Canadian manufacturers are facing the slow recovery and strong dollar head on, largely optimistic about the future and investing in new products to prove it.
Even in the face of global economic weakness, they are taking comfort in Canada’s relatively strong economy, which could set the stage for continued hiring and expansion into the United States and beyond as they seek broader markets for new products.
Joey Khatri, president of a light-fixture manufacturer in Blainville, Que., is emblematic of how many in the industry are forging ahead, with the belief that innovation is the main driver of growth in a stagnant economy.
Following the successful launch of a new light-emitting diode product line in January, Mr. Khatri plans to reinvest $500,000-worth of profits from his 25-person business, Dals Lighting Inc., to develop another line of innovative lighting products that produce less heat, use less energy, and last longer.
“We do feel optimistic about our business and our industry,” Mr. Khatri said. “Our plan for the next number of years is to launch new products once a year at least.”
An overwhelming number of Canadian manufacturers share this kind of confidence, according to a recent KPMG survey. Despite data that show manufacturing sales have declined over the first part of 2012, some 85 per cent of Canadian companies surveyed say they are optimistic or very optimistic about the next two years. Last year, fewer than three-quarters answered the same way, and globally, only 75 per cent of manufacturers feel as much confidence in 2012.
The manufacturing industry has accounted for 3 per cent of the employment gains in Canada over the past year, hiring some 53,800 people since June, 2011, according to the latest jobs figures from Statistics Canada.
James Kierstead, owner of Edmonton-based Enspire Electronics, purchased his business in December, 2011, and immediately got to work on new product development.
“When I bought this business I had one engineer, I now have seven,” Mr. Kierstead said.
They’re working on electronic accessories for hot tubs, such as applications to control a hot tub remotely from a mobile device. The company currently does about $3-million in sales of other electronic products and plans to market its new devices to manufacturers in the United States beginning in the next six months.
A strong Canadian dollar doesn’t seem to be a deterrent. Mr. Khatri also said he’s targeting the U.S. to boost his market. Currently, about 20 per cent of his sales go to Americans.
“My clients tell me [they] remember an 85-cent dollar and they look at where they are today and say ‘you know, maybe I wasn’t quite as focused at 85 cents as I am now’,” said Laurent Giguère, KPMG’s National Industry Leader and the author of the manufacturing outlook report.
Companies are finding cost savings throughout their supply chain, he said. As smaller, niche manufacturers, Canadian companies are better equipped to compete on unique, high-value products.
Windsor, Ont.-based Radix Controls Inc. creates devices that use software, cameras and robotics to track products as they move through the manufacturing process at companies such as John Deere and Ford Motor Co. Radix’s Tool Tracker traces auto parts and records data on when they were securely fastened to other parts, allowing companies to monitor quality.
This kind of high-tech product illustrates where manufacturing is headed, said Shelley Fellows, vice-president of operations at Radix. While she noticed customers were hesitant to upgrade to these new products in the wake of the recession, business is starting to pick up again, she said.
For all their big plans, Canadian manufacturers are putting less money into managing risk than their international counterparts, according to KPMG. But this might not hurt them, Mr. Giguère said.
The effects of significant risks might be less on a Canadian business than on a large multinational company, he explained.
“Typically Canadian manufacturers are a little bit more nimble,” Mr. Giguère said.
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