Despite a sluggish economic recovery, 85% of Canadian manufacturers are optimistic about the future of their business over the next two years, according to a survey released by KPMG.

The survey finds Canadian manufacturers are more optimistic than last year (nine percentage points) and share a more positive outlook than that of their global counterparts.

“Our survey tells us that Canadian manufacturers are confident in their business strategies, but investing in innovation, increasing efficiencies and managing risk are top-of-mind moving forward,” says Laurent Giguère, national industry leader, industrial markets, KPMG in Canada. “As smaller, niche players operating with a strong dollar, Canadian companies realize they need to innovate in order to compete with lower-cost global producers.”

Canadian manufacturers are striving to increase productivity and manufacture products at the lowest cost to stay competitive. Labour costs continue to be a priority for Canadian companies — half of respondents say reducing labour costs is the cost control method they expect to be most important over the next 12 to 24 months. Coming in at number two is exiting unprofitable product lines and/or geographies (46%).

As the number of Canadian manufacturing companies doing business in emerging markets rises, their investment in risk management strategies should increase as well – however, this is not the case. Canadian respondents plan to spend relatively less on risk management than their global counterparts in 2012. Currently, only five per cent of Canadian respondents use scenario/simulation planning to address aspects of risk management and 17% of Canadian respondents “don’t know” how they’re going to identify risk in their supply chains over the next 12 to 24 months.

KPMG’s Canadian Manufacturing Outlook 2012 surveyed 150 participants from across Canada. The majority, 70%, of respondents were C-level executives and 79% are responsible or significantly involved in developing their company’s sourcing/manufacturing strategy. Companies with annual revenues of less than $100 million make up 62% of the respondent base and four per cent are companies with revenues exceeding $1 billion.