SMEs in the manufacturing sector are suffering from labor shortages to the point of transferring contracts to subcontractors outside the province, which is causing a net loss for the Quebec economy, deplores an association of manufacturing companies .
Posted at 10:00 a.m.
STIQ unveiled Monday the results of the 13and edition of the Quebec Industrial Barometer. The telephone survey carried out by Bip Research was carried out between January 18 and February 16, 2022, relating to the state of these indicators in 2021. Some 500 SMEs were questioned out of a universe of 3,000 companies with 10 to 500 employees, a representative sample in relation to the survey population. The margin of error is 3.9%, 19 times out of 20.
Relocation
About 15% of the SMEs surveyed relocate their activities outside Quebec to counter the labor shortage, causing a net loss for the Quebec economy.
“Companies have to produce and deliver their orders and if the only way to do that is to send a small part of it outside, it’s not their first choice, but they will do it,” says , in an interview, Richard Blanchet, Chairman and CEO of STIQ.
Due to a lack of manpower, 7 out of 10 companies resign themselves to delivering late orders and 6 out of 10 refuse contracts. One in five companies admits that they are cutting corners on the quality of their products and services.
“Compared to 2019, there is a significant increase in contracts or orders delivered late (+ 11 points) and in the loss or refusal of contracts or orders (+ 7 points)”, we read in the document which analyze the survey.
This phenomenon is in addition to another tendency which consists in opening establishments in the United States in order to be able to comply with the requirements of the Buy American Act. A company like Marmen, for example, opened a subsidiary in Albany, New York, to build wind turbines.
Labor shortage
The situation has never been worse for 13 years, according to STIQ. Nine out of ten SMEs consider the recruitment of specialized employees to be a crucial issue, while seven out of ten of them believe that the challenges of retaining this workforce are just as great. These are levels not reached since the start of the Barometer.
The proportion of companies, at 44%, that recruit abroad has jumped 11 percentage points since 2019.
The number of vacancies has increased by 36% in just one year, with an average of 12 vacancies in companies. “If we distribute this average over our universe of 3,000 SMEs with 10 to 500 employees, we arrive at 36,000 open positions in the companies targeted by our survey. This is the highest level ever reached,” says Mr. Blanchet.
Supply disruptions
The pandemic has shown the shortcomings of just-in-time. “The Barometer survey highlights the extent to which the problems of delays and disruptions in supply chains have major impacts on the Quebec manufacturing sector. Almost all companies surveyed (95%) increased their prices and 80% delivered contracts or orders late,” the highlights read.
Whether it is because of the shortage of labor or disruptions in supply, SMEs are feeling the effects on the profit line.
Nine out of ten companies say they are raising wages and benefits to attract employees to their businesses. Consequence: six out of ten see a drop in their profitability, even if a high proportion passes the bill on to their customers.
The digital shift is long overdue
Despite all the rhetoric, the shift to manufacturer 4.0 has not been taken by everyone. “In three years, there has been no significant progress in the integration of new technologies among manufacturers,” noted STIQ. The organization points to the shortage of manpower, the boss putting all his energy into filling his orders.
On this question, the world of SMEs is divided in two, points out Mr. Blanchet. Those who have undertaken the digital shift in the past and who have taken advantage of the pandemic to go further, and the others, those resistant to change, who have remained on their own. One out of two companies has not implemented a single new technology. Worse, companies that are not very advanced in the digital shift (28%) attach little importance to the issue of digitization.