This text is part of the special Business Challenges section
For Quebec manufacturing SMEs, inflation and the increase in interest rates are among the main challenges observed during the year 2022. This is particularly what reveals the recent edition of the Quebec Industrial Barometer of Subcontracting Industrielle Québec (STIQ), which annually paints a portrait of the sector through a series of measurable indicators.
The new edition of STIQ’s Quebec Industrial Barometer indicates that inflation and increasing interest rates are harming the competitiveness of Quebec manufacturing SMEs. Richard Blanchet, President and CEO of STIQ, points out that half of the responding companies suffered a drop in their profit margin and 93% of them were forced to increase their prices in order to cope with the situation. .
“One in ten companies fear for their survival and some say they have liquidity problems,” laments the CEO. The ability of companies to invest in research and development has particularly decreased during this period and some have had to delay their projects. investment,” he continues.
Think strategically
In order to survive, entrepreneurs must find innovative solutions, as demonstrated by Danny Thibodeau, president of Précision SF Tech, an SME specializing in aeronautics. “Automation and robotization are essential to remain competitive in the long term, as rising interest rates have a direct impact on company profits,” he says. He explains that he recently acquired “two new state-of-the-art machines” that can operate alone, which increases efficiency and requires almost no staff.
However, the effects of inflation and rising interest rates are sometimes such that “certain companies have become more selective in their choice of project or technology”, as Richard Blanchet points out. He also believes that in the long term, the main risk is rising prices, due to ever-higher costs of equipment and raw materials.
According to the CEO of STIQ, companies do not always have the possibility of “passing on cost increases to customers” because of fixed contracts. However, as Danny Thibodeau points out, “we must be able to be competitive to obtain contracts, and the repercussions are even greater when we are an SME with 36 employees”.
The scarcity of labor is also an aggravating factor and represents “the primary reason why entrepreneurs do not do more,” indicates the president of Précision SF Tech. “No matter the innovation or development, you need personnel to do it,” also confirms Richard Blanchet.
“In Quebec, low-cost labor leads to a high turnover rate, staff with little or no training and a lack of processes,” says Danny Thibodeau, while these people “perform critical tasks.” This can therefore cause a drop in quality and additional costs of non-compliance which may add up for companies.
The CEO of the STIQ, however, remains optimistic. He believes that the challenges linked to inflation and interest rates are cyclical and is “pleased that the public authorities have understood the importance of having a strong manufacturing sector in Canada and Quebec. » He also recommends training and recruitment, whether local or international, in order to help businesses.
Priority to profitability
This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.