Canadian manufacturers still reluctant to branch out into emerging markets as a way to mitigate supply chain risk

Canadian manufacturers are still reluctant to branch out into emerging markets as a way to mitigate their supplier interruption risks, Robert Forbes of EDC told a Toronto Insurance Conference (TIC) seminar in Toronto on Supply Chain Risk in a Global Economy.
During 2005-08, Forbes was responsible for establishing and leading an offshore team serving Canadian and local customers located in key markets around the world. He said trying to get Canadian companies to consider protecting their supply chain by moving into emerging markets was a tough sell prior to 2003-04. “Somewhere around 2004, the numbers really started to change,” Forbes said. “The game really started to change for Canadian investors and exporters.”
Forbes said companies do need to be plugged into local supply chains in emerging markets. “This creates sales and an economy in parallel to our own domestic or traditional export in the investment economy. Very, very important to the future of Canada. We need to be plugged into these global supply chains.”
By 2050, Canada could have half of its trade in the emerging markets. And yet, when it comes to mitigating risks in their supply chains, most Canadian companies opt to avoid setting up camp in emerging markets, Forbes said, citing a study of Canadian manufacturers by KPMG.
The KPMG study, called Re-shaping the Supply Chain Risk, found that 82% of Canadian companies surveyed elected to avoid emerging companies in the first place in order to mitigate their supply chain risks. In comparison, only 40% of manufacturers in other parts of the world expressed the same opinion.
The study also found that only 8% of Canadian companies were taking out or increasing insurance against supply chain interruption. “One of the least-used strategies,” Forbes observed, although it was consistent with the 9% of other companies around the world that indicated the same.
“This reflects our Canadian psyche, it is Canadian conservatism at work,” Forbes said. “But it’s going to really work against us if the competition is more aggressively using some of these other methods to mitigate and to be bold and go into these markets.”