Profitability via Productivity (BTO Article)

Jan 6, 2009 | Government News

By Leonard Loboda, Senior Manager, Productivity Improvement, Grant Thornton LLP                                                                                   

Canadian manufacturers can compete – even dominate – in the global market. But they need new skills – and a new concept of manufacturing.

Canadian manufacturers are optimistic about revenue and economic growth but unsure about their prospects for improved profitability. Why? Grant

Leonard Loboda, Senior Manager, Productivity Improvement,

Leonard Loboda, Senior Manager, Productivity Improvement,

Thornton believes this uncertainty reflects concerns about whether Canadian manufacturers are measuring up to world -class standards. Some questions need to be asked: Are Canadian manufacturers improving productivity as quickly as their global competitors? Are Canadian manufacturer flexible enough to adapt to rapidly changing markets? Are Canadian manufacturers innovating with both products and processes? Are Canadian manufacturers getting the most out of their supply and value chains or are they falling behind more nimble competitors?

Some Canadian manufacturers are already doing all of the above, but recent research indicates they’re more the exception than the rule.

Canadian manufacturers face both threats and opportunities in global markets that require excellence in all phases of business, from R&D to sales to customer support. Few manufacturers can achieve world-class performance across this entire spectrum of activities, and the savviest will search out supply-chain partners to support their operations. The rest- including a large percentage of Canadian manufacturers- will find the transition from vertically integrated manufacturer to supply-chain manager difficult. Yet this transition is necessary if manufacturers want to improve productivity and maintain profitability.

Canadian manufacturers often lack the metrics required to assess their organizations, and frequently fail to make these measures visible even when they’re available. Today’s global environment requires world-class capabilities for all activities in which a company is engaged; gauging those capabilities requires a structured analysis that answers four questions: 

  • What is the financial performance (profit) of this activity or function?
  • What are the total costs associated with this activity and how can they be reduced?
  • Can we realistically improve performance of the function – speed, delivery, quality, innovation, productivity, etc. – in a reasonable amount of time? And how do we do it?
  • Are there reasons other than performance (tax ramifications, intellectual property, image or brand-building, emerging markets or process advantages, etc.) that require the activity to remain internal?

Unless the answers to these questions lead to a definitive conclusion that the work should be kept inside, external options ought to be considered by weighing the potential of the internal activity. Ask the question, “If we worked at this, could we do it better?”

“Profitability via Productivity”, a white paper produced by Grant Thornton LLP, offers a clear view of Canada’s current manufacturing climate as well as key strategic insights. The key to consistent profitability is improving the productivity of a manufacturer’s core competencies and, where that cannot be done, leveraging the company’s supply chain wherever possible to boost productivity. “Profitability via Productivity” shows how that can be achieved.

For more information contact:

Leonard Loboda, Senior Manager, Productivity Improvement,

Grant Thornton LLP,

T: 204-944-0100

E:  [email protected]  

Visit Grant Thornton at www.GrantThornton.ca/manufacturing

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