Staying competitive

Canadian firms must remain watchful of their balance sheets to remain competitive. If a product costs a company $10 to produce and a competitor can make it for $8, the company must see where it can reduce production costs to remain in business. Staying competitive often involves adopting manufacturing technology, allowing companies to churn out products more quickly and at lower cost. As a growing number of Canadian firms take this route, many have boosted their production capacities with machinery and equipment, exploiting the latest technological advances.

Manufacturers began to increase their investments in machinery and equipment substantially in 1994. That year, they spent almost $12 billion, representing an increase of over 20% from the year before. Investment in machinery and equipment peaked in 1998 with manufacturers spending over $18 billion. Since then, investment has been on the decline, dropping to $14 billion in 2002.

A firm's use of advanced technology depends to a great extent on its size. Large firms are more likely to make use of at least one advanced technology, such as design and engineering or network communications. In 2002, 77% of large firms (firms with over 500 employees) in the private sector used intranets while 81% of all large public sector establishments did so. Among large private and public sector organizations, 7 out of 10 used the Internet for purchases, while approximately 2 out of 10 of large private and public organizations used it for sales.

As technology is increasingly applied on the production line, the demand for higher skills among the workers on the line has also grown. A shortage of skilled workers can be an obstacle, not only to the adoption of production technology but also to innovation. Manufacturers, therefore, have also invested in employee training. In a survey conducted in 1999, three-quarters of the plants using production technology provided skills training for their employees. Nearly nine-tenths offered technical skills training and nearly as many provided instruction to help achieve computer literacy.

Nevertheless, two-thirds of those firms in the survey using advanced technology reported skill shortages. Workers in demand included industrial and manufacturing process engineers, electronic engineers, and machine operators and machinists.