Productivity in Ontario's manufacturing sector is the subject of Part 2 of our chat with NGen CEO Jason Myers. The conversation revolves around a new joint report by NGen and the Trillium Network for Advanced Manufacturing addressing Canada's “productivity problem”. The episode highlights the importance of understanding productivity to solve it, different ways to measure productivity, and the role of strategic management and leadership skills in driving future growth in manufacturing. Missed Part 1? Catch up here: Season 10, Episode 2. 

• 04:50 What is Productivity and Why is it Important?
• 08:59 How Manufacturers Will Generate More Money in the Future
• 10:47 Highlights from the NGen-Trillium Report
• 15:02 Is Canadian Manufacturing Productivity Growing Fast Enough?
• 17:02 What Economic Developers Need to Know About Productivity 
• 20:30 Getting Ahead of an Aging Workforce
• 23:15 Workforce and Skills Development
• 24:27 The Impact of Technology and Outsourcing
• 26:16 A Vision for the Future of Manufacturing

Highlighted Report

• NGen and Trillium Productivity Report 2024: trilliummfg.ca/show/the-trillium-network-and-ngens-report-on-manufacturing-productivity

Find Out More about Trillium

• Trillium website: trilliummfg.ca
• Trillium GIS: trilliumgis.ca
• LinkedIn: linkedin.com/company/trilliummfg
• X/Twitter: x.com/TrilliumMfg
• Instagram: instagram.com/trilliummfg
• Facebook: facebook.com/trilliummfg
• Old ‘Making it in Ontario’ Episodes: https://soundcloud.com/making-it-in-ontario-past

About the Making it in Ontario Podcast

Making it in Ontario is your window into what's next in manufacturing. Ontario’s economy depends on manufacturing, but the latest research reveals concerning trends that could undermine the sector’s strength—if we don’t address them. Join us as we talk to CEOs and other leaders at the forefront of the sector about productivity, strategy, talent markets and career opportunities, and the role of manufacturing in a prosperous and sustainable future.

This podcast is an initiative of the Trillium Network for Advanced Manufacturing. It’s hosted by Michelle Samson and produced by Storied Places Media.

Welcome to Making it in Ontario, your window into what's next in

2

Ontario's manufacturing sector from the

data driven researchers at the Trillium

3

Network for Advanced Manufacturing.

4

I'm Michelle Samson.

5

Brendan Sweeney: And I'm Brendan Sweeney

6

Hey everyone, we are back with the

second part of our two part episode

7

with Jason Myers, the CEO of NGen.

8

Michelle Samson: Yeah, so part one, if

you missed it, was season 10, episode

9

2, and that was a big picture discussion

about manufacturing in Ontario and Canada.

10

We do highly recommend listening if you

haven't already, but Brendan, what are

11

we discussing with Jay this time around?

12

Brendan Sweeney: This time we are

focusing on productivity specifically.

13

Productivity, this is a subject of

a recent NGen-Trillium Network joint

14

report that was just published.

15

Lots of talk about productivity

recently and about Canada's quote

16

unquote productivity problem.

17

The report that we released focuses

specifically on manufacturing and

18

it does identify that, you know,

there are some challenges with

19

productivity and manufacturing.

20

Productivity should be considered

a bit of a problem, but it's not

21

just a manufacturing problem.

22

This is a Canada problem.

23

This is a problem across our economy.

24

Manufacturing actually is more

productive than the average

25

for all Canadian industries.

26

Therefore, there's, you know,

more prosperity, more wealth

27

associated with manufacturing.

28

That's why it's important.

29

That's why we want manufacturing, or one

of the reasons why we want manufacturing.

30

As the report shows that when we dive

in to manufacturing and we kind of

31

slice and dice some of the numbers

regionally, uh, with Atlantic Canada,

32

Quebec, Ontario, Western Canada, we slice

and dice it by industry, some really,

33

uh, interesting insights in there.

34

And the report shows that there are

some success stories out there, whether

35

it's on a Canada wide basis, on an

industry basis, or on a regional basis.

36

Pharmaceuticals is kind

of the big winner here.

37

Um, and so while there are success

stories, these are, uh, fewer and

38

further between than we'd hope.

39

And in this episode, and I think

Jay does a really good job, really

40

breaks down why simply understanding

productivity is important if

41

we're going to solve the problem.

42

And then we venture a few ideas of

what we can actually do about it.

43

Michelle Samson: Yeah, I thought it

was really interesting how there are

44

different ways of measuring productivity,

but a lot of them miss that beating

45

heart of why productivity is actually

important, and can even lead decision

46

makers towards bad decisions if you're

measuring productivity in the wrong way.

47

Brendan Sweeney: Yeah, and if we

just kind of look at, hey, you

48

know, this is a productive industry,

why don't we have more of that?

49

You know, as the report shows, we'd

end up with a nation of cigarette

50

factories, which are highly productive,

but that doesn't mean they're desirable.

51

Addressing this challenge, fixing

this problem, that it's not an easy

52

thing to do, but it may emerge as,

you know, the priority for industry

53

stakeholders moving forward, especially

because, you know, productivity

54

is the foundation for prosperity.

55

It's something that Trillium and

NGen are committed to working

56

together on moving forward.

57

And, there's lots of work to do, but as

I always say, uh, having lots of work

58

to do is better than having none at all.

59

Michelle Samson: Yeah.

60

Cheers to that.

61

And, um, and there's work for all

of the stakeholders in this too.

62

Like there is really a role for everyone,

business leaders, economic developers who

63

come up in the episode, universities and

colleges, everyone has their role to play.

64

So where can people find the full report?

65

Brendan Sweeney: Uh, they can

find it on the NGEN website.

66

They can find it on the Trillium Network

website, and I think they can find

67

it in the, uh, notes associated with

this podcast, and, uh, like Michelle

68

mentioned, economic developers, there's

something in here for you, so listen

69

up, university deans, uh, provosts,

president, department heads, there's

70

something in here for you, so listen up.

71

We get into a really sophisticated

conversation in this one, and uh, I really

72

enjoyed having this conversation with Jay.

73

Michelle Samson: Yeah.

74

So go find the report, but before

you go find the report, stick around

75

and listen to this conversation.

76

It is a really great

companion to that report.

77

Brendan Sweeney: So, productivity.

78

There was, especially earlier

in the year, there was a lot

79

of public discourse related to

Canada's record of productivity.

80

What is productivity and why is it

so important to be talking about it?

81

Jayson Myers: Trillium and

NGen have been working on joint

82

report on exactly this issue.

83

As you say, a lot of reports out

there looking at productivity

84

performance in Canada, writ large.

85

A lot of hand wringing, all of the

conclusions are we're not doing very well,

86

very few ideas about how to do better.

87

But I think we need to take a step

back and really think about what

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productivity is, not even from an

economic point of view, but what

89

we're really trying to get at here.

90

And it's all about, whether it's

a country, whether it's a company,

91

whether it's an industry sector like

manufacturing, it's all about how

92

do you increase the value of what

you're producing, how do you make

93

more money, basically, uh, and how

to do that with the least resources.

94

And there are various ways

of measuring productivity.

95

You can measure the

productivity of your equipment.

96

You can measure the productivity of

other inputs like, uh, like IP or

97

software, or you can measure productivity

in terms of output per worker hour.

98

So labor productivity is probably the best

because, you know, what's the point of

99

measuring equipment or IP productivity?

100

Because at the end of the day, it's

people that's running this anyway.

101

So this whole idea of productivity

improvement is how do you

102

maximize the value of what you're

producing as a business or as a

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industry sector per worker hour.

104

And you can figure that out by looking

at sales revenue and the value of

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the inventory you're creating, and

then subtracting all the inputs

106

that are necessary to do that.

107

What's left over is the amount you

pay your employees, and the amount

108

of money that is left over in terms

of gross profit or gross margin.

109

That's GDP, and you want to create

as much GDP, as much value add as

110

possible with the least hours worked.

111

And that's where I think we really

need to focus maybe a little less

112

on cutting just the worker hour and

much, much more on creating the value.

113

At the end of the day, the last

remaining manufacturer, when they turn

114

off the lights, and they sell their

last product , where the bank sells

115

the assets and nobody's working in the

company, that's infinite productivity.

116

But that's not where we want to go.

117

We want to create much more wealth,

much more value for customers,

118

much more revenue for the economy.

119

That's what it's all about.

120

And to do that with the least

amount of effort, with the

121

least amount of resources.

122

The history of productivity

and manufacturing is, when you

123

look back 30 years ago during

124

I mean, that's when

manufacturing was growing.

125

A large part of that was because of the

North American Free Trade Agreement.

126

The next decade, the 2000s, well, we were

really struggling, but we lost a lot of

127

manufacturing over that period of time.

128

We were losing the highest value

sectors of manufacturing as a result

129

of competition from China, both for

our product, but also for investment.

130

And then over the last 14 years,

131

productivity is growing twice as fast

as US manufacturing productivity is, and

132

that's largely because we're creating new

businesses, but it's also because we're

133

using new technology to improve processes

and the efficiency of process as well.

134

But it's leading to new ways of

doing things, new opportunities

135

for business growth and, frankly,

new opportunities for new products,

136

smart products, and services.

137

So that's really, in my view,

where some of our challenges are.

138

The opportunity going forward is how to

create more value, how do we generate

139

more money, how do we grow companies.

140

And that's really the key in

my mind about productivity.

141

Michelle Samson: So Jay, not to

put you on the spot, but how do

142

we tap into that opportunity?

143

Like how do we create more value?

144

How do we generate more money?

145

Jayson Myers: I think, frankly,

the future of manufacturing is

146

not getting product out the door.

147

Product today is the platform

for data, it's a platform for

148

service, and it's the services

that are really generating revenue.

149

And much more revenue

today than product is.

150

You know, that's clear on any cell phone

that we're using, but, you know, it could

151

be jet engines where we've got great

jet engine manufacturers in Canada, but

152

the revenue that they're generating is

through leasing the engine to the aircraft

153

companies and reading all the data coming

in and maintaining the engine in flight.

154

That's a very, very

different business model.

155

But that's where, where the future

revenue generation will come

156

from in advanced manufacturing.

157

If you look at overall revenue

being generated across the

158

manufacturing sector, 25 percent

of that is coming from services.

159

It's not coming from product at all.

160

And yet we're measuring productivity,

and this gets back to another issue,

161

are we measuring productivity correctly?

162

We're measuring productivity on the basis

of volume of product going out the door.

163

Um, it has nothing to do with the

quality or changes of quality of

164

the product, and it has nothing

to do with the services that are

165

being generated around the product.

166

So, I think we have real problems in

measuring productivity because we're

167

not taking into account all of the value

that is being generated, and we're not

168

taking into account the higher wages

that reflect the higher skills levels

169

of manufacturing employees either.

170

That all seems to be written

off as inflation today.

171

Brendan Sweeney: So we've got this

jointly produced report, NGen and

172

Trillium, about productivity, and we've

had some good debate on how to interpret

173

the data, on how to frame the data.

174

In the process of pulling that data and

pulling that report together, Jay, what

175

were some of the biggest takeaways?

176

What were some of the biggest surprises

and what were some of the biggest,

177

the most important conclusions,

along the lines of, maybe we need

178

to be measuring productivity in a

179

Jayson Myers: There were a few

things that really stood out.

180

Number one, how much common sense it made.

181

It confirmed a lot of things like

manufacturing is one of the highest

182

value adding sectors of the country.

183

How much greater manufacturing

productivity is compared

184

to the economy as a whole.

185

That certainly, I don't think, was

any surprise, but that certainly

186

has stood out, has confirmed

the importance of manufacturing.

187

One of the other maybe surprising things

at the beginning is where are the biggest,

188

most productive sectors of manufacturing?

189

Well, you know, tobacco products,

chemicals, pharmaceuticals, all stand

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out there, and the reason why is that

these are standard products, where you

191

can easily measure the volume of output.

192

They could be complex products, but

the product lines are not complex.

193

You're producing a particular product

en masse and if you can do that, and use

194

equipment to get as much product out the

door as you possibly can, you tend to

195

have, uh, higher rates of productivity.

196

But even there, it confirms that

economic theory that, you know, you've

197

got a product and as competition

enters the market and as demand

198

changes that your profit is driven

down as a result of competition.

199

And as a result of that, your

productivity falls as well.

200

And in all of these areas, productivity

is high, but it's fallen fairly

201

sharply over a period of time.

202

I think the other thing that it helped

confirm to me is that there are real

203

structural issues that we need to take

into consideration, uh, when we're

204

talking about manufacturing productivity.

205

Um, you know, the size of companies.

206

We have probably more smaller

companies in comparison with those

207

of the United States, for example.

208

And as a result of that, you

don't get the big economies of

209

scale through mass production.

210

But what you do get are smaller

companies that are making money on

211

the basis of higher value services,

of higher value customization.

212

And I think that's where Canadian

companies have always stood out.

213

And so we have lower levels of

volume, lower levels of output, but

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maybe higher value of those products.

215

Uh, but you need more people, and

smaller companies tend to hold on to

216

the workforce much longer than larger

companies do, where they can not only

217

attract more people, but they have

much greater flexibility in terms of

218

their ability to shed workers or lower

worker hours, if volume turns down.

219

So, I mean, all of these trends were

kind of confirmed, I think, Brendan,

220

in the report that you did for us.

221

Trillium really did a lot of the basic

number crunching and data analytics, but

222

again, it really underlies how complex

this issue of productivity actually is.

223

And if anything else kind of raises a

lot of questions and let's us dive more

224

deeply into issues like, how is revenue

being generated today and where are the

225

limitations in terms of being able to

improve process and reduce worker hours?

226

But let's not get caught up.

227

It's not a race to the bottom,

this is a race to the top.

228

It's not about how do we just simply

reduce workers and worker hours because

229

as I said before, you can be the most

productive company in the world on

230

the day that you go out of business.

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Brendan Sweeney: Hmm.

232

And just to kind of back up

a bit, Canadian manufacturing

233

productivity is growing.

234

It's growing faster than productivity

in the United States' manufacturing

235

industry, and it's growing faster

than the overall Canadian economy.

236

But is it growing fast enough?

237

Jayson Myers: It can always grow faster.

238

Brendan Sweeney: Yeah.

239

Jayson Myers: Manufacturing has

one of the highest productivity

240

rates of any sector in the country.

241

A lot depends on the ability of

our manufacturers to continue

242

to grow their business here.

243

This often leads into a discussion

about, you know, what does the policy

244

environment need to be like in Canada in

order to enable companies to grow more?

245

I think that's an important issue.

246

But I think much more of a pressing

issue is do companies themselves

247

have the strategic and management

capabilities to grow their business

248

here and to use technology successfully

to improve their processes, but

249

also enable them make more money.

250

So I think there are real challenges

here, and the challenges are not

251

necessarily all at the policy level.

252

The challenges in many cases are

challenges around management and strategy

253

and leadership at the company level too.

254

We've got, frankly, a lot of small

manufacturers that are doing very, very

255

well with their current lines of business.

256

And many companies are asking, "well, why

should I do anything different than that?"

257

And I think if you don't have your

eye on the future and on future

258

opportunities, but also on the

competitive challenges that are going

259

to be there in the future, you may not

be doing all that well for very long.

260

So the issue of productivity and

where we're going and how to improve

261

productivity is a, very, very complex one.

262

And it's not something that's

easily understood, I think,

263

simply looking at the data.

264

And what I see in a lot of the

productivity debates, you can use

265

productivity to justify almost anything

that you want to do in terms of policy.

266

Michelle Samson: Jay, if I may interject,

my background is in economic development

267

and we have a lot of economic developers

who will be listening to this.

268

So I'd love to spend a little bit of time

looking at it from their point of view.

269

Whether it's at the municipal level or

all the way up to really the national

270

level, as economic developers we tend

to look at which industries should

271

we be prioritizing and supporting.

272

Obviously there's that balance of what

does your jurisdiction currently have?

273

What does it have assets for?

274

But also what is growing, what is

looking promising rather than declining?

275

So how does productivity work into that

choice of which industries to support?

276

Jayson Myers: If productivity is

all about business growth, it's

277

all about advanced manufacturing.

278

And that includes the adoption

of new technologies to improve

279

product, to improve process.

280

But it also takes a look at the

development of new technologies and how

281

to grow new companies here in Ontario.

282

Often, people look at advanced

manufacturing and they say, okay, well,

283

there are certain sectors here that are

advanced and others that are not advanced.

284

Automotive is advanced.

285

Aerospace is advanced.

286

Pharmaceuticals is advanced.

287

Textiles, not so much.

288

Wood products, not so much.

289

And yet, if that were the case, then

I can identify a number of automotive

290

and aerospace and biomanufacturing

and pharmaceutical companies that

291

I don't think are very advanced.

292

They're trying to, you know, put

the same old product out the door,

293

diminishing returns, greater competition.

294

That's not advanced manufacturing.

295

But I know, for instance,

a company called Shimco.

296

They make shims.

297

You know, how simple is a shim, a piece

of metal, a piece of material that you can

298

put in between boards to stop vibration.

299

But these are smart shims, they've

got a sensor in it that can tell

300

vibration, that can read back.

301

And the sales revenue is not

generated as a result of the product.

302

The sales revenue is generated as a

result of the service that's being

303

provided by all of this data that's

being collected by these shims.

304

To me, that says a lot about where

the industry is going and, not to

305

dismiss some areas of manufacturing,

as long as they're using technology

306

to be able to develop new products,

new services, that nobody else can do.

307

So it becomes very difficult to say,

oh yeah, you know, let's look at a

308

particular sector of manufacturing.

309

If economic developers, municipalities,

or governments are looking at real

310

business development opportunities, I

think the key thing here is connectivity.

311

How do you connect with the technology

companies, with the services?

312

And the manufacturing that are not

necessarily in your jurisdiction, but

313

are out there across the province and

leverage that as much as possible.

314

The growth will come from those

companies that can use these

315

technologies really effectively.

316

So I think today in many ways,

you know, thinking about economic

317

development, it's changing.

318

It has to, it has to change.

319

It's all about how to facilitate the use

of these technologies and services to

320

maximize revenue and to present those

opportunities for local companies.

321

The other major challenge, of

course, that we're all facing in

322

advanced manufacturing, not only in

that sector, is an aging workforce.

323

And so automation is going to be

much more important going forward.

324

It's the only way that companies

can actually offset the

325

impact of an aging workforce.

326

The labor shortages are already here,

and they're only going to get worse.

327

And of course, if we're talking about

automation as a solution for that, then

328

we need to talk about skills development

at the same time, and where can companies

329

find people with the skills they're going

to require to grow their business, and how

330

do companies support skills development

within their own operations, which I think

331

is not addressed as much as it should be.

332

So, in many respects, economic development

may become much more of a focus on

333

people and on high quality personnel

development and skills development

334

than attracting various companies.

335

If you have that skilled workforce

or if, even better, if you have the

336

colleges, the universities that can

partner with companies in a particular

337

field, where you're leveraging

existing expertise to become a sector

338

of excellence in a particular product

line, or technology, then I think

339

that's a real winning combination.

340

I mean, you take a look at some of

these cities in Europe which have

341

really developed high tech clusters,

robotics clusters, for instance.

342

They've done it because there

are joint interests on the part

343

of technology companies to work

together and develop a really, really

344

strong skills base, educational

base behind what they're doing.

345

And then, looking at joint

opportunities to connect those

346

companies, uh, with global customers.

347

And that's the type of thinking

that economic development

348

offices have to go through.

349

It's "How can we leverage

the strengths that we have?

350

How can we make sure that we're

integrating the types of technology

351

and supporting the technology

development, supporting the skills

352

development required really to support

our local industries and attract the

353

knowledge supply chain, the technology

supply chain that can actually help

354

our existing manufacturers grow.

355

And I think that's the way that

economic development organizations

356

have to think in the future.

357

Does that make any sense?

358

Michelle Samson: Yeah, I think it does.

359

I know of a lot of communities who

are paying a lot of attention to

360

things like workforce and bridging

those kinds of connections.

361

So if they're already doing it,

you're saying, keep doing it!

362

Jayson Myers: Yeah, yeah.

363

If economic development organizations have

that type of support, and it's not just

364

the existing skills base, it's the ability

to work with particularly with colleges,

365

but also universities here to help

companies develop their own workforce.

366

I think that's an incredibly important

attractor for investment today, and

367

also to help people transition from

one job to another, from one company

368

to another, from one sector to another.

369

When we talk about technology,

the technology requirements or

370

the technology skills today, uh,

are frankly pretty common across

371

technologies, and those are the skills

most in demand by manufacturers.

372

In some cases, particularly with small

manufacturers, it's usually better to work

373

with a tech partner, a service provider

from a technology company, rather than

374

trying to develop these skills yourself.

375

So you need technology and

innovation management skills,

376

but you don't necessarily need

the tech skills themselves.

377

Michelle Samson: So yeah, once upon

time, it was telling all the kids,

378

"you gotta learn how to code".

379

But we need a broader

range than just that?

380

Jayson Myers: Absolutely.

381

And this goes back to, do we

really understand what the

382

manufacturing sector is today?

383

There was a study, I'm reverting

to the economist here, there was a

384

study that came out of MIT that looked

at the impact of technology on U.S.

385

manufacturing, and it concluded that

over a period of 20 years, about 5

386

percent of the manufacturing workforce

had been displaced by technology.

387

But when you looked at the economics

behind this, uh, what you found was that

388

companies weren't making any more money,

any more profit as a result of this.

389

What was happening is that the amount

that manufacturers were paying in

390

terms of labour compensation had been

reduced by about 5%, but instead of

391

that, they were contracting out more

services, and particularly to the

392

technology and engineering sectors.

393

That totally compensated for the,

uh, reduction in labour costs.

394

So what we're really seeing is a lot

of jobs that are no longer maybe in

395

manufacturing, but are now in the

engineering and technology industries,

396

providing services of some sort and

technology support for manufacturing.

397

That's the same thing as

like 30, 40 years ago.

398

A lot of companies had cafeterias

and paid for cafeteria workers

399

as part of their business.

400

Well, there aren't very many companies

today with in-house cafeterias.

401

That's not to say that there aren't

still jobs in that sector in those

402

companies, but they're outsourced.

403

And, you know, I don't think we pay

enough attention, again, to that

404

overall value chain, here in Canada.

405

That you can be working in a manufacturing

job, but you don't have to be working

406

in manufacturing to have that job.

407

Brendan Sweeney: Last question.

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You get a magic wand.

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You get to wave it and you can make one

big change to really put manufacturing

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in Ontario, manufacturing in Canada,

on a course to becoming not "a"

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world leader, but "the" world leader.

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What do you do?

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Jayson Myers: I would make sure

that we have university programs

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that actually taught strategy

and management for manufacturing.

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We don't today, and we need to

develop a cohort of young managers,

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of young business leaders that know

how to run a manufacturing facility.

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That know how to manage

value chain relationships.

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That know how to sell their product,

their service around the world.

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That know how to develop those products

and services, and how to differentiate

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them from their competitors.

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That know how to invest in the

most important asset that we have

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in manufacturing, which is people.

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We simply don't have that education

here in Ontario or in Canada.

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Leadership and management and project

management are the biggest skills

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gaps that we have in this country

with respect to manufacturing.

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So, that's my magic bullet.

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Michelle Samson: New episodes of Making

it in Ontario are published weekly.

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Making it in Ontario is an

initiative of the Trillium Network

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for Advanced Manufacturing.

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It is produced by Storied Places Media.