Reshoring to Strengthen Canada’s Supply Chains

Published on February 15, 2022

Listen to the Podcast:

Takeaways

Supply chain issues are systematic in Canada and the COVID-19 pandemic mostly served to focus attention on what has been a longstanding problem.
Reshoring can not only help supply chain resiliency, but it also presents a huge opportunity for Canadian businesses to innovate and save costs.
The government must provide more information and assistance to Canadian businesses on how to navigate the complex landscape of supply chains.

Action

Solving supply chain challenges will require the teamwork of all stakeholders, including the government, the private sector, academia, non-governmental organizations and more. A cohesive strategy must be one that is prepared for constant changes and that does not take stability for granted.

What is Reshoring Canada looking to address?

Reshoring became a hot topic during the last recession in 2008 to 2009 when people started talking about where the jobs going were going. People had a view that Canada was shedding jobs to different parts of the world and we were suffering as a result of that. The idea was that we should bring all this work back home. In that regard, reshoring has a nativist connotation.

However, reshoring is not about being nativist for me. I am completely pro-trade as a former trade minister. The Canadian economy is based on trade, so we certainly want more of it.

What reshoring means for us is that companies, especially SMEs, need to rethink how and where they are getting their parts and materials from. They need to ask if there is an easier, better and more economical way. What they thought was appropriate in the 1980s may no longer be relevant. The whole world has changed since then and now is actually a great time to start revisiting some of those price points, methods and routes. Companies need to think about doing things in the best way. This allows for a lot more opportunities to grow, especially with the way Canada automates. There is a huge opportunity for Canadian businesses in places where they have not looked before. This crisis is going to make them look.

What are Canadian business leaders’ views on our supply chains?

Reshoring Canada surveyed 10 or 12 different industry associations to make sure we were talking to different types of businesses in Canada. We found that 40% of the people who did the survey were in the C-suite of their organizations, which is rare for surveys. That really speaks to how supply chain issues are very important and critical now, not just to the purchasing or procurement people but right up companies’ chain of command. Supply chain issues must be hitting the balance sheets of all these companies already.

“Supply chain disruptions are happening every few years, annually or quarterly.”

The other thing that we learned was that supply chain issues are systematic. They have been ongoing. There are three identifiable continuous supply chain issues. It is not just about what is happening now because of the pandemic but rather what has been going on for quite some time. The first supply chain issue is cost instability. The second is logistics and the third is capacity restraints. An important point is also how long these issues have been going on. This chart shows that supply chain disruptions are happening every few years, annually or quarterly.

Interestingly, what the pandemic did for us was it took every single problem in the world and put them on our plates all at the same time. Anybody who knows manufacturing knows that these issues have long confounded us. Maybe it was the tsunami that hit Tokyo and knocked out their nuclear plants which had a whole series of impacts on different sectors, or it was the Texas snowstorm that caused parts to stall. It made many of us realize that many things could be impacted by people not being able to move around in Texas for just a few days.

“Events like the Suez Canal block will happen again. Climate change will result in this type of impact.”

The pandemic simply caused everything to happen on all continents at the same time. Throw in the Suez Canal being blocked up and we had real challenges with supply chains. The canal blockage was not related to the pandemic but rather to climate change with massive sandstorms that shut down the Suez Canal, making the ship get stuck as a result. Events like the Suez Canal block will happen again. Climate change will result in this type of impact. People should realize that in every few years or every other year, we are going to be impacted by some kind of a supply chain issue that is not pandemic related. These issues are ongoing and we need to start working on a plan. Supply chain issues are endemic. Businesses will need to double down, have other options and have multiple plans.

For businesses, that is a lot more planning and work to do. We need to realize that supply chain issues do not come only from once-in-a-lifetime freak events. We are seeing events happen right here in Canada, such as the flooding in Windsor. At the very least, we should expect events like this once every five years. The world is changing and the pandemic simply focused our attention on supply chain issues.

What should businesses and organizations do together with government to help implement a supply chain strategy?

Going back to that survey Reshoring Canada did, 77% of respondents in the Reshoring Canada supply chain survey suggested that they needed diversification in their supply chains. Diversification was the solution that they felt they needed to go to.

So what is the government’s role in assisting with that kind of initiative? If your company is as large as Martinrea, you may not need the assistance of government to figure that out. However, SMEs can especially benefit from government involvement in assisting with supply chain diversification. The government can have a more active role in suggesting what SMEs can do because our departments around the world are fantastic and our ministries understand business in Canada. We just need to figure out how to share information that is most useful for companies. Many companies do not have the bandwidth to figure out their options when it comes to supply diversification and require more assistance. Our survey focused on manufacturing as they have the longest and largest supply chains, and we found that steel was the most prevalent industry in need of diversification. This was followed by plastics and electronics. What can we do to help those industries and companies?

“Governments are actually in a better place today, thanks to the pandemic, to know what they need to build and change to have a positive impact on businesses.”

There also needs to be better infrastructure and a conversation on how we can better use infrastructure for logistics. This was the second biggest issue for our survey respondents. Are we properly utilizing our port system? Can we better integrate that with other modes of transportation? We need to look at how ports are integrated with rail and road and whether there is more infrastructure that we need to build for this purpose. Today, we can calculate the opportunity costs of better logistics because we have our failures during the pandemic to reference. This means we can know for sure that an investment of a certain amount will have a certain amount of influence. Governments are actually in a better place today, thanks to the pandemic, to know what they need to build and change to have a positive impact on businesses.

What can we do in terms of creating a digital marketplace to connect SMEs with bigger opportunities?

For Reshoring Canada, such initiatives are going to come further down the road because first, we are focusing on how to get information to our businesses about the true costs of reshoring. That is what our first focus will be, but as people start coming to our site, they are going to automatically ask the next question. If it is better to manufacture in Canada, where should one go to build a new manufacturing plant? Questions like these will arise. We want to provide businesses with all the information they need. Being able to access all the information needed about reshoring is a very good way to help local businesses and make it cost-effective for them as well.

A lot of people are getting involved in this space and realizing that information is key. Businesses have to have data at hand, and they have to be able to analyze data quickly.

We went to the University of Windsor’s Business School and we had their supply chain students help us facilitate these surveys to reach as many companies as possible. I talked to the professor there who teaches courses on the supply chain, and it seems like everything is turned on its head. If you were the supply chain lead in a company, your primary focus is how to get the best prices and quality. But I discovered that there is more to it than that. You also need to understand political risks, natural disaster risks and logistical risks. There are elements that supply chain experts now have to embed in their formula for how a company should develop its supply chain. I cannot imagine that any one company with only one person responsible for procurement will be able to figure out the geopolitical risks of dealing with an Asian country, for example.

That is where the government must step in and help companies navigate political risks based on their experiences or assist with finding alternatives in terms of other countries. Businesses still have to worry about the bottom line. They are not going to start creating work that is ineffective and do it in Canada when they know there is somewhere else in the world that can do it better. Information is the key to guiding businesses to the right path.

What should organizations like TECHNATION and Reshoring Canada focus on in the next 12 to 18 months to make a difference?

TECHNATION’s expertise is going to be very helpful because your organization represents some of Canada’s finest companies with the brightest minds, and that is who we need for the challenges ahead. We need to reach out to Canadians to get the best people at the table.

Reshoring Canada’s charm is that we have the ability to reach out to a number of different groups and bring them together even if they would never have sat at the same table before. It is about time that we do that because we are facing a problem that we have not seen at this magnitude before. It impacts everybody–it is not just about the auto sector or manufacturing; it really has hit home in a number of ways.

“Government will not solve the supply chain crisis alone. When we put everybody together at the table, everyone is going to play their part.”

It is important to remember that government is not going to solve all the problems. They cannot and nor should they. The public sector, non-governmental organizations (NGOs) and the business sector need to come together. Government will not solve the supply chain crisis alone. When we put everybody together at the table, everyone is going to play their part. I am looking forward to working with you, Angela, and your organization. Say hi to my friends over there.