Advanced manufacturing industry in Canada poised to grow as global supply chains evolve

The manufacturing facility of the 21st century is as revolutionary to its time as the assembly line was in transforming production in the 20th century. Automation, digitization and robotics reshape not just products but also the processes by which goods are made.

Manufacturing has long been a critical economic sector for Canada. In the 1940s and 1950s, manufacturing represented more than 25% of the national economy. Today, it is about 10%, but the sector still employed approximately 1.7 million Canadians in 2019.

Now manufacturing is in transformation, not only because of the changes in the sector, but also the changes brought on by the COVID-19 pandemic. The pandemic resulted in disruption of supply chains, which is especially concerning for firms that rely on global production locations and sophisticated logistics to deliver goods to their end consumer.

Two-thirds of respondents to the 2020 KPMG CEO Outlook: COVID-19 Special Edition said they have had to rethink their approach to global supply chains, which ranked 9th in terms of risk factors at the beginning of 2020, but rose to second as a major strategic threat by mid-year. A recent McKinsey survey of manufacturing and supply-chain professionals found that 93% plan to focus on resilience of their supply chain, and 90% plan to invest in talent for digitization.

Shortening of supply chains offers new investment opportunities

One way to achieve this objective is to locate elements of production closer to the final customers. Despite the pandemic-induced recession, the U.S. remains the largest consumer market in the world. Canada is therefore an ideal market for foreign investors to locate to service the U.S. economy, as well as other large markets with whom Canada has free trade agreements.  Global companies looking to create or expand their footholds in North America can trust the internationally recognized made-in-Canada brand and a high level of trust in Canadian-built products for their quality, reliability and safety. Despite some lingering trade tensions and ongoing border restrictions in North America, nearshoring is still being considered as a safer course, especially for critical products such as health supplies.

The shift from geographically dispersed supply chains to production centres located close to the end consumer is the leading post-COVID economic opportunity for the advanced manufacturing industry, according to findings of a KPMG LLP report produced for Invest in Canada, Advantage Canada: Reshaping Supply Chain Investment Opportunities After COVID-19.

The advanced manufacturing industry includes high value-added processes and covers multiple sectors, such as automotive, aerospace, chemical, pharmaceuticals, medical devices, electronics and plastics. It incorporates the Internet of Things (IoT)– the connection of goods or products to the internet – into established or evolving manufacturing processes. The Canadian advanced manufacturing sector benefits from one of the best research and development (R&D) environments in the world along with a readily available wealth of talent. Notable hub Catalyst137 in Kitchener is the largest manufacturing and IoT space in the world.

In 3D: Additive manufacturing a growth segment

Investment in innovative technologies is the crucial element needed to make Canada a leader in the advanced manufacturing industry. One significant opportunity is 3D printing, or additive manufacturing, which Kearney suggests will help to increase the production of goods closer to the consumer.

Canada’s Next Generation Manufacturing Supercluster (NGen) estimates that additive manufacturing has the potential to attain 1% of global manufacturing revenue in the next five years. For Canada, growth of this scale would translate to $2 billion in additional GDP.

Canada already has capability in 3D printing from coast-to-coast and several success stories in the industry, including: MDA’s satellite communication applications, Exco’s conformal cooling of massive die‐casting tools and COVID-19 nasal test swabs from Precision ADM.

According to results of a survey conducted by NGen, Canada’s strengths in additive manufacturing include access to the U.S. market, availability of raw materials, a highly educated workforce, access to clean energy and a “globally known cluster of machine, tool, die and mold companies”. While Canada’s market is relatively small compared to the American and German markets, the current leaders, this too creates an opportunity for multinational firms to gain first-mover advantages in the under-tapped Canadian market.  

Cleaning up in cleantech

Retooling Canada’s manufacturing sector for additive manufacturing should also incorporate clean technologies to provide current and future energy needs. As Canadian governments commit to policies to achieve carbon emission reduction targets, investors will find a welcome environment for clean tech investment. A growing global consumer demand for sustainability aligns well with Canada’s ethical and efficient energy industry, and manufacturing processes are increasingly relying on clean sources of energy to power their facilities. Advanced manufacturing and clean technologies have a symbiotic relationship which can only lead to further investment opportunities.

The alignment between advanced manufacturing and clean technologies can be seen in recent and significant investments within the Canadian automotive industry, especially in the fields of batteries and electric vehicles:

• Ford Motor Company of Canada, Limited has committed to transform its Oakville, Ontario Assembly Complex from a gas-powered vehicle plant to also become a battery-powered electric vehicle manufacturing facility, starting in 2024, as part of a C$1.8-billion investment.
• General Motors Canada plans to invest $1 billion in commercial electric vehicle production at its CAMI plant in Ingersoll, in southern Ontario. Large-scale commercial production of BrightDrop EV 600s, an all-electric van, is set to begin next year.
• Fiat Chrysler Canada has agreed to invest $1.5 billion in a multi-energy vehicle platform at the Windsor, Ontario Assembly Plant. Both Plug–In Hybrid Vehicles and Battery Electric Vehicles will be produced, with at least one new model coming in 2025. 
• In 2019, Tesla acquired Hibar Systems of Richmond Hill, Ontario to gain access to the Canadian company’s innovative process for mass-producing lithium battery cells.
• Nova Bus (part of the Volvo Group) has announced an investment of $10 million for the expansion of its manufacturing facility in Saint-François-du-Lac, Quebec. Nova Bus produces electric buses, hybrid electric buses, high-capacity vehicles and integrated intelligent transport.
• Mercedes-Benz Canada Fuel Cell Division (MBFC) in Burnaby, British Columbia, which opened in 2012, is playing a key role in the implementation of the next Fuel Cell Car Series, a joint venture by Daimler Truck AG and the Volvo Group.

Underpinning Canada’s supply chain opportunities are a highly skilled workforce that extends across sectors and disciplines, an attribute that can drive manufacturing innovation and energy transformation. Canada also possesses proven strengths in logistics and infrastructure such as rail and ports, and long-standing experience in exporting products to all corners of the world.

If you’re a global company looking to invest in Canada, contact us to discuss your advanced manufacturing or supply chain project.