Thursday, August 11 2022

The risks associated with a globally integrated supply chain were addressed during the pandemic, as health crises forced governments around the world to prioritize national concerns. For many countries, including Canada, a new national direction for governments and manufacturers has emerged in response1.

For manufacturers, the increased prioritization of national capacity comes at a time when the industry in Canada, largely made up of small and medium-sized enterprises, was already focusing on advancing advanced manufacturing practices, digitization and chain mandates. smart procurement. According to a recent report from REMAP, a government-backed fine manufacturing association, “[t]he global competitive landscape that was responsive to digital manufacturing SMEs before the global pandemic has only intensified the need for Canadian SMEs to invest in the adoption of transformational technologies.2.

Areas to watch

Areas of growth include vaccine production, PPE, 3D printing, robotics, manufacturing transformation (increased automation) and rapid prototyping. 3D printing in particular is well past its early days, creating equipment for the oil and gas industry, medical implants, and a host of other life science applications.3. As companies improve their technologies, systems and processes, they also impact the workforce as new skills and training are required.4.

To help drive innovation in the sector, the federal government’s Advanced Manufacturing Supercluster (NGen) is building and promoting the adoption of next-generation manufacturing capabilities, such as advanced robotics and printing. 3d5. The Supercluster seeks to position Canadian businesses to pursue industrial digitization, maximizing competitiveness and participation in global markets. NGen ended 2020 after approving 23 industry-led collaborative innovation projects valued at $ 76.8 million. NGen’s projects will mobilize 61 industry partners, including 53 SMEs, as well as 15 colleges, universities and innovation centers across Canada.

New sourcing strategies

Many long-standing assumptions underlying public procurement were challenged during the crisis: the strong presumption in favor of competitive public procurement and against sole-source contracts; the presumption in favor of notice and cost transparency; and the intrinsic assumption that the leverage would in most cases be with government buyers and not with suppliers. Going forward, achieving the broader strategic goals of future government procurement will require careful planning within the context of Canada’s international trade commitments to ensure a thoughtful approach to sourcing within a supply chain context. world that evolves in response to rapid change and systemic disruption.

Doing Business and Investing

M&A practices in the manufacturing sector should be informed by new technologies and innovations, which negotiators will want to audit and align in their search for opportunities. As supply chains reorganize around innovations, and alongside an evolving approach to public procurement, contract management and regulation of competition and foreign investment will be areas of consideration for transactional risks.

Technical due diligence

Start the technical due diligence process at the start of a transaction and enlist the help of your integration team to plan the integration well in advance of signing6. Ask for their opinion on the cost and timing, which could greatly affect the overall economics of the deal. Study target IT, not just as a supporting asset, but as part of the business value proposition. Has the target developed systems and processes that enhance the value of the business, or has the target simply used standard technologies in a way that matches their business needs?

Supply

Have an IT procurement strategy that anticipates mergers and acquisitions scenarios. Make sure your IT service providers are obligated to assist with technical due diligence and that there is a mechanism in your service contracts to support target operations.

Data governance

The “data readiness” of a manufacturing company is an influencing factor in the application of any technological solution, especially when it comes to technologies such as machine learning where the importance of having properly structured data. that a computer can understand is essential for the success of the tool “7.

Employment and upscaling

To keep pace with the integration of technology, it is estimated that 50% of workers in the manufacturing sector will need to acquire new skills. It will be important to synthesize and understand a careful assessment of the skills and training of a target’s employees as well as your data and technology diligence for assessment and future operations and strategies.

Limit the risk

Contractual risk

We are seeing renewed interest in business continuity / disaster recovery (BC / DR) arrangements following the pandemic. As with force majeure clauses, the importance of prompt communication on incidents and business disruptions was highlighted. Suppliers who have had to communicate their activities to multiple customers are likely to see some benefit in implementing more standardized processes as part of their contractual arrangements.

Review of competition and foreign investment

Partly in light of the public money invested in procurement, procurement laws, transparency of the procurement process and procurement contracts are now viewed from a new perspective. Tensions between Canada’s trade and international obligations and rights to “interfere” in domestic laws to protect Canadian citizens have arisen, with stakeholders constantly seeking help on legal issues in a context of conflict. domain which is now very busy.

Footnotes

1. Rewiring the Supply Chain: How the Pandemic Shapes Public Procurement. Torys Quarterly: Rethinking Cross-Border Business, Available here.
2. Smart manufacturing for a connected world. Refined manufacturing association process, available here.
3. Digital transformation in manufacturing. The Globe and Mail, available here.
4. Five reasons for optimism from Canada’s resilient tech sector. The Toronto Star, available here.

5. Innovation in Canada. Internal research report. June 2021.

6. Technical Issues Related to Mergers and Acquisitions Will Keep Traders in the Cloud, Torys M&A Trends, Available here.
7. Digital transformation in manufacturing. The Globe and Mail, available here.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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