Thank you, Madam Chair and members of the committee, for the privilege to speak to you today.
My name is Matt Weller. I am the founder of Naviga Supply Chain, which was created to respond to the supply chain challenges of small and medium manufacturers, which make up 99.4% of all of Canada's manufacturing. Many of these produce low-volume, high-value or high-complexity products that present a unique set of supply chain challenges that are seldom discussed and even less addressed.
I'm speaking to you today as a practitioner with 24 years of experience working hands-on in every supply chain discipline in a variety of industries who has seen first-hand the productivity and supply chain challenges these Canadian manufacturers face at their roots.
Our supply chain challenges cannot be addressed solely by export programs, process improvements, technology, AI or investment. None are the panaceas many wish they were. To be certain, these are all essential and beneficial elements once a firm has become reliably effective in its productivity and profitability, but disastrous if applied without first achieving effective operations.
Where SME manufacturers are concerned, the core challenge is in getting to this point. There are more challenges stacked against them in this regard than I can list in this short address, but executional knowledge, development and retention are paramount among them.
These pre-existing challenges are now being exacerbated by the perfect storm. Declining birth rates and a large retiring demographic mean that capital is already becoming scarce. Arbitrary taxation and regulatory policies are antithetical to competition and productivity, and serve to stifle SMEs, which further compounds the problem.
Globalization is breaking down, with new geopolitical impacts on supply every day. As we lose existing manufacturing resources, future entrepreneurs are being discouraged from manufacturing, believing that physical production is not a viable business model in Canada. Many VC firms will not invest in manufacturing because of the front-loaded capital aspects and the lack of confidence in their ability to produce value.
It's time to do something different. Here are three suggestions.
First, while industry must inform and lead the solutions to these challenges, a national reindustrialization strategy is needed to coordinate and prioritize those efforts and design a supply chain and business environment that is favourable to productivity. We need to ensure we can understand, identify and retain critical manufacturing resources, skills, capacity and capabilities, and their complex interactions at the detailed levels, which will be needed for both industry and consumers in the much longer term.
Taking a “whole system thinking” approach, we can balance the needs of our economic system and avoid short-term benefits to any particular sector or industry at the long-term expense of overall productivity and economic stability. This is critical for us to survive the societal, economic and geopolitical challenges that lie ahead. The recent pandemic has already demonstrated our vulnerability.
Second is education and funding. Young entrepreneurs are taught how to fundraise, market and sell, but not how to produce. For manufacturing start-ups the default practice is to worry about that later. When later comes, many fail, along with the funds invested in them.
We need to change this trend in our institutions and incubators. We need to incentivize educational institutions to develop supply chain-system thinking for reindustrialization and actively fill the executional knowledge gap. Funding—government or private equity—could be awarded based on executional knowledge retention in meeting productivity targets and—proving the viability of the business with results. This would also serve to de-risk for investors, who otherwise would not invest in any kind of manufacturing.
Third, build a small and medium manufacturing ecosystem.
There is a lot that our small and medium manufacturers can learn from our intangibles tech sector in terms of building ecosystems. Our SME manufacturers tend to be unbelievably stretched on resources, poorly networked online and they struggle in isolation. An ecosystem could help tremendously with this, regionally and nationally. It must be industry-led, but encouraged by government. An active ecosystem can leverage broad, experienced-based knowledge to solve common problems, improve the visibility of Canadian manufacturing and build an inventory of resources and capabilities with collaborative trade networks and relationships across Canada in addition to existing north-south trade patterns.
We need to act post haste. The world is changing quickly and it will not wait for Canada. This study brings me the optimism we could have the dialogues and vision to act.
Thank you for your time.