Deloitte: Canada urged to invest in talent to drive industrial competitiveness

While recent reports have confirmed a moderate rebound for the Canadian economy, the country's manufacturing industry continues to face serious challenges in competitiveness from emerging economies. As a result, Canada is being urged to step up investments in talent-driven innovation to improve performance in this sector and in creating a competitive policy infrastructure.

A report issued by Deloitte indicates that access to talented workers capable of supporting innovation is the key factor driving global competitiveness at manufacturing companies – well ahead of “classic” factors typically associated with competitive manufacturing, such as labor, materials and energy.

According to the report 2010 Global Manufacturing Competitiveness Index from Deloitte's Global Manufacturing Industry group and the U.S. Council on Competitiveness, dominant manufacturing powers of the late 20th century are no longer leading the sector and will continue to be outpaced by a new group of leaders such as China, India, the Republic of Korea and Brazil. North American and Western European nations are expected to be less competitive in the next five years. 

Canada is ranked in the middle of the pack and is expected to remain there five years from now. "This finding deserves careful consideration as Canada evaluates its global competitiveness position," cautions Luc Martin, Deloitte Canada's national manufacturing leader.

Talent-driven innovation essential for a vibrant manufacturing industry
According to Martin, the study confirms that the global competitive landscape for manufacturing is undergoing a transformational shift. "The Canadian economy as a whole is in a strong position compared to other developed countries, but our average competitiveness will mean that further restructuring of Canadian companies will be needed. Investments in a skilled workforce and in innovation will be key to improving performance and keeping a vibrant manufacturing industry in Canada," Martin said.

The report found that the countries with a competitive edge in manufacturing have a steady supply of highly skilled workers, scientists, researchers, engineers, and teachers who collectively have the capacity to continuously innovate and, simultaneously, improve production efficiency. 

In addition, the most competitive nations demonstrate strength in research and development, as well as engineering, software and technology integration abilities. For example, the report found that although China, India and Korea relied on lower-cost labor early on, the current edge shown by their manufacturing sectors is attributable to their ability to supply high-end and highly technical products.

"Talent, specifically talent that drives innovations, trumps all when it comes to global competitiveness at manufacturing companies. The availability of talented people along with research and development capabilities are vital elements of the talent-driven and innovative manufacturing enterprise of the 21st century," Martin said.

Key drivers of competitiveness reflect a critical interplay between government forces and markets 
The report identified other key drivers of competitiveness in the global manufacturing industry, many of which are policy related such as cost of labor and materials; economic, trade, financial, and tax systems; energy cost and policies; legal and regulatory systems; quality of physical infrastructure.

On this front, the report found a clear geographical divergence in the perception of public policy support for competitiveness. China is seen as making competitiveness easier compared to Europe and North America through government policies including support of science, technology, and innovation. European governments provide an edge to their manufacturing industry with the support of infrastructure development, while North America is perceived as having the most advantageous intellectual property protection policies.

In North America, financial and tax systems ranked third in factors influencing manufacturing performance. The report noted that appropriate regulations and policies on corporate taxes, trade, central banking and overall financial systems foster the necessary business climate for a thriving industrial sector, while inappropriate measures in this area can stifle the manufacturing sector and be a drag on a country's competitiveness. 

According to Martin, "Given that manufacturing  will continue to be an essential path for attracting investments, spurring innovation, and creating high-value jobs, governments in Canada will need to ensure we have the right foundation in place for financial and tax systems, as well as quality infrastructure." 

The report is based on the responses of more than 400 chief executive officers and senior manufacturing executives worldwide to a survey conducted in late 2009 and early 2010. It also draws on select interviews with key manufacturing decision makers.

To download the 2010 Global Manufacturing Competitiveness Index, visit www.deloitte.com/globalcompetitiveness.

About Deloitte
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,700 people in 58 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. See www.deloitte.com/aboutfor a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.