Manufacturers Should Look Beyond Simply Cost Minimization: KPMG

A focus on cost and risk mitigation will be critical to Canadian manufacturers looking to stay competitive, according to a recent survey from KPMG LLP. In the report Reshaping the supply chain: New opportunities for Canadian manufacturers, the accounting firm states that Canadian manufacturers should find new ways to compete with their global counterparts when faced with the reality of a strong Canadian dollar and lower cost jurisdictions.

“Canadian manufacturing executives are still pointing to cost minimization as the key factor in addressing supply chains,” said Jonathan Kallner, National Leader of Industrial Markets at KPMG. “In addition to cost management, global manufacturers are looking at their entire supply chains to establish partnerships and generate efficiencies. Canadian companies should embrace a multitude of strategies to remain competitive, including an enhanced focus on innovation and product development.”

The survey, which was conducted among 81 executives in Canadian manufacturing, revealed a number of differences between how Canadian manufacturers and their global counterparts approach their supply chains. Almost sixty percent of Canadian executives state that they have been forced to develop new business models that reduce supply chain risk, compared to only 43 percent of global manufacturers. Fifty-two percent of global manufacturers plan to shift or collaborate more with their suppliers  when addressing research and development, compared to only 37 percent of Canadian companies.

The survey also found that global manufacturers are prepared to accept and manage more risk to achieve lower costs, improve supply chain efficiencies, and access innovation. Canadian manufacturers prefer to avoid high-risk jurisdictions—the same jurisdictions that would provide competitive opportunities.

“Canadian business has traditionally been very conservative and more risk averse,” said Brian Smith, Ontario and Atlantic Lead, Supply Chain Management Services at KPMG. “To succeed in the new realities of increased globalization and a strong Canadian dollar, manufacturers should develop strategies that drive innovation at home and through collaborative partnerships with supply chains abroad.”

Logistics are largely fulfilled by Canadian manufacturers at home and in the United States, while global manufacturers look to new low-cost districts such as China and India. Instead of looking for supply chain solutions abroad, 82 percent of Canadian manufacturers stated that a cost versus risk analysis has led them to adopt a strategy of avoiding geographies that have higher risk of political and regulatory volatility.

To access a copy of the report, Reshaping the supply chain: New opportunities for Canadian manufacturers please visit: http://www.kpmg.com/Ca/en/IssuesAndInsights/ArticlesPublications/Pages/ReshapingtheSupplyChainNewOpportunitiesforCanadianManufacturers.aspx 

About KPMG 
http://www.kpmg.ca/ 

KPMG LLP, the audit, tax, and advisory firm, a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International. KPMG International’s member firms have 140,000 professionals, including more than 7,900 partners, in 146 countries.

For further information:

Shilpa Kotecha, Media Relations, 416-777-8918, [email protected]