Production down, costs up on supply chain woes

Canadian manufacturers say supply chain disruptions are cutting into production while raising costs, putting the recovery of the sector and the overall economy at risk.

A new survey by Canadian Manufacturers and Exporters found nine out of 10 companies in the sector are grappling with supply chain issues. More than half said the disruptions are having a major or severe effect on operations.

“We’re seeing long delays and higher costs,” said Dennis Darby, president and CEO of the manufacturing industry group. “There’s just no slack in the system.”

Demand for goods is strong, but manufacturers just can’t keep up with orders, Darby said.

Indeed, Canadian manufacturers have lost more than $10 billion in sales as a result of supply chain disruptions and are facing nearly $1 billion in increased costs, the report said. Eight in 10 said they have been forced to hike prices and delay fulfilling customer orders.

The situation risks stalling Canada’s economic recovery and could linger for several more months — or even longer, Darby said.

“There’s a fair degree of pessimism,” Darby said. “The majority of manufacturers don’t think the supply chain issues will be resolved until 2023 or later. We’re in for a continued hurt.”

Meanwhile, businesses in Canada are struggling to pay down debt amassed during pandemic shutdowns, with some considering bankruptcy even as restrictions lift.

The Canadian Federation of Independent Business said 67 per cent of small and medium-sized businesses took on an average of $158,000 in debt during the pandemic, according to a recent member survey.

Yet only 35 per cent have returned to normal sales, hurting their capacity to pay off debt and cope with higher costs.

The CFIB is calling on the federal government to extend its hiring program for businesses and halt tax hikes, including a planned increase in the alcohol excise tax and carbon tax.