Backstory: The future of reshoring in Canada

Jun. 27, 2016 – Reshoring has been a discussion point over the last decade and was a reaction to the heavy globalization of manufacturing that moved production capacity out from western economies to emerging markets offshore. “Take back manufacturing” advocates have now convinced most corporations that globalizing manufacturing just for low cost labour, while grossly over extending supply chains, has significant hidden total costs; many are now accepting that much more sustainable and environmentally-friendly short supply chains can be the better solution.

Many products are now reshoring back to local manufacturing supply chains to support the consumer base within NAFTA, but in some situations, active reshoring may be a very slow process that requires the rebuilding of local supply chains that declined in the last decade of globalizing manufacturing. Although an increase in political will for reshoring now firmly exists in North America, future national economic and industrial policies will continue to shape business decisions as to “if, how” and “where” reshoring happens.

Recent trends point to Mexico and the Southern U.S. right-to-work states being the more obvious and favourable option for reshoring, and while some exceptions and success stories do exist, many experts do not consider Canada a logical and typical reshoring destination within NAFTA.

The reasons for “why not Canada?” are many. We are a relatively high-cost destination with a questionable political will to set a consistent, national industrial policy in hopes of convincing business leaders to invest, but often times, Canada presents a comparatively small consumer base with flat growth, an unpredictable resource-driven ex- change rate, high overall energy costs, non-competitive transportation and border transactions, as well as high labour expenses and punitive safety and environmental legislations. Our advantage of a lower corporate tax rate and a strong—yet fast eroding—skilled workforce does not offset this longer list of disadvantages.
Our governments, manufacturing sectors and our educational support organizations must respond to these challenges, and work more cohesively to reverse this outlook, or we will continue to see further decline in many of our manufacturing sectors.

Commentary by Nigel Southway, who is a Lean business consultant, author of Cycle Time Management, and a founding partner and engineering VP at Additive Metal Manufacturing. He is also a current member of Manufacturing AUTOMATION’s editorial advisory board.

This article was originally published in the May 2016 issue of Manufacturing AUTOMATION.