Supply Chain Adaptability in the Canadian Manufacturing Industry

Written by Baneet Grover | Nov 13, 2023 1:00:00 PM

The Canadian manufacturing industry is responsible for a large portion of the country's economic growth, representing more than 10% of total GDP at $174 billion. Not only does the manufacturing sector work alongside other industries, but it also stimulates job security for workers. However, like many others, the country is still experiencing economic struggles since the COVID-19 pandemic, though enhancing supply chain resilience is a prime way for Canada to counteract the economic damage.

Factors of Canadian supply chain resilience

There are many factors that prove the resilience and evolution of supply chains in the Canadian manufacturing industry. Canadian manufacturers have shown strength through their ability to adapt to the various conditions of the economy and are enhancing their supply chain resilience by modifying their inventory, embracing new technology and broadening their supplier base.

As for economic incentives, Canada provides significant trade advantages for investors with the lowest new business investment tax rate of all G-7 countries. This is largely realized from our duty-free tariff system on imports of manufacturing machinery and inputs, along with the Goods and Services Tax/Harmonized Sales Tax (GST/HST) being completely recoverable for most businesses, as well as many other advantages found in FTZs globally. These factors, combined with Canada's geographically flexible duty and tax relief programs, allow investors advantages they can use anywhere in the country.

While other countries emphasize location-specific foreign trade zones, Canada provides a geographically flexible approach to allow businesses to invest in the location that suits their financial goals, making our country a destination of choice for foreign investment.

Improving inventory

While the Canadian supply chain has experienced difficulties in recent years, its resilience has become inarguable. According to Statistics Canada, one of the main factors to note from a recent survey is that, fewer businesses will experience supply chain challenges. This is exemplified as the relative easing of inflationary pressures in Q4 2022, coincided with a decline in the number of businesses that experienced increased supply chain disruptions. However, there may be a few industries that will continue to struggle if changes aren't made.

For those businesses that do experience difficulties with the supply chain, problems can be navigated by considering some of the following:

Manage margins by shifting prices on high value products.
Find alternate inputs.
Continually analyze and manage inventory against forecasted demand.
Improve inventory tracking to plan timing of purchases.

While this may seem like an obvious solution, properly organizing and managing inventories can help businesses with supply chain struggles. Being better prepared for disturbances in the supply chain will allow companies to be more flexible in the wake of negative economic and supply impacts.

Incorporating new technology

Supply chains have been utilizing advanced technology, such as the Internet of Things (IoT) and artificial intelligence (AI), to help companies navigate the effects of economic fluctuations in their business. These new forms of technology allow industries to collect data, help with decision making and avoid disruptions in the supply chain.

For example, IoT allows sensors to be fixed directly on equipment to provide real-time visibility to unexpected machinery maintenance. This enables proactive maintenance and repair by monitoring equipment status.

AI modeling is then employed to study supply chain performance, indicating potential bottlenecks and disruptions. By incorporating RFID technology, goods can be tracked from raw materials to the factory floor and all the way to the customer, allowing better inventory management. These technologies help optimize production and logistics, ensuring inventories are kept at forecasted levels and products reach their destinations on schedule.

Diversifying suppliers

One way to reduce supply chain disruptions is to diversify suppliers. By working with multiple suppliers from different regions, manufacturers aren't relying on one supplier to deliver a product, thus reducing the risk of disruptions at any given vendor. Though it is beneficial to invest in local resources to support the regional economy, best practices to safeguard your supply chain include engaging with suppliers both domestically and internationally.

Not only will diversification of vendors help the supply chain, but it can also increase collaboration among domestic and international suppliers. This is important because collaborating with a diverse group of suppliers will help Canadian manufacturers build relationships with other geographic markets.

Conclusion

Supply chain resilience is not guaranteed- but in an age where disruptions have occurred quite frequently, the Canadian manufacturing sector has been excelling in recent years. By making adjustments to inventory, utilizing new forms of technology and diversifying suppliers, manufacturers can adapt to supply chain uncertainty. These advancements increase supply chain resilience and position manufacturers for a more successful future.

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