Manufacturing is key to the economic strategies of Canada’s western provinces, and there’s a very good reason for that: it just makes sense, from both an economic and as well as increasingly from an environmental and sustainability perspective. This is why manufacturers are locating in Western Canada, and if you are a technology or solution provider to them, you should too.
First, let’s consider the region’s traditional and historical economic engines: oil & gas, agriculture, lumber, and mining. All of these are considered ‘primary industries’ in that they harvest something off the land or from the ground. These primary resources, up to recently, largely been monetized by being sold to other regions.
Manufacturing is a secondary industry. It takes the primary industry’s output, adds value to it through “manufacturing” – a word which originally meant “making things by hand” but now refers to “making from raw materials by hand or by machinery” – and then sold at a far higher price than the cost of raw material. The most obvious example of the impact the conversion of raw materials into finished goods has on the economy is the automobile. The total cost of raw materials (in 2022) used to make the average car produced in North America was $2,000, while the average price a car produced in North America sold for (in 2022) was $43,000. The value of the raw materials gets multiplied by a factor of 20 through all of the manufacturing processes involved to produce the end product.
Growing the manufacturing sector in the Western provinces allows more value to be added to the raw materials (lumber, grains, oils and minerals) before exporting them for sale to other regions, domestically or internationally. This economic activity creates wealth not just for the provinces, but more importantly, for all the people that live there, even those that don’t work directly in manufacturing. (The ripple effect of manufacturing has been estimated to be “7 times” – for every job created directly by manufacturing, 6 other jobs are created.)
Adding value to raw materials (i.e. manufacturing) close to their point of origin (ie. forestry, agriculture, oil & gas and mining) makes sense environmentally as well. Transporting raw material to plants that are far closer reduces energy (and our carbon footprint) two ways: the distance traveled is greatly reduced, and the finished goods themselves are typically far smaller than all the raw material required to produce the product. Since not all the raw material ends up in the final product (think minerals or lumber for instance), transporting large quantities of raw materials large distances is in effect spending a lot of energy moving not only the material that gets used, but also all the material that doesn’t get used.
In the past, the cost of labour advantage low cost regions had more than offset the cost of transportation, as did the infrastructural and ecosystem advantages the more developed manufacturing regions had. But, times have in fact changed, and for economic and environmental reasons, manufacturers are looking to move their operations west. As proof of that, consider the recent commitments made by DeHavilland and Dow to locate major new manufacturing facilities in Alberta.
Technology and solution providers are certain to be a major part of this rapidly growing ecosystem, so if expansion into Western Canada is in your plans, plan to be seen as one of your industry’s leaders at this year’s SmartMTX!
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