If we made a list of words we are most sick of hearing in 2022 it would likely be topped by “COVID” and “pandemic.” However, rising quickly in the hated words power rankings is “supply chain.” Supply chain talk is so pervasive that guitar aficionado Jack White named his upcoming North American tour the “Supply Chain Issues Tour.”
There’s good reason for all the chatter as the outlook for Canada’s manufacturing sector continues to be clouded by ongoing supply chain, workforce and pricing pressures.
The pandemic has disrupted nearly every aspect of the global supply chain, resulting in shortages and price hikes across a whole range of products. The most prominent example of this is the global semiconductor shortage, which has severely dented auto production. But there are countless other examples. Until these issues are sorted out, the economic recovery will remain bumpy.
Against this backdrop, Canadian Manufacturers & Exporters surveyed members about the extent to which supply chain issues are affecting their operations, the strategies they are implementing or planning to implement to mitigate them, and recommendations on short and long-term solutions.
Unsurprisingly, we learned that nine out of 10 manufacturers are experiencing supply chain disruptions and 60 per cent of those rated those disruptions as “severe.” For respondents, we were able to calculate estimates; they have suffered a combined $10.5 billion in lost sales and $1 billion in increased costs.
Respondents told us the top three supply bottlenecks facing manufacturers today are rising transportation costs, accessing critical components from foreign suppliers and labour shortages and absenteeism disrupting production. Eight out of 10 manufacturers facing supply chain challenges have been forced to increase prices and delay fulfilling customer orders, while 70 per cent have been forced to find alternative suppliers of key inputs.
On the positive side, less than one out of 10 say they have resorted to laying off workers to cope with such disruptions.
We wanted to know how manufacturers are adapting to these challenges. Would manufacturers be re-shoring their supply chains or bringing them closer to home? Only 18 per cent of respondents said they would, with many blaming this on the fact that there are no Canadian suppliers of their critical inputs, or at least they aren’t aware of any. Only 28 per cent of respondents said they would scale up Canadian production or relocate production closer to home. Availability and cost of labour is the biggest hurdle there, according to the survey results.
Manufacturers are taking meaningful steps to reduce the impact of supply chain disruptions, including increasing inventories of critical components (74 per cent), increasing communications with customers and suppliers (63 per cent) and increasing inventories all along the supply chain (51 per cent).
We don’t yet see the light at the end of the tunnel. Most manufacturers predict these disruptions won’t end until some time in 2023. Among other things, we’re going to continue to work with the federal government to address labour woes by increasing the number of economic class temporary foreign workers and push for new initiatives that help manufacturers adopt new technology.
Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies, who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.