Canadians lag behind in competitiveness

Canada sits at the bottom of a ranking of competitiveness among G7 countries, trailing far behind the U.S. at the top of the list. In spite of free trade, the productivity gap is growing between Canada and the U.S. After-tax profits for Canadian manufacturers average only two-thirds of those in the U.S. Canadian industry lags in terms of investing in R & D, skills, advanced and e-commerce technologies, and commercialization. Canada’s standard of living and purchasing power is falling in relation to other developed economies. For most of the past decade, returns on investments in Canadian manufacturing have been lower than the cost of capital.

These dismal revelations were presented by Jayson Myers, senior vice-president and chief economist with the Canadian Manufacturers & Exporters (CME), in Toronto in December.

Canada is lagging behind the U.S. because Canada has a different scale and structure of industry, higher taxes on wealth creation, a more onerous and costly regulatory system, higher unemployment, plus lower profit margins and returns on investment, Myers reported. Canada has also invested less in infrastructure, R & D, new technologies, skills and education.

Myers noted that Canadian manufacturers and exporters need to improve management within their companies while the Canadian government needs to put policies in place to make Canada more attractive to investors.

Myers’ presentation also included the results from the CME’s annual national survey. The 2002-2003 Management Issues Survey involved 410 companies, representative of the membership of Canada’s manufacturing and exporting communities.

He reported that the survey revealed that Canadian manufacturers are impeded from improving performance primarily by cost/resource limitations, organizational culture or structure, and lack of qualified personnel. He said that most overcome those constraints by improving operating efficiency and changing employee skill sets. Changing the organizational structure, reengineering processes and enhancing technology ranked next in order of most common strategies.

A lack of computer and IT skills are not the main problem facing Canadian companies, the survey revealed. Computer skills ranked lower than problem solving, communication, teamwork, worth ethic, technical and even literacy as skills in need of improvement. Similarly IT skills came ninth on a list of 13 skill shortages with engineering and manufacturing management ranking at the top.

The survey participants cited as priority issues: investment in innovation, skills, acquisition and commercialization of knowledge, market growth and world-class business management.

From the first quarter of 2000 to the second quarter of 2002, Canadian manufacturers faced selling prices that dropped 2.5 per cent although wage rages rose by 8.2 per cent, raw materials by 12.4 per cent, payroll taxes and benefits by 13.5 per cent, electricity by 18.5 per cent and industrial fuel by a staggering 34.5 per cent, Myers reported.

He also spoke of the many challenges in competing in world markets. These included global access to knowledge and new technologies, an accelerating pace of technological change, plus new and more exacting customer expectations. He said that competitiveness is now determined by more than cost, quality, and timely delivery. As a result, innovation is a precondition for business success, he added.

Myers’ presentation set the stage at The Practical Side of Innovation, a one-day manufacturing productivity and profit workshop hosted by CME’s Ontario Division.

The workshop highlighted productivity, profitability, innovation and lean strategies.

Half the day-long session was devoted to the results achieved by two companies using Profitability Dash Manufacturing Intelligence Software from pVelocity Inc. The software was said to help evaluate accurately customer profitability, product profitability, available machine and plant capacity and other key performance indicators.

CME is a co-sponsor with the Association for Manufacturing Excellence (AME) of what is being billed as North America’s largest lean conference. Called Measure Up for Success, it is set for Toronto this Oct. 6 – 10. “It better move Canada along a foot or two in terms of competitiveness or we’re all in trouble,” noted Dave Hogg, conference organizer and president of HPM Consortium.

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