Commentary

Transforming our approach to supply chains for sustainable economic growth

People inspecting large spools of wire

Canada’s continued prosperity in a globalized, knowledge-based economy will be driven, in part, by our transition to a set of next-generation technologies, popularly known as “industry 4.0” technologies. These technologies present a significant evolution over productivity-enhancing technologies developed in the 20th century. Some well known foundational next-generation technologies include 5G networks, Internet of Things, Artificial Intelligence, and Cybersecurity. While cybersecurity is not a specific technology, it is a foundational element that ensures authorized access at appropriate times to relevant data.

These foundational technologies will power the growth of new industries in Canada, including Advanced Manufacturing, Ocean Technologies, Agricultural Technologies, Digital Platforms, and Renewable Energy. Canada stands among global leaders in investing early in these new industries, and we are starting to see some early successes. For example, the significant level of collaboration among members of the Government of Canada-supported Superclusters initiative is positioning us in the lead.

Canada cannot, and should not, attempt to capture a leading role in all of these emerging supply chains. We are a middle power with a limited but important role to play in world affairs. As such, we should develop a list of criteria that we would use to determine which industries and what supply chain roles are a ‘good fit’ for us.

To maintain this early lead, however, we will need to scale up the production of solutions for these new industries and gain global market share. The scale-up requires global supply chains to manage production as well as collaborations to meet global demand for products and services in the new industries. In the 20th century, most production facilities and capabilities were outsourced (and offshored). Canada became a hub for services—over 70% of our economy is comprised of services-based sectors. This fundamental reality has defined how we train the next generation of our workforce, support businesses, invest in infrastructure and establish trading partnerships with other countries.

But now, as we consider the post-COVID-19 “new normal” and the ongoing geopolitical uncertainty, we must consider the supply chain requirements for the new industries. Timing is critical, and Canada must define a national approach on what role we want to play in these industries. Other nations are actively pursuing their niches and looking to capture the high-value parts of the emerging supply chains. The fundamentals of our economy will need to be aligned with the competitive advantage we choose vis-à-vis other countries.

Market realities will have a significant role to play in determining the ultimate structure of these supply chains. But the policy decisions that Canadian governments at all levels make will influence our role within these emerging supply chains. Examples of these policy decisions include:

  • investments to grow, attract and retain businesses in the new industries,
  • regulatory environment to enable the growth of these businesses in Canada,
  • the ability for these businesses to access intangible resources (e.g. talent, intellectual property)
  • trade relationships with other countries and jurisdictions to enable businesses to scale and gain global market shares, and
  • enhancing the internal capabilities of our businesses to innovate and remain competitive.

Canada cannot, and should not, attempt to capture a leading role in all of these emerging supply chains. We are a middle power with a limited but important role to play in world affairs. As such, we should develop a list of criteria that we would use to determine which industries and what supply chain roles are a “good fit” for us. This is analogous to our strategically important role in industries that gained prominence in the last century, e.g. oil and gas and automotive manufacturing. The following are key considerations for making these strategic choices.

National security

As these new industries are bound to integrate within our existing and upcoming economic sectors, our role in the supply chains can have a significant impact on Canada’s national security. For example, if a foreign nation can withhold critical supplies of raw material or infect digital assets with malicious elements, it will negatively impact our critical infrastructure (e.g. banking, telecommunications), social infrastructure (e.g. hospitals, schools) and democratic values in general.

Economic opportunity

The new emerging supply and value chains will determine which parts of the world will perform the higher value-added work, i.e. create and sustain high-paying jobs, and gain a competitive edge over others in the evolution of these new industries. We should seek to build an “early mover” advantage and try to capture higher value-added parts of the emerging supply and value chains.

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Strategic alliances

Canada has successfully curated strategic alliances throughout our history. These alliances have also been traditionally associated with our trading partners. As we look to establish a competitive advantage for the new industries, we must leverage our existing alliances to ensure that emerging supply chains are shielded from potential future geopolitical uncertainties. This will mean establishing dedicated and robust governance and planning mechanisms with our alliance partners around these supply chains.

Canada has established an early advantage with respect to new industries that will power the next round of global economic growth. We must, however, strategically choose our role in emerging supply chains that will support the growth of these industries. While market-based forces will play the dominant role in developing these supply chains, governments’ policy decisions will influence the ultimate structure of the emerging supply chains. We must adopt a national approach and identify key markers to help us gain a global competitive advantage in these industries.

Harry Sharma

Harry Sharma

Director, Innovation and Technology

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