar trade surplus with Canada in 2003.

China’s average per capita income will reach US$2000 within the next ten years.

Canada’s major exports to China are natural resources.

Foreign investment in China exceeds US$450 billion.

MANUFACTURING CHALLENGES IN CANADA

5

Global

COMPETITION China is not the only source of low cost and increasingly high value competition that Canadian manufacturers are facing. Throughout the past decade, we have seen the emergence and development of large export-oriented industry sectors in Southeast Asia and South Korea, Mexico, and South America. Now India is a major competitor, particularly in the fields of software and business services. Eastern Europe has become a magnet for manufacturers poised to take advantage of the expansion of the European Union.

ECONOMIC & INDUSTRIAL GROWTH RATES IN EMERGING ECONOMIES 2003

CHINA INDIA INDONESIA MALAYSIA SINGAPORE SOUTH KOREA TAIWAN THAILAND ARGENTINA BRAZIL CHILE MEXICO SOUTH AFRICA TURKEY RUSSIA -5

0

5

10

15

20

25

YEAR-OVER-YEAR PERCENT CHANGE

GROSS DOMESTIC PRODUCT

INDUSTRIAL PRODUCTION

For manufacturers, international competition is a reality at home as well as in export markets. Contracts today are won or lost on a click of a mouse. And manufacturers around the world have developed the capacity to supply high-value, sophisticated products to customers at lower and lower prices. Canadian manufacturers are facing intense competition in their efforts to defend and grow market share. They are competing for supply contracts from customers who are now able to source products and services on a global basis. Manufacturers are competing for the best in knowledge, skills, and technologies from around the world. And, Canada is competing for investments and product mandates on the part of manufacturers and other businesses that can choose from a number of other attractive investment locations with lower costs and more reliable infrastructure.

MANUFACTURING CHALLENGES IN CANADA

6

New Market

OPPORTUNITIES NAFTA has opened up the North American market for Canadian manufacturers and exporters. Today over 55% of what is manufactured in Canada is exported to other countries.

Canadian companies are looking for customers, investment opportunities, and attractive locations for opening production facilities to serve new markets. They are also searching for international business partners, particularly for purposes of marketing and sales, distribution, establishing manufacturing joint ventures.

INTERNATIONAL MARKET OPPORTUNITIES

Over half of Canadian manufacturing output is sold into or through the United States. A large part of those exports to the U.S. are then distributed outside of North America. That is on top of about $25 billion of goods manufactured in Canada for direct export to other countries.

UNITED STATES SOUTH AMERICA EUROPE MEXICO CHINA SOUTHEAST ASIA MIDDLE EAST RUSSIA & CENTRAL EUROPE AFRICA SOUTHERN ASIA JAPAN CHILE

Now new and highly lucrative market opportunities are opening up around the world – in Europe, Africa, the Middle East, Latin America, India, Southeast Asia, & China.

OTHER 0

10

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50

60

70

80

PERCENT OF MANUFACTURERS

INTEREST IN FINDING FOREIGN PARTNERS

According to CME’s 2003 membership survey, all are on the radar screens of Canadian companies as they look at expanding their sales and investments outside North America.

MARKETING REPRESENTATIVES & SALES AGENTS DISTRIBUTION MANUFACTURING JOINT VENTURES INTERNATIONAL MARKETING

SOURCING COMPONENTS LICENSING TECHNOLOGY OR SERVICE SOURCING SERVICES & TECHNOLOGIES RESEARCH & DEVELOPMENT SERVICE SECTOR JOINT VENTURES 0

5

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45

50

PERCENT OF MANUFACTURERS

MANUFACTURING CHALLENGES IN CANADA

7

More Demanding

CUSTOMERS Today the customer rules. For manufacturers, both business success and profit margins are driven by meeting customer needs. The challenge is that customer requirements are also changing – at a time when the competition is greater than ever before.

Whether they are individual consumers, other manufacturers, or other businesses, customers are demanding new products to meet new needs and better products to fulfill old ones. They expect quality to be high, products to be delivered on time, and prices to be the lowest on the market. That is the baseline. Today, customers are also demanding more in the way of value and service, and customer loyalty is disappearing almost everywhere.

provide design and engineering, financing, quality assurance, technical assistance, and ongoing services – all at a reduced price. Consumer tastes and purchasing power are also changing. Product innovation and new technologies create new demands. An aging population and immigration trends are changing consumer purchasing patterns, opening new markets and closing old. So too are changes in the pattern of work and leisure activity. Manufacturers keep their customers when they create customer value and become an important part of their customers’ success. It is an increasingly difficult thing to do when customer needs are becoming at once more specific and more complex, when customers are demanding lower prices, and when more and more competitors can deliver both.

Consumers are expecting better functionality, customized design, financing, and after-sales service. So too are business customers. Suppliers are no longer being asked simply to manufacture to specifications, but to solve the technical and business problems of their clients – to

MANUFACTURING CHALLENGES IN CANADA

8

Accelerating Pace of

INNOVATION Product and process innovations are essential if manufacturers are to keep up with new and changing customer requirements.

They are even more important when it comes to keeping up with the competition. The development and commercial application of new technologies has led to a revolution in both product and production capabilities. And, the pace of change will continue to accelerate as a result of new and transformational applications of information and communication technologies, biotechnology, micro- and nano-technologies, new materials, energy technologies, sensors, robotics, and other advanced machining, measuring, and automation systems. Today’s fast pace of innovation has made time a competitive advantage. The first company to bring a product to market has a considerable lead over other competitors. The faster the better in terms of making money before the competition eventually catches up and prices begin to fall. New process and shop-floor innovations offer other advantages. They can help to improve operating efficiencies, boost quality, and customer service. New products and production techniques can sometimes

disrupt markets by offering customers a more convenient or lower cost way of getting things done that competitors cannot match.

But, accelerated innovation also brings tremendous challenges. It is shortening product life cycles and creating new and more demanding expectations on the part of customers. Some manufacturers are facing a market window of only a few months before the competition steps in or customer requirements change. The electronics sector is a good example. There are also considerable challenges in managing the risks of change, mobilizing resources behind innovation, and creating a working environment that rewards risktaking and creativity. Today manufacturers have to continuously upgrade their products, processes, and technologies simply to maintain their position in the market. They have to make even greater investments in innovation in order to grow.

Key Facts:

The average life cycle of electronic components is about 18 months. The design and development time for new models of cars is 18 months. Over 25,000 new consumer products were launched onto the North American market in 2003.

MANUFACTURING CHALLENGES IN CANADA

9

The Commodity

TRAP

More intense competition, the faster pace of innovation, and excess industrial capacity in world markets are trends that have led to the commoditization of manufacturing around the world. Simply put, as demanding as customers are, there are more and more goods and services being produced that can effectively meet their requirements. The result is falling prices. MANUFACTURERS' SELLING PRICES 110 108 106

INDICES (2001=100)

104 102

From wood and metals, to chemicals and textiles, computers, microchips, and electronics, food and consumer products, to cars, planes, and their components, most manufactured goods are commodities today and are being priced accordingly. Downward pricing pressures are intense. Few companies are in a position to pass higher costs along to their customers in form of price increases. Just the opposite. Customers are forcing price cuts down the line to their suppliers. Contracts are now in place that will require some companies to cut prices by 20% or more over a period of only three years.

100 98 96 94 92 90 2001

2002 MANUFACTURERS' SELLING PRICES

2003 INTERMEDIATE GOODS

2004 FINISHED PRODUCTS

MANUFACTURING CHALLENGES IN CANADA

10

There are only a few exceptions to this commoditization rule: When economies are booming, rising demand pushes up the price of raw materials. Manufacturers that process those resources may also be able to push up their prices because industrial customers need the products they supply. But, prices peak and begin to fall when new supplies of materials are brought onto the market; Manufacturers that continuously innovate can maintain or sometimes increase pricing levels for their product lines by offering new products to meet customer needs. New models of cars, new consumer products, and new clothing fashions are examples of how products continually evolve to meet customer requirements; Companies can sometimes maintain a pricing premium as a result of brand recognition – producing the same type of product as the competition but at higher prices because of the brand name; and,

Manufacturers can at least partially offset the trend to lower prices by differentiating their products through customization – meeting specific customer requirements through functional specialization, design, and service in a way that no one else can match.

For Canadian manufacturing as a whole, however, the impact of commoditization is severe. On average, manufacturers’ selling prices fell 2.5% between the beginning of 2001 and January 2004. Average selling prices were only 4.9% higher at the beginning of 2004 than they were seven years prior. The appreciation of the Canadian dollar and growing competition from China will only contribute to additional price deflation across the sector.

MANUFACTURING CHALLENGES IN CANADA

11

Rising

BUSINESS COSTS While prices are falling for most manufacturers, the costs of doing business are on the rise. Change creates costs for any business. The need to respond to market challenges, move into new markets, or keep pace with innovation requires companies to take on risk and make up-front investments before any money can actually be made.

Industrial energy costs have more than doubled in Canada since 2000. Oil and natural gas prices have both soared as a result both of rising demand for energy and supply constraints.

Input costs are rising as well. The cost of raw materials has soared as a result of booming industrial demand in China and stronger economic growth around the world. The weakness of the U.S. dollar has exerted additional upward pressures on the price of primary commodities. The cost of iron ore, nickel, copper, aluminum, and other metals has increased dramatically since 2001. The price of scrap metal, an important ingredient in some steel making processes, more than tripled in 2003 alone. Similar cost pressures are being felt by manufacturers reliant on coal and other non-metallic minerals, or on natural gas, resins, and other chemical feedstocks.

Payroll taxes and supplementary labour benefits are growing even more rapidly on an hourly rated basis.

Electricity rates for manufacturers have also increased significantly, particularly in Ontario and Alberta, where again generating capacity has failed to keep up with market demand. Labour costs are increasing. Hourly wage rates in manufacturing have been rising on average by about 3% per year since 2000 – the result of cost of living increases keeping up with consumer price inflation and productivity growth.

MANUFACTURING CHALLENGES IN CANADA

12

Other operating taxes, user fees, and regulatory compliance costs are also on the rise. Regulations with respect to how products are made and what they contain, how they are approved and how they are sold, require manufacturers to incur costs in their operations and information systems in order to comply with the rules. There are also hidden costs in the form of time delays, uncertainties, and lost business opportunities that result from complex regulations and inefficient government. These are all forms of mandatory overhead that individual companies have to bear.

AVERAGE PRICE & COST INCREASES FOR CANADIAN MANUFACTURERS: 1997-2003 WAGE RATES

SUPPLEMENTARY BENEFITS

RAW MATERIALS

INDUSTRIAL FUEL

ELECTRICITY

MANUFACTURERS' SELLING PRICES

0

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TOTAL PERCENT CHANGE

MANUFACTURING CHALLENGES IN CANADA

13

Margins At

RISK

Rising costs and falling prices are creating a real squeeze on the bottom line. They have cut into cash flow and profit margins across Canada’s manufacturing sector. The focus for most manufacturers today is squarely on profit margins. And, for good reason – a healthy bottom line not only keeps shareholders, banks, and other investors happy; it is essential for generating the cash that drives investments in innovation, new production capacity, and new technologies. It is essential for both business survival and growth.

MANUFACTURING CHALLENGES IN CANADA

14

In 2003, average after-tax profit margins for Canadian manufacturers dropped to only 1.5% of sales. That means in an average Today, the bottom line is eight-hour production what counts, because cash shift, it took manufacturers flow drives investment, and 7 hours and 47 minutes to higher profit margins lead to break even – to cover their faster rates of capital turnover, operating costs and cost of business expansion, and depreciation. It took them employment growth. another 6 minutes to pay corporate MANUFACTURERS' BREAKEVEN TIME income and capital taxes. They were left with slightly over 7 minutes to make money for growth purposes. 8:00

7:52

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7:37

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7:22

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7:07

7:00

MANUFACTURING CHALLENGES IN CANADA

15

Canada’s

EXCELLENCE GAP Canada’s manufacturers are competing today in a global marketplace where the pace of doing business is red-hot, the competition is intense, the name of the game is adding value, and where innovation is the key to success. Their success depends on their ability to compete with the best companies in the world.

There are a lot of success stories – start-up companies that are now selling specialized goods, services, and technologies around the world; businesses that have restructured their operations and product lines to become world leaders in their field of expertise; large and small companies alike that have pursued excellence in their dayto-day operations and that are now taking on the best that the rest of the world has to offer. But on average, Canadian industry has lagged behind its international competitors.

When benchmarked against industrial performance in other leading economies, Canada’s manufacturing sector is falling behind. A significant excellence gap has opened up between world-class practice and the average performance of Canadian industry. Canada’s excellence gap can illustrated by benchmarking the performance of Canadian industry against the best of the world’s seven leading economies, using a number of indicators crucial to the competitive success of manufacturers worldwide.

The Group of Seven (G7) industrial economies include Canada, the United States, Japan, Germany, France, Italy, and the United Kingdom. Canadian performance over the five-year period from 1998 to 2002, is measured in relation to best practice in the G7 – as a percent of the G7 leader – over the same period of time. CANADA'S EXCELLENCE GAP MANUFACTURING PRODUCTION

PATENT COMMERCIALIZATION

GOODS & SERVICES EXPORTS

LABOUR TRAINING

SELLING PRICES

TECHNOLOGY INVESTMENT

LABOUR PRODUCTIVITY

RESEARCH & DEVELOPMENT

UNIT LABOUR COSTS

AFTER-TAX PROFIT MARGINS

MANUFACTURING CHALLENGES IN CANADA

16

The benchmarks of competitive success are based on annual averages and include: Growth in manufacturing production; Growth in the volume of goods and services exports; Changes in manufacturers’ selling prices; The rate of improvement in labour productivity; Changes in unit labour costs; After-tax gross profit margins as a percent of GDP; Business investment in new technology as a percent of GDP; Business investment in research and development as a percent of GDP; Business investment in skills training as a percent of payroll costs; and, The rate of new product commercialization, measured in terms of the growth in the number of patents filed per country in the U.S. Trademark and Patent Office.

An overall performance rating can be calculated as an average across all benchmarks of competitive performance. The excellence gap is the difference between this rating and a perfect score of 100%. Indicator Production

G7 Leader

Benchmark

Canada

France

3.9%

99%

Germany

8.2%

79%

Prices

Japan

0.6%

3%*

Productivity

France

4.9%

39%

Unit Labour Costs

France

-3.3%

24%*

Profitability

Japan

30.0%

75%

Capital Investment

Japan

16.1%

56%

R&D

Japan

2.1%

50%

Skills Training

Japan

1.6%

31%

U.S.

9.8%

41%

G7

100%

50%

Exports

Commercialization Average

* Percent calculated across range of G7 performance.

MANUFACTURING CHALLENGES IN CANADA

17

Canada’s

EXCELLENCE GAP BUSINESS INVESTMENT IN R&D AND NEW TECHNOLOGY 1998-2002 18 16 14 12 PERCENT OF GDP

Canadian manufacturers perform on average about half as well as the best of the G7. Our excellence gap is, therefore, 50% of G7 best practice.

10 8 6 4 2 0 -2

UNITED STATES

JAPAN

GERMANY

FRANCE

ITALY

UNITED KINGDOM

ITALY

UNITED KINGDOM

BUSINESS INVESTMENT IN NEW TECHNOLOGY

GROWTH IN PATENTS FILED IN THE U.S. PATENT OFFICE 1998-2001 11 10 9 8 ANNUAL PERCENT CHANGE

Canada, in fact, turns in one of the lowest performance ratings of any of the world’s major industrial economies when all benchmarks are taken into account. Our major trading partner, the United States leads the world, in terms of the competitiveness indicators used in the analysis, standing at the head of the G7 in only one out of ten performance benchmarks, but with an average rating of 75% of the G7 best – an excellence gap of 25%. Japan ranks first in five benchmarks of competitive performance, but comes in second overall with an average score of 71%, while the European economies range from 45% up to 70%.

CANADA

BUSINESS INVESTMENT IN R&D

7 6 5 4 3 2 1 0 -1 -2 CANADA

UNITED STATES

JAPAN

GERMANY

FRANCE

G7 COMPETITIVENESS RANKINGS 100 90

PERCENT OF OVERALL BEST

80

75.1

71.4

70.4

70

60.6 60

49.7

50

45.3

44.9

ITALY

UNITED KINGDOM

40 30 20 10 0 UNITED STATES

MANUFACTURING CHALLENGES IN CANADA

JAPAN

FRANCE

GERMANY

CANADA

18

And, there is a significant gap with respect to innovation, including training, research and development, investments in new technologies, and the commercialization of new products. There has, in other words, been less of a tendency in Canada to compete on the basis of new products, new processes, and new skills, and greater reliance on other factors such as the low Canadian dollar, slower growth in labour costs, and until recently strong U.S. market demand. Those underlying conditions are now rapidly changing.

GROWTH OF MANUFACTURING PRODUCTION & EXPORTS 1998-2002 9 8

ANNUAL PERCENT CHANGE

7 6 5 4 3 2 1 0 -1 -2

CANADA

UNITED STATES

MANUFACTURING PRODUCTION

JAPAN

GERMANY

FRANCE

ITALY

UNITED KINGDOM

ITALY

UNITED KINGDOM

ITALY

UNITED KINGDOM

VOLUME OF GOODS & SERVICES EXPORTS

GROWTH IN MANUFACTURING LABOUR PRODUCTIVITY 1998-2002 30

25

TOTAL PERCENT CHANGE

Canada’s excellence gap tells an interesting story. Canadian manufacturers have been fairly competitive when it comes to production and export growth, but less so in terms of productivity, profitability, and investment.

20

15

10

5

0 CANADA

UNITED STATES

JAPAN

GERMANY

FRANCE

CHANGE IN MANUFACTURING UNIT LABOUR COSTS 1998-2002 12 10 8 6 4 TOTAL PERCENT CHANGE

The challenge facing Canadian manufacturers is to close the excellence gap – before their competitors close the market for them. The realities of the international business today – intense international competition, the rapid pace of technological development, and the ease with which information, investment, and knowledge flow around the world – mean that it is more important than ever for companies to lead the world when it comes to innovation and productivity improvement. There are many world-class companies manufacturing in Canada today. There should be more.

2 0 -2 -4 -6 -8 -10 -12 -14 -16 -18 CANADA

MANUFACTURING CHALLENGES IN CANADA

UNITED STATES

JAPAN

GERMANY

FRANCE

19

Lagging Productivity

PERFORMANCE

Productivity is a measure of the wealth creating capacity of any company, industry sector, or national economy. It basically tells us the value of output being generated per unit of input in terms of labour and capital, or technology. The more efficient the process, the higher the level of labour skills and expertise, the more ingenious the ideas, and the more innovative and customized the product or service, the greater the value of what is being produced and the higher the level of productivity will be. Higher productivity leads to higher employment, higher incomes, and higher rates of economic growth.

Canada has led most industrialized economies in terms of manufacturing growth over the past decade. Manufacturing production increased by more than 45% in Canada between 1991 and 2002, compared to 40% in the United States, 27% in France, or 1.9% in Japan, and a 1.9% decline in Germany. The only industrialized economy that has surpassed Canada in terms of production growth was Sweden, where manufacturing output has risen by a 79% over the past decade.

Manufacturers in Canada have been employing more people to get product out the door. Again, between 1991 and 2001, manufacturing employment rose by 16% in Canada, as opposed to declines in other economies ranging from 4% in the United States to 23% in Germany. Employing more people is good for the economy. Jobs create higher levels of income and personal spending – one factor that has contributed to stronger economic growth in Canada than in other leading economies. GROWTH IN MANUFACTURING PRODUCTIVITY 1991-2002 (OUTPUT PER WORKER HOUR) 100 90 80 70 TOTAL PERCENT CHANGE

Competitiveness, not to mention survival, depends on driving down costs, improvements in operating efficiencies, and a continued focus on delivering higher value products and services to customers.These are all key elements of productivity improvement. But, the record of Canadian manufacturers in boosting productivity performance has not been very strong over the past decade.

60 50 40 30 20 10 0 CANADA

MANUFACTURING CHALLENGES IN CANADA

UNITED STATES

JAPAN

FRANCE

GERMANY

ITALY

UNITED KINGDOM

SWEDEN

20

But, the story is not all good news. Canadian manufacturers have lagged behind their counterparts in other countries when it comes to improving labour productivity (measured in terms of output per worker hour). Between 1991 and 2002, manufacturing productivity in Canada rose by 22%. But, Canada trailed all of the world’s leading industrial economies, except Italy, in productivity growth. Labour productivity in U.S. manufacturing increased by 45% over the same period of time, while productivity levels were up by 27% in Britain, 31% in Germany, 51% in France and Japan, and by a full 90% in Sweden.

The implications of Canada’s poor productivity performance can be seen, both in terms of lagging income levels and higher production costs. First, labour compensation has risen more slowly in Canada than among manufacturers in other countries. After discounting for inflation, average compensation for manufacturing workers increased by 8% in Canada, as opposed to 11% in the United States, 18% in Britain, 20% in Germany, and 32% in Sweden, between 1991 and 2002. Canadian manufacturers may be hiring more people, but their employees are not earning that much more after inflation.

AVERAGE ANNUAL COMPENSATION IN MANUFACTURING 1991-2002 CANADA

Even so, Canada’s relatively poor productivity performance has meant that on a unitby-unit basis labour costs for Canadian manufacturers have risen more rapidly than they have in other countries. Unit labour costs in Canadian manufacturing increased by 2% between 1991 and 2002. It is a good record compared to Germany, Italy, and Britain, where unit labour costs increased even more rapidly.

UNITED STATES

JAPAN

FRANCE

GERMANY

ITALY

UNITED KINGDOM

SWEDEN

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TOTAL PERCENT CHANGE

AVERAGE ANNUAL COMPENSATION

COMPENSATION DISCOUNTING COST OF LIVING INCREASES

UNIT LABOUR COSTS IN MANUFACTURING 1991-2002 CANADA UNITED STATES JAPAN FRANCE GERMANY ITALY UNITED KINGDOM SWEDEN -40

-30

-20

-10

0

10

20

30

But, it is a poor showing in comparison with reductions in unit labour costs of 4% in the United States, 12% in Japan, 13% in France, and 33% in Sweden. Canada and other countries have had to rely on a depreciation of their currencies in order to reduce unit labour costs in U.S. dollar terms.

TOTAL PERCENT CHANGE

NATIONAL CURRENCIES

U.S. DOLLARS

MANUFACTURING CHALLENGES IN CANADA

21

Keeping Up With The

NEIGHBOURS

The productivity gap between manufacturers in Canada and the United States has widened significantly since 1995. The depreciation of the Canadian dollar took a large toll on manufacturing productivity in Canada up to the end of 2002. A lower dollar made it relatively cheaper to hire people than to invest in new technologies. Now conditions are reversed. Manufacturers across Canada have to improve their productivity performance simply to survive on a higher exchange rate. RELATIVE PRODUCTIVITY IN MANUFACTURING

PERCENT OF U.S. PRODUCTIVITY

140 120 100 80 60 40 20

SP

O

R

LABOUR PRODUCTIVITY IN CANADIAN & US MANUFACTURING 160 150 140 130 INDICES (1990=100)

On average, manufacturing productivity is 83% lower in Canada than in the United States. There are some sectors of Canadian manufacturing where productivity levels are on par with or even higher than those south of the border – wood products, automotive products and other transportation equipment, primary metals, and paper. Others are not as productive, and Canadian productivity lags sorely behind in some key industries like food products, chemicals, machinery, and electronics.

N

O

N -M

TR

ET

PR

TA

TI

O

N

EQ

W O

O D IM UIP AR ME N Y T M E TE TA AL XT LI LS C PA M ILE IN P ER PRO ER AL D U PR C TS O D U C T P TE RIN S TI PL X N AS TIL G E TI M C IL & LS R U B FA F BE BR UR R N IC AT ITU TO ED RE TA M M L ET A M EL AL EC AN CH I U TR FA NE C O R IC C M TU Y A PU PE L E R TE IN TR QU R G O S LE IPM & EN U EL M EC & T TR C C O H O EM AL N IC EQ ICA LS U IP M EN T FO O C M D L I LE SC OT E H AT LL I H AN NG BE ER EO VE PR U S R AG OD E/ UC TS TO BA C C O

0

AN

For Canadian manufacturers, U.S. industry is still where most of the competition still resides – and where most customers are. Canada’s lagging productivity performance therefore poses a real challenge not only in defending market share and responding to the impact of a higher Canadian dollar, but also in continuing to meet customer expectations for high value, low cost products and services.

120 110 100 90 80 70 60 1980

1982 CANADA

MANUFACTURING CHALLENGES IN CANADA

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

UNITED STATES

22

Managing

GROWTH Canadian manufacturers have to be world-class. And, world-class manufacturing demands world-class leadership and business management. Business as usual is no longer a viable option for any company.

The challenges that manufacturers are facing mean that new business strategies and new ways of operating are essential. Innovation must be at the heart of any business plan, whether the objective is to rapidly reduce costs, increase customer value, or bring new products and services to market. Innovative ideas are not enough on their own to ensure that they will be adopted by business. They are certainly not enough to run a business or to justify investments in new products, processes, skills, or technologies. There has to be a profitable return on the investments required to translate new ideas into profitable products and business practices. And, as with all investors, the returns that businesses realize are determined by their vision, their entrepreneurial drive, their ability to

learn, and their appetite for risk. Profitable investments are made on the basis of good strategy, good intelligence, good management, continuous improvement, and best business practice. Business leaders have to be able to leverage the strengths and counter the disadvantages they face in doing business in Canada. And, business leaders have to know how to execute their plans successfully, translating objectives into action. In CME’s 2003 membership survey, Canadian manufacturers report a number of constraints in their efforts to achieve measurable improvements in business performance. Among the most important are cost and resource limitations (especially on the part of smaller companies), lack of customer demand and qualified personnel, organizational culture and structure, as well as financial constraints.

CONSTRAINTS ON PERFORMANCE IMPROVEMENT COST/RESOURCE LIMITATIONS LACK OF CUSTOMER DEMAND LACK OF QUALIFIED PERSONNEL ORGANIZATIONAL CULTURE LACK OF FINANCING ORGANIZATIONAL STRUCTURE PROCESS DESIGN/FLEXIBILITY LACK OF EXPERTISE TECHNOLOGICAL CONSTRAINTS COMMUNICATION SUPPLIER QUALITY LACK OF TOOLS TO SUPPORT DECISION MAKING

MANUFACTURING CHALLENGES IN CANADA

LACK OF INFORMATION DIVISIONAL BARRIERS OTHER FACTORS 0

10

20

30

40

50

60

PERCENT OF MANUFACTURERS

23

Investing In Technology

& INNOVATION Investments in new technologies give manufacturers the ability to keep up with customer demands, keep ahead of the competition, and drive cost savings and quality improvements throughout their operations.

Yet, generally speaking, Canadian manufacturers have not been keeping up with their competitors when it comes to making the investments in new technologies they need to improve productivity growth.

Canadian companies have been slower to invest in new information and communications systems as well as in the advanced manufacturing and integrated automation systems that have been credited in boosting manufacturing productivity in the United States. Since 1990, the rate of growth in the value of technology in place in Canadian industry has fallen behind that of American manufacturers. REAL DEPRECIATED VALUE OF MANUFACTURERS' CAPITAL 140

INDICES (1990=100)

120

100

80

60 1980

1982 CANADA

MANUFACTURING CHALLENGES IN CANADA

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

UNITED STATES

24

Another challenge has been to keep up with the continuous improvements and process innovations that are necessary to achieve productivity benefits from investments in new technologies. Whereas American manufacturers have been able to generate long-term growth in labour productivity per dollar invested in technology, Canadian companies have been losing ground since the mid-1990s. Unless companies aim to drive peak efficiency through production systems, their productivity performance is liable to fall behind, regardless of how much they invest in new technologies.

LABOUR PRODUCTIVITY PER DOLLAR INVESTED IN TECHNOLOGY 130

Canadian manufacturers have also been relatively slow in bringing new products to market. Patent applications are one measure of the challenge they face. But, Canada’s manufacturers also report that they are experiencing a number of important constraints when it comes to developing and commercializing product innovations. Among the most critical problems they face are in developing the right products for customers, meeting the challenge of competition, prototyping, design and customization, obtaining adequate financing, and securing regulatory approvals for introducing new products onto the market.

INDICES (1990=100)

120

110

100

90

80 1980

1982

CANADA

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

UNITED STATES

CONSTRAINTS ON COMMERCIALIZATION COMPETITION FINDING CUSTOMERS PRODUCT DESIGN & CUSTOMIZATION PROTOTYPE DEVELOPMENT FINANCING PRODUCT APPROVALS AVAILABILITY OF SKILLED PERSONNEL PROCESS RE-ENGINEERING & SCALE-UP TECHNOLOGICAL CONSTRAINTS REGULATORY CONSTRAINTS SHORT PRODUCT LIFE CYCLES ESTABLISHING INTELLECTUAL PROPERTY RIGHTS TAX TREATMENT ACCESSING RESEARCH 0

5

10

15

20

25

30

35

40

45

50

PERCENT OF MANUFACTURERS

MANUFACTURING CHALLENGES IN CANADA

25

Skills

SHORTAGES Manufacturing is at the forefront of the knowledgebased economy. It succeeds on the basis of innovation, its use of technology, and its ability to improve productivity and enhance process efficiencies. A welltrained and highly skilled workforce is essential to meet those requirements.

But, manufacturers across Canada report a shortage of skilled and experienced personnel. Over 40% of manufacturers in CME’s 2003 membership survey say that skills shortages are seriously constraining their ability to improve business performance and grow. About 17% indicate that skills shortages pose a major constraint on their ability to develop and commercialize new products. Slightly more than 25% report that a lack of skilled and experienced personnel is a challenge that will fundamentally change the nature of their business over the next five to ten years.

Companies are experiencing significant problems in retaining and attracting workers with the skills required in modern manufacturing. According to CME’s 2003 survey, there are serious shortages of people with specialized skills ranging from manufacturing management, engineering, marketing and design to more technical skills in fields like machining, tool and die, welding, and information technologies. It is not just technical skills that are in short supply. When asked to assess the skills most in need of improvement within their companies, manufacturers identify soft skills like problem-solving, communication, teaming, work ethic, and interpersonal skills, in addition to literacy, numeracy, computer, and more technical skills.

MANUFACTURING CHALLENGES IN CANADA

26

Skills shortages are one of the most protracted problems that Canadian manufacturers face, but the future looks even more daunting. A wave of retirements will hit Canada’s manufacturing sector over the next ten years. Companies will lose many highly skilled employees with years of experience and wisdom built up in the industry. At current rates of population growth, by 2010 there will be more people retiring than entering the manufacturing workforce.

SKILL SHORTAGES MANUFACTURING MANAGEMENT ENGINEERING

MARKETING BUSINESS DEVELOPMENT DESIGN MACHINING EXPORT DEVELOPMENT

RESEARCH INFORMATION TECHNOLOGY OTHER TECHNICAL SKILLS TOOL & DIE WELDING SOFTWARE PROGRAMMING & DEVELOPMENT OTHER SKILLS

FIND

0

5

10

15

20

25

30

35

40

KEEP

45

50

PERCENT OF MANUFACTURERS

SKILLS IN NEED OF IMPROVEMENT PROBLEM SOLVING

COMMUNICATION

TEAMWORK

WORK ETHIC

INTERPERSONAL

TECHNICAL

ENTREPRENEURIAL

LITERACY

COMPUTER

NUMERACY

LEARNING

0

10

20

30

40

50

60

PERCENT OF MANUFACTURERS

MANUFACTURING CHALLENGES IN CANADA

27

The Energy

CRUNCH Manufacturing is an energyintensive business. It takes energy to make things, and more energy to deliver products to customers. A reliable supply of costcompetitive energy is not only a competitive advantage for manufacturers, but a business requirement.

In natural gas markets, demand is increasing in both Canada and the United States. It has been especially strong on the part of electricity generators in the U.S., industrial producers switching away from more emission-intensive fossil fuels, and oil sands developments in Western Canada. The U.S. National Energy Report (2001) forecasts that demand for natural gas in North America will grow by 50 percent while supply is on track to grow by only 14% by 2020. Canada may not be able to meet the forecast for its own needs in addition to U.S. exports after 2004;

Canadian manufacturers have long been able to take ample supplies of low cost energy for granted. That is not the case any more. Increasing demand in world markets, in North America, as well as in Canada is outstripping energy supply.

A reliable and competitively priced supply of electricity is also in jeopardy – in Ontario, but also in other provinces where generating capacity has failed to keep up with growing energy demand. Canada’s electricity needs will not only require new investments in generating capacity, but the correct price signals and political will to ensure that investments when they are made can reliably meet both short- and long-term energy needs at costs that are commercially attractive.

The outlook is not promising: World oil production is expected to peak by 2012 placing industrialized countries like Canada in direct competition with rapidly growing economies like India and China. Supply from unconventional sources of oil – like Canada’s oilsands – are unlikely to compensate for the decline that is forecast in conventional oil production;

MANUFACTURING CHALLENGES IN CANADA

28

INFRASTRUCTURE Canadian manufacturers have always placed a heavy emphasis on welldeveloped infrastructure. Up until the mid- 1990s, manufacturers viewed the quality of Canada’s transportation, communication, and utilities infrastructure as a significant competitive advantage for their business.

In Ontario, the bridges and tunnels that carry 60% of Canada’s trade with the United States have become bottlenecks to efficient logistics and supply chain management;

Conditions have changed over the past ten years:

At the local level, the availability of serviced industrial land for manufacturers intending to expand their operations is in extremely short supply.

Roadways feeding into and out of major urban centres are increasingly clogged with cars and trucks, slowing traffic and making it both more expensive and more risky to meet just-in-time delivery schedules;

Canadian port facilities cannot guarantee that they can offer adequate or reliable services to meet the requirements of manufacturers increasingly dependent on export or import shipments; Communication costs are competitive, but bandwidth availability is limiting the extent to which manufacturers can take advantage of new communication capabilities; and,

Highways leading to and from Canada’s crucial border crossings with the United States cannot handle current traffic volumes in a time-efficient way;

MANUFACTURING CHALLENGES IN CANADA

29

The Cost of

REGULATION Manufacturers are facing a more highly regulated business environment in Canada. In many cases, best practice among the business community itself is setting more stringent standards for how companies should act with respect to health and safety, environmental management, consumer protection, and corporate governance. But, other regulating bodies – both public and private, around the world – are also developing rules and standards that for manufacturers make it more complicated, more costly, and more difficult to comply.

between $30 billion and $50 billion per year. Over a third of those costs were borne by manufacturers. But, even this estimate understates the detrimental impact that an inefficient regulatory environment can have on the time it takes to bring products to market, on productivity performance, or on the ability of companies to acquire the best components and materials from other countries.

The Treasury Board of Canada estimated in the late 1990s that regulatory compliance cost Canadian business MANUFACTURING CHALLENGES IN CANADA

30

Some of the key challenges that manufacturers face within Canada are: Outdated regulations that constrain innovation, investment, or business development; Rapid changes in regulations and compliance requirements; More and more complicated regulations that raise compliance costs, sometimes to a level where business activity is no longer commercially viable; Time-consuming product and project approval times that are both costly and uncompetitive in relation to Canada’s major trading partners; Regulations that act as barriers to interprovincial labour mobility and trade in goods and services;

Inconsistent, overlapping, duplicative, and contradictory regulatory requirements and interpretations within and across local, provincial, and federal government departments; Different standards and regulatory requirements in other markets, and particularly those of our major trading partners; and, User fees and administrative penalties applied by government that are increasing, but not necessarily tied to improvements in either regulatory or business performance.

Compliance and reporting requirements that are at odds with the way that companies collect information or run their operations;

MANUFACTURING CHALLENGES IN CANADA

31

Market

ACCESS Canadian manufacturers count on access into international markets to provide them with the potential to grow their businesses, whether through exports or locating investments and production facilities in other countries.

Canada’s international trade agreements have expanded access around the world – multilaterally through the World Trade Organization, but particularly within North America and Chile where free trade agreements have been negotiated and are now in place. Nevertheless, Canadian manufacturers and exporters are facing challenges in the form of growing protectionist sentiment and barriers to trade and investment activity on the part of many of our major trading partners.

Meanwhile, entry into American state and local markets for government procurement and professional services remains as impenetrable as ever. New security measures that have been implemented along the American border pose additional hurdles for Canadian companies reliant on the timely delivery of exports and imports, or the free movement of personnel between Canada and the United States. Other economies, like the European Union. Japan, and many Asian markets (including China), are using standards and regulatory requirements to restrict imports and, in some cases, investments from other countries. The trade negotiating priorities that manufacturers identified in CME’s 2003 Management Issues Survey are a good indication of the challenges that Canadian companies face in expanding their businesses in markets around the world. PRIORITIES FOR TRADE NEGOTIATIONS HARMONIZED CUSTOMS PROCEDURES LOWER TARIFFS FOR INDUSTRIAL GOODS

In the United States, trade actions and import restrictions are affecting Canadian exports of softwood lumber and beef products. New protectionist actions against China or other emerging economies that are being contemplated in the U.S. could also sideswipe Canadian exporters.

MUTUAL RECOGNITION OF STANDARDS & REGULATIONS INTELLECTUAL PROPERTY PROTECTION STREAMLINED PRODUCT APPROVALS NON-DISCRIMINATORY REGULATIONS REDUCE NON-TARIFF BARRIERS EASIER ACCESS FOR BUSINESS TRAVELLERS MORE EFFECTIVE DISPUTE SETTLEMENT REMOVAL OF INVESTMENT RESTRICTIONS ACCESS TO PROCUREMENT PROTECTION FROM EXPROPRIATION MUTUAL RECOGNITION OF PROFESSIONAL CREDENTIALS HARMONIZED COMPETITION RULES REDUCTION OF AGRICULTURAL PROTECTION 0

10

20

30

40

50

60

70

80

90

100

PERCENT OF MANUFACTURERS

MANUFACTURING CHALLENGES IN CANADA

32

The Fight for Product

MANDATES The world’s largest manufacturers are no longer simply multinationals operating autonomously in a number of countries. Today they are global enterprises with consolidated investment, planning, and decision-making functions, but with trade and supply networks, production activities, and investments spread throughout the world.

in Canada are higher than those in many other jurisdictions that are competing for industrial investments. Canada’s effective tax rates (accounting for write-offs, credits, and deductions) are even more out of line – especially with those in the United States. As the markets for manufactured products change and demand shifts away from the industrialized world to the markets of China, India, and other developing economies, international competition for investments and product mandates will become even more intense.

Canada is competing for a share of their business – even for investments and product mandates from Canadian owned companies that now have global reach.

FACTORS AFFECTING PRODUCT MANDATE & INVESTMENT DECISIONS COMPETITIVE OPERATING COSTS ACCESS/PROXIMITY TO MARKET PROXIMITY TO SUPPLIERS/PARTNERS TAX ENVIRONMENT

Canada’s high rate of taxation on invested capital is a major impediment in retaining as well as attracting manufacturing operations in this country. Nominal corporate tax rates

ACCESS TO SKILLED LABOUR BUSINESS MANAGEMENT REGULATORY ENVIRONMENT TRANSPORTATION OR TELECOMMUNICATIONS INFRASTRUCTURE GOVERNMENT LOCATION INCENTIVES PROXIMITY TO R&D COMMUNITY 0

10

20

30

40

50

60

70

PERCENT OF MANUFACTURERS

35

EFFECTIVE TAX RATES ON MARGINAL INVESTMENTS 30

25

20

15

PERCENT OF TAXABLE CORPORATE INCOME

Many factors have an influence on where companies choose to locate their manufacturing and services activities. Proximity to customers and suppliers, the availability of skilled workers, the scale of Canadian operations, reliable supplies of energy and natural resources, access into and out of external markets, and regulatory regimes are all important issues. So too are considerations based on overall cost competitiveness and the returns that can be generated on investments after taxes are paid.

10

5

0 CANADA MANUFACTURING

MANUFACTURING CHALLENGES IN CANADA

MEXICO

UNITED KINGDOM

UNITED STATES

FRANCE

ITALY

JAPAN

GERMANY

SERVICES

33

Meeting The Challenges of Global

MANUFACTURING Canadian manufacturers are confronting a whirlwind of change. The challenges they face are complex. For some companies, they are overwhelming. They are all expensive to overcome. Yet, the business of manufacturing has always been one of coping with change. The 1990s saw Canadian manufacturing restructure and grow in the wake of North American free trade. The result was a different way of doing business – more specialized types of production in Canada, a growing export orientation, head office consolidation, and a more integrated industrial market with the United States. Markets are again changing – fast. Canadian companies are now responding to a stronger dollar, the rise of new global competitors like China and India, the emergence of new international market opportunities, the need to catch up in the race for innovation and productivity improvement, and a domestic business environment that has become a less reliable competitive advantage for manufacturing in Canada. Canadian manufacturers have little choice but to be world-class. They are having

to compete in global markets and in the process are becoming more integrated in global supply chains to serve customers around the world. The way that businesses respond to the pressures of globalization will shape the future of manufacturing in Canada over the next decade.

Today’s challenges are fundamentally changing the business of manufacturing in all countries. What will Canada offer manufacturers in terms of competitive advantages in a global marketplace? How can businesses in Canada compete and win in global markets? What part will Canadian businesses play in global supply chains? What future is there for manufacturers that make things in Canada? What do Canadian manufacturers have to do to become the benchmark of the world in terms of delivering customer value, increasing productivity, and sustaining profitable business growth?

MANUFACTURING CHALLENGES IN CANADA

34

What will Canada offer manufacturers in terms of competitive advantages in a global marketplace?

How can businesses in Canada compete and win in global markets?

What part will Canadian businesses play in global supply chains?

MANUFACTURING CHALLENGES IN CANADA

35

What future is there for manufacturers that make things in Canada?

What do Canadian manufacturers have to do to become the benchmark of the world in terms of delivering customer value, increasing productivity, and sustaining profitable business growth?

MANUFACTURING CHALLENGES IN CANADA

36

Canada’s Leader in Business Excellence Our mission is to continuously improve the competitiveness of Canadian industry and to expand export business. We achieve this by: • Effective advocacy to government at all levels • Timely, relevant information, programs and support of superior quality and value • Opportunities for networking, learning and professional growth • Promoting the development and implementation of advanced technology

We represent... CME members include Canada’s leading businesses engaged in manufacturing and in the export of goods and services. Our members represent:

For more than 130 years, Canadian Manufacturers & Exporters has successfully represented the interests of Canadian business, keeping members on the competitive edge of world-class manufacturing and trade. CME has divisional offices in every province, its national office is in Ottawa and its corporate office is in Mississauga. CME is a truly national association and the undisputed champion of business issues in Canada.

• 90% of exports; • 75% of the country’s manufacturing output; • 90% of private sector R&D in Canada; and • While our membership includes Canada’s largest players, 80% of our members are considered small and mid-sized companies.

© Copyright Canadian Manufacturers & Exporters 2004

MANUFACTURING CHALLENGES IN CANADA

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