Studies & Reports
2011 Canadian Manufacturing Study: The sixth annual industry snapshot reveals that manufacturers are headed in the right direction
By Mary Del
As we inch closer to 2012, there are still many challenges that remain for Canadian manufacturers, including the high Canadian dollar and the availability of skilled labour. And, although some economists warn that Canada may be headed for a double-dip recession, the results of our sixth annual Canadian Manufacturing Study – conducted by Manufacturing AUTOMATION, in conjunction with the Excellence in Manufacturing Consortium (EMC) – tell a different story.
Keep in mind that the survey questions do not drill down into month-to-month comparisons of customer demand, productivity, etc., but rather show an overview of the year so far, and expectations moving forward.
The good news is that both customer demand and product output are up for Canada’s manufacturers compared to last year. Though the increases are modest, it certainly shows that the economy is headed in the right direction, according to many of the record 503 Canadian manufacturers who took the Canadian Manufacturing Study survey this summer.
Last year’s study revealed that both customer demand and product output were way up over 2009. This year, we continue on that upward trend, though the recovery is much slower. While a slow recovery may not be great news, there is still plenty of good news to take from this year’s results – the hourly wage for workers is up; close to 40 percent of respondents expect that their plant will expand in the next 18 months; the majority of respondents plan to increase spending on equipment and technology in the coming year; and nearly 40 percent of respondents have already experienced a turnaround in the economy.
A total of 503 respondents took the Canadian Manufacturing Study survey over a five-week period this summer. The survey was mailed out to our readers via e-mail, as well as posted on our website. The Excellence in Manufacturing Consortium also mailed the survey out to its members.
• The average hourly wage for workers on the plant floor in 2011 is up more than a dollar compared to last year.
• In comparison to last year’s results, where the majority of respondents – 44 percent – fell in the $10-14 an hour category, this year, that category had the fewest number of respondents, with only 11.5 percent. The majority of respondents this year – 36.1 percent – fell in the $15-19 range, while the number of those making $20-24 an hour jumped from 15.2 percent of respondents in 2010 to 27.6 percent in 2011. And those making more than $25 an hour almost doubled from 12.8 percent last year, to 24.8 percent this year.
• Just like last year, more than three-quarters (80.5 percent) of our respondents have been in business for at least 20 years – a sign that they have been able to ride out the ebbs and flows of the economy. However, the fact that only 3.2 percent of respondents have been in business for less than five years shows how difficult it is for a startup to survive in this economy.
• Nearly two-thirds (64 percent) of respondents have an annual revenue of less than $50 million. This number is down from last year’s 71.1 percent, which means that, even when you account for the 6.4 percent who couldn’t answer the question this year, the number of companies making more than $50 million a year is up by nearly one percent. The percentage of respondents in the “more than $1 billion” category doubled – jumping from 3.1 percent to 6.2 percent.
• More than half (60.2 percent) of respondents anticipate increasing spending on capital equipment and technology over the next year; up just 2.6 percentage points from last year’s 57.6 percent.
• For equipment purchases over the next year, the majority of respondents plan to target material handling (37.3 percent), followed closely by assembling (34.5 percent), production control (32 percent) and testing/inspection (31.7 percent). These results are similar to last year, when assembling, material handling and testing/inspection were the top three choices.
• The majority of respondents – 26.1 percent – expect to spend between $50,000-$199,000 on manufacturing technology, software and related equipment and services over the next year.
• Like last year, just over 80 percent of respondents employ some type of plant improvement strategy, such as Lean manufacturing – which was once again by far the most employed strategy.
• Continuous improvement is the number one strategic practice companies employ, garnering nearly three-quarters – 74.8 percent – of the votes.
• 40.2 percent of respondents plan to expand production in the next three years (barely up from last year’s 40.1 percent). And 57 percent of those who plan to expand, plan to do it in Canada. However, just like last year and the year before, the majority (49.3 percent) are being cautious and have no plans to expand, contract, merge or close up shop in the next 12 to 18 months.
• Fewer companies are planning layoffs in the next 12 to 18 months. Our results reveal that only 5.3 percent of respondents are planning layoffs in the next year and a half, compared to last year’s 10.2 percent. However, those expecting a plant closure increased from one percent last year to 1.8 percent this year.
• This year, the majority of respondents (52.2 percent) have seen an increase in demand from their current customers, up just four percentage points from last year. This is nowhere near the 21.7 percentage point jump we saw the year before, proof that the recovery is slowing down. In addition, the number of respondents who saw a decrease in customer demand continues to decline – from 50.9 percent in 2009, to 21.2 percent in 2010, to 13.8 percent in 2011.
• Production output is up 7.1 percentage points over last year, increasing from 52.7 percent of respondents saying they have increased their company’s total production in 2010, to 59.8 this year. Growth has indeed slowed, as this is nowhere near the 22.5 percentage point jump from 2009 to 2010.
• While production is up, so are manufacturing costs and the price of your products. Close to 70 percent of respondents say their manufacturing costs have increased, up from last year’s nearly 60 percent. Likewise, 52.6 percent of respondents say the price of their product has increased, up 8.5 percentage points from last year. It should be noted, however, that 36.9 percent of respondents say that the price of their products has not changed.
Economic recovery: Readers weigh in
Once again, we asked the survey respondents when they expect to see a significant turnaround in the economy. The good news is that the majority of respondents – 39.1 percent – have already experienced a turnaround, and another 13.2 percent expect to see one by the end of this year. Others, however, are less optimistic and don’t see an end to their economic woes until sometime in 2012, and some even beyond that. According to the majority of respondents, the high Canadian dollar and the availability of skilled labour are the biggest barriers to their company’s future competitiveness. Here are what some respondents had to say:
• “Largely due to the U.S. economy and the strong Canadian currency, we are experiencing challenging times.”
• “Our largest neighbour to the south will influence any return to [a] normal business environment.”
• It’s “hard to predict, [but] the future seems bright – we are still quoting lots and are booked into the new year.”
• “Revenues are down from last year, but up from two years ago. Profit is lagging behind revenues and will take until late 2011 to recover.”
• “Our company lost touch with our relationships with customers. We did not anticipate or adapt well to the changing market. We did not adapt [our] pricing model to reflect a more competitive marketplace.”
• “We did very well within the first half of 2011. Things have slowed down in the second half, and I do not expect to see an upswing until 2012.”
• “Cost cutting plans by [the] U.S. government are causing [an] uncertain/declining market and [the] lowering of prices.”
• “We’ve been following along with our industry’s trends. Global economic uncertainties directly affect our sales and production.”
• “We grew throughout the recession.”
• “Projected sales for 2013 are equal to 2008 – our record high.”
• “The calibre and quality of workers entering the workforce from either high school, college or university has diminished significantly. Expectations and a sense of entitlement fueled by society are out of synch with the focus, hard work and discipline required to compete globally with other nations. Our young people simply don’t have the attention span and self discipline to ‘pay their dues’ as a requisite for career growth, opting instead to jump from one employer to the next in search of their next pay increase.”
• “We are currently replacing old machining processes with newer technology, but the skills required need to be developed as they are not available.”
• “The turnaround isn’t big enough and the high dollar is dragging us down again.”
• “We cannot keep up [with] demand.[We] need more skilled machinists. We are turning away work!”
• Contrary to media reports, there has not been any significant sustainable recovery in manufacturing. Any improvement to date has been at taxpayers’ expense and is not sustainable.”
• “Raw material increases, [the] high Canadian dollar [and] uncertain economic times are providing a cautious approach going forward.”
Check out the October 2011 print or digital edition for graphs and charts galore, including a year-to-year comparison – dating back to 2006 – to show the state of affairs over the last several years.
This article originally ran in the October 2011 issue of Manufacturing AUTOMATION.