We got a newsflash for you, Walter Cronkite. It doesn’t.

We get asked this question a lot. By our staff. By policy-makers. By the media. Sometimes even by manufacturers. And it’s not that there aren’t definitions out there. Quite the opposite. There are lots. But in our opinion, these definitions are too often vague, arbitrary, overly inclusive, or overly exclusive. They are certainly inconsistent. Even our organization, which includes ‘advanced manufacturing’ in its name, has been lax in defining a concept closely linked to our raison d’être.  

For example, Innovation, Science and Economic Development (ISED) Canada notes that advanced manufacturing is defined by: ‘the development and adoption of innovative technologies to create new products, enhance processes and establish more efficient and cost-effective ways of working.’ This sounds a bit too much like table stakes. We’ll put it into the vague and overly inclusive category.

Others, like our friends at the CME, (wisely) tell it like it is, and admit that there is no consensus, but that there are some commonly accepted elements. That makes sense. More on this below.

Another example is brought forward by the Brookings Institution (via the Martin Prosperity Institute). That definition includes those industries ‘that conduct large amounts of research and development (R&D) and employ a disproportionate share of science, technology, engineering, and mathematics (STEM) workers.’ This falls into the arbitrary and overly exclusive category. It also completely ignores production-intensive industries that don’t do a lot of R&D. You know, the part of manufacturing where people use new technologies and processes to make stuff.

The Brookings Institution definition also ignores the fact that there is diversity among manufacturers within industries, and some are invariably more ‘advanced’ than others. Maybe the average clothing or cabinet manufacturer is not terribly advanced. However, this is not the case for Toronto’s Myant, whose STEM-intensive workforce knits sensors and electronics into medical-grade (and fashion-forward) clothing. Nor is it the case for Vaughan’s Cutler Forest Products, which uses digital twins as a means to interface with customers and develop export markets for their vanities and cabinets. Do we risk throwing the baby out with the bathwater when we rely on definitions that ultimately exclude entire industries from our conversations about advanced manufacturing?

Others, like our friends at the CME, (wisely) tell it like it is, and admit that there is no consensus, but that there are some commonly accepted elements. That makes sense. More on this below. 

In any event, if we can’t agree on a definition of advanced manufacturing, how will we know what we are looking for and where to look for it? This is especially important if we are seeking to promote and support advanced manufacturing and advanced manufacturers.  

Let’s try asking the question a different way: in which industries are we most likely to find advanced manufacturing? By reframing the question, we can align the data that is available and avoid excluding an advanced manufacturer simply because they belong to an industry that is, on average, less advanced. 

How should we measure this? As mentioned, there is some consensus that advanced manufacturing exhibits some or all of the following characteristics:

  • Advanced manufacturing relies on a technologically proficient workforce, and a relatively high proportion of the advanced manufacturing workforce is employed in STEM-related occupations;
  • Advanced manufacturing is R&D intensive, and advanced manufacturers make higher-than-average investments in R&D;
  • Advanced manufacturing relies on leading-edge production and design technologies and is marked by relatively high rates of productivity;
  • Advanced manufacturing is characterized by higher-than-average levels of capital expenditures, which signal that companies are investing in leading-edge production technologies. 

To help answer this question, we used Statistics Canada data from the past decade (2010-2019) to identify the industries in which we are most likely to find advanced manufacturing. It turns out it was mostly consistent with what we thought going in (i.e. aerospace is advanced), but there were some surprises. 

STEM-Related Occupations
Advanced manufacturing relies on a technologically proficient workforce, including a relatively high proportion of engineers, scientists, technologists, and other occupations that fall into NOC Code 2. Approximately 9 per cent of Canada’s workforce is employed in a STEM-related occupation. The proportion of STEM-related occupations in manufacturing is slightly higher at 9.8 per cent. 

That’s a good start. But it’s inconsistent across manufacturing industries. Some industries have a much higher proportion of STEM-related employees. Aerospace (29 per cent), pharmaceutical and medicine (28 per cent), and electronics (23-40 per cent, depending on the segment) stand out. Oil refining, chemicals, and machinery manufacturing (think automation and tooling, mining and agricultural equipment, and power generation technologies) also employed more persons in STEM-related occupations than the average. Food, beverage, clothing, and textile manufacturers, on the other hand, employed fewer persons in STEM-related occupations than the average. The production-oriented automotive industry was close to the average. 

R&D
According to most definitions, advanced manufacturing is synonymous with investments in R&D. Canadian companies as a whole spend approximately $1,200 in R&D per employee annually. Canadian manufacturers spend more ($3,800). Within manufacturing, electronics ($18,300), pharmaceutical and medicine ($15,800), and aerospace ($14,200) manufacturers led the way. Electrical equipment ($9,400) and machinery ($6,300) manufacturing also exceeded the average. Food, beverage, clothing, textile, and furniture manufacturers invested considerably less (between $197 and $652 per employee annually).

Productivity
When measured by output (GDP) per employee, the average for all Canadian industries was $112,400. The average for all manufacturing industries was slightly higher at $127,900. Within manufacturing, oil and petroleum refineries stood out at $579,600 per employee, a testament to this industry’s extremely capital intensive nature. Other industries that stood out include pharmaceutical and medicine ($205,500), vehicle assembly ($164,300), beverages ($158,300), and primary metals ($156,400).

Productivity Gains
Over the past decade, productivity across all Canadian industries increased by approximately 2 per cent annually. Manufacturing productivity increased by about 4 per cent, double the national average. Within manufacturing, pharmaceutical and medicine (17 per cent), electronics (12 per cent), and food (10 per cent) posted the greatest increases. 

The same productivity gains were not evident in the fast-growing beverage industry and the ever-important automotive and aerospace industries. This, however, is more closely related to structural changes than to the nature of production in these industries. Beverage manufacturing has seen a shift away from large and well-capitalized foreign-owned breweries and distilleries and towards smaller craft-based beer and wine producers. For automotive and aerospace, the issue is related to capacity utilization. In the case of the automotive industry, only one of the five automakers with assembly plants in Canada operated at or near full capacity in 2018 and 2019. 

Capital Expenditures
Over the last decade, capital expenditures across all Canadian industries averaged $15,800 per employee annually. The average for manufacturing was less ($11,400). In some industry segments, however, average annual capital expenditures per employee were significantly more. These industries include primary metal ($45,800), vehicle assembly ($34,400), plastics and rubber ($21,400), and chemicals ($20,700, this figure includes pharmaceutical and medicine manufacturing). 

In order to adopt and implement advanced manufacturing technologies and processes, companies must invest. Significant investments are also necessary to maintain and upgrade large and well-capitalized production facilities such as vehicle assembly plants and steel mills. In our opinion, the relatively low rates of capital expenditures in manufacturing outside of the industries listed in the paragraph above warrants further analysis. 

What does this mean?
There’s a lot to digest in this post. We’ll include even more detail on data and methods in a comprehensive report that we hope to release later this spring. In the interim, I think we can venture a few conclusions:

  1. There is no consensus definition of advanced manufacturing. But it would be helpful to have one, or at least to define some parameters.
  2. Us manufacturing types should pay more attention to what is happening in the pharmaceutical, medicine, and medical device industries. The data shows that pharmaceutical and medicine manufacturing ticks all the advanced manufacturing boxes. A recent Trillium Network report also lauded pharmaceutical manufacturers for their commitment to gender diversity. 
  3. Electronics manufacturing is advanced. Canada still has a relatively large electronics manufacturing industry. It employs over 60,000 people. These electronics find their way into many different industries, including aerospace, automotive, healthcare, automation, and power generation. As such, we tend not to treat electronics as a cohesive industry but rather as an appendage to the aforementioned industries (e.g. automotive power electronics, avionics, medical devices). Is there room for more conversation here? We think so. 
  4. Aerospace is advanced too. One of the great things about Canada’s aerospace industry is that it includes several homegrown companies (e.g. MDA, De Havilland, Bombardier, Magellan) as well as a number of globally competitive companies (e.g. Airbus, Raytheon). But the industry is going through an upheaval, and its future is uncertain. Let’s make sure we pay close attention to this in the next couple of years. 
  5. The machinery manufacturing industry exceeds the manufacturing average in terms of R&D expenditures, STEM intensity, productivity, and productivity gains. Many of these companies, which develop, manufacture, and integrate many of the production technologies associated with Industry 4.0, are also part of Canada’s advanced manufacturing ecosystem. This category includes companies like ATS Automation, Valiant TMS, CenterLine, Laval International, Eclipse Automation, and hundreds more. 
  6. What about the automotive industry? Based on ISED’s definition the automotive industry in Canada is advanced, but based on the metrics employed by the Brookings Institution, it is not. This begs the question: is advanced manufacturing about doing research and employing engineers, or is it about investing in automation and Industry 4.0 and empowering production and trades employees to engage with those technologies on the shop floor? The automotive industry in Canada is not research intensive, nor is it heavily reliant on STEM-related occupations, at least when compared to other affluent automotive-producing jurisdictions. This has much to do with the fact that automotive R&D activities are concentrated near the headquarters of global automotive manufacturers, none of which are Canadian. But does that mean that the highly productive and capital intensive automotive manufacturing industry in Canada is not advanced? According to the Brookings Institution definition, it means exactly that. We disagree and conclude that this is why we need a more comprehensive and data-driven conversation about the definition of advanced manufacturing. 

If we want to support advanced manufacturing, we need a more consistent definition of what advanced manufacturing is. 

Who wants to join this conversation?  

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