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Momentum: BDO’s Manufacturing and Distribution Leadership Report

2025 edition.

Leading with insights

Challenges tend to arise from the unknown or unprecedented, with the current tariff pressures being a prime example.
Disruptive challenges are often catalysts for transformation and growth—and Canada’s manufacturing and distribution industry
has historically demonstrated its resiliency by focusing on opportunities to drive progress in the face of disruption.

The results of our manufacturing and distribution leadership survey reflect this notion, underscoring the industry’s focus on the key areas where significant opportunities exist to transform, grow, and optimize.

This diverse and essential industry—which includes major sectors in Canada such as aerospace, automotive, and food and beverage processing—is finding ways to thrive as it evolves to overcome challenges and seize opportunities.

Amid complexities such as supply chain constraints, skilled labour shortages, evolving trade policies, and economic and geopolitical uncertainties, the manufacturing and distribution industry continues to demonstrate adaptability.

As a cornerstone of Canada’s economy, around 90,000 manufacturing companies contribute over 10% to the nation’s total GDP.  More so, manufacturers play a key role in trade, generating $354 billion in exports annually and representing 68% of all Canadian merchandise exports, according to Innovation, Science, and Economic Development (ISED) Canada.

At its core, the industry is more than the sum of its parts. Advanced technologies and the principles of Industry 4.0 are accelerating its transformation, empowering leaders to streamline operations, enhance efficiency, and maintain a competitive edge in an ever-shifting domestic and global marketplace.

Especially during challenging times, it is important for manufacturers and distributors to focus on what they can control and prioritize digital transformation, supply chain optimization, and productivity improvement. Resilience in the face of uncertainty is built by doubling down on these fundamentals. Through the application of lean operating principles and the adoption of innovative practices, industry leaders can sustain progress even amid external challenges.

To take the pulse of this vibrant industry, we conducted an extensive survey to gain insights directly from Canadian manufacturing and distribution leaders. A total of 126 industry leaders across Canada, from CEOs and VPs to owners and senior executives, shared their perspectives in late 2024 and shed light on the priorities, opportunities, and challenges shaping the years ahead. Whether advancing digital transformation, navigating talent shortages and inflation, or pursuing sustainable growth, their collective insights can help guide businesses through today’s complexities while building a foundation for future success.

Growth, innovation, and talent emerged as prominent themes from the voices of the surveyed industry leaders. These findings reflect not only the energy driving the sector but also the ambition fueling its progress. We invite you to explore the report, harness these insights, and join the leaders shaping the future with bold strategies, innovative ideas, and a relentless drive for excellence.

Among the Canadian industry leaders surveyed, the general sentiment is one of facing challenges with innovation.
The survey demonstrates that the sector continues to aim for growth and improvement with an eye on the long term, despite the challenging economic environment.

An icon of a dollar sign in a circle connected by lines to other circles.
Investment considerations for products and innovation
81% were considering launching new products or services, whereas 80% considered investing in new equipment or infrastructure in the next 24 months. When asked about funding strategies, 58% were considering external investment to support growth.
An icon depicting a lightbulb constructed from puzzle pieces.
Most agree that Canada needs to address its productivity problem
75% acknowledged that we are having productivity issues. Common strategies to address this include consulting external experts, investing in equipment and training, and boosting employee engagement and satisfaction.
A machine with connected parts representing an AI icon.
A positive outlook on AI and the future of their business
Regarding digital priorities, 37% selected improving cybersecurity as their top priority. Currently, 48% use AI in their business, with the expectation that AI will boost efficiency, planning, decision making, and profitability.
An icon with two interconnected circles, one featuring a dollar sign and the other a percentage sign, forming a cycle.
Government incentives are positively impacting investment decisions
46% have applied for government grants or tax incentives specifically aimed at investment in technology, equipment, or machinery, and 44% were considering increasing clean tech investments because of new grants.
Horizontal arrow icon pointing to upper right.
Majority has observed a positive ROI in digital transformation
66% of respondents rated the return on investment (ROI) of their digital transformation initiatives at seven or higher out of ten.

Planning for the future is no simple task, especially in an industry shaped by evolving dynamics and change. Yet, for the surveyed industry leaders, a clear vision of their top priorities for the next two years was apparent: market expansion, product innovation, and fostering customer loyalty.

These goals seem to be driven by a strategic focus on growth. Leaders are keen to diversify by entering new markets and reaching untapped customer bases, creating opportunities to boost volume and strengthen brand recognition. Simultaneously, they are committed to scaling their operations, increasing margins, and staying ahead of industry trends to maintain a competitive edge.

Efficiency and cost management continue to be key priorities as well, as businesses seek to optimize operations while delivering value. Equally important is cultivating customer loyalty through exceptional experiences, ensuring repeat business and long-term relationships. A notable shift is the growing emphasis on environmental sustainability, with many leaders integrating sustainable practices into their strategies to align with evolving consumer expectations and regulatory standards. (See figure 1).

Two female coworkers, one holding a tablet, talking in a warehouse.

Business priorities for the next 24 months



Business priorities for the next 24 months
Business priorities Top priority Second priority Third priority
Expansion 17.5% 13% 15%
Products and innovation 16% 19% 14%
Customer loyalty 14% 14% 14%
Technology and analytics 12% 15% 8%
Productivity 10% 11% 11%
Supply chain and value chain 8% 8% 11%
Human resources 5% 10% 13%
Sustainability 4% 8% 10%
Other 13.5% 2% 4%
"A constant drive towards greater efficiency is absolutely critical in the manufacturing and distribution industry, given the traditionally tighter margins compared to other industries. The more a company is able to streamline its operations, the greater its potential for profitability."
Jesus Ballesteros, Partner and National Manufacturing and Distribution Advisory Leader

Future strategies

Following a question on future strategies, the survey findings revealed a strong emphasis on innovation and investment as key priorities for industry leaders over the next 24 months. A striking 81% of respondents said they were considering introducing new products or services, while 80% were considering investing in new equipment or infrastructure during this period.

Focusing on launching innovative offerings and modernizing their operations enables businesses to position themselves to meet shifting customer expectations and capitalize on emerging trends. These strategies are pivotal as they not only foster growth and competitiveness but also ensure that businesses remain at the forefront of market trends. (See figure 2).

Two professionals walk side by side and talk in a factory setting.

Prioritized strategies



Prioritized strategies
Strategy Percentage of respondents' business strategies for the next 24 months
Launching new products or services 81%
Investing in new equipment or infrastructure 80%
Improving supply chain management 78%
Increasing workforce (hiring and training) 75%
Expanding into new markets 74%
Improving cybersecurity measures 71%
Investing in digital transformation or new software 66%
Investing in AI development 65%
Implementing sustainability initiatives 60%
Increasing research and development activities 57%
None of the above 1%

When asked about their future strategies, 58% of respondents considered seeking external investment to fuel growth, signalling a clear shift in funding and investment strategies. In the face of economic stagnation, acquisitions appeared to be a favoured strategy for expansion. When leveraging external capital, businesses were aiming to accelerate growth through initiatives such as entering new markets, enhancing capacity, or broadening their customer base.

Interestingly though, and despite the demographic wave of baby boomer retirements and the anticipated wealth transfer, it seems that fewer leaders than expected were exploring options like selling their businesses or transferring ownership to family. This unexpected trend suggests a re-evaluation of traditional succession planning in favour of alternative growth and ownership models. (See figure 3).

"As companies find it more and more challenging to grow organically, acquisitions are becoming a key growth strategy for business owners looking to expand their reach, increase capacity, or tap into new markets. Business owners are increasingly looking to partner with private equity funds to help execute their strategies, as they have the financial resources and expertise to support these companies."
Sunil Sharma, National Leader, Transaction Services and Private Equity

Ownership and investment actions



Ownership and investment actions
Investment action Will consider Will not consider Don't know/No Answer Provided
Seeking external investment to support growth 58% 39% 3%
Merging with or acquiring a company 44% 50% 6%
Selling the company to an external buyer 26% 71% 3%
Transferring ownership to family members 31% 66% 3%
Two professionals talking, standing next to a conveyor belt in a factory setting.
“Despite economic uncertainties, businesses remain focused on strategic growth opportunities. Merger and acquisition activity continues to be shaped by shifting market conditions and interest rate expectations. Companies are navigating this landscape with a long-term view, leveraging acquisitions and strategic partnerships to drive resilience and expansion.”
Michael Morrow, Managing Director, National Leader, M&A and Capital Markets

Additional insights

From managing value expectations to addressing environmental concerns, explore six key factors to consider when planning to sell your manufacturing business.

Learn more

How can we help?

Supporting your expansion and growth goals

BDO provides end-to-end support for growth through M&A, helping you identify strategic targets, conduct thorough due diligence, and secure financing. We also assist with post-transaction integration, covering IT, HR, and legal aspects, to enable a seamless transition.

Contact us

Productivity

Productivity challenges remain a pressing concern for many manufacturing and distribution leaders. In our survey, 75% of industry leaders agreed that Canada is facing a significant productivity problem, with only 22% disagreeing. This sentiment is reinforced by conversations with our clients, where productivity is often cited as a key obstacle to growth and competitiveness.

Skill gaps, talent acquisition challenges, leadership issues, and employee retention are all critical factors affecting productivity. For manufacturers and distributors, these hurdles can create a ripple effect, impacting efficiency, innovation, and the ability to meet market demands. (See figure 4).

Addressing this productivity gap requires a holistic approach, focusing not only on attracting and retaining talent but also on upskilling the workforce and fostering strong leadership. Investing in these areas can help unlock the full potential of a company’s operations.

"Productivity remains a critical challenge in our industry, but what gets measured gets managed. By leveraging key performance indicators, effective management strategies, and data-driven insights we can tackle productivity challenges and drive meaningful improvement."
Bob Repovs, President and CEO, Samco Machinery

To address this pressing issue, companies are adopting a multifaceted approach, including collaboration with external consultants, substantial investments in new equipment and infrastructure, and comprehensive training programs. Additionally, fostering employee engagement and satisfaction remains a cornerstone of these productivity-enhancing strategies.

The Government of Canada recently stated that the country is facing a productivity problem. Do you agree with this statement?



The Government of Canada recently stated that the country is facing a productivity problem. Do you agree with this statement?
Yes No Don't Know
No Answer Provided
75% 22% 3%
“Strategic planning for growth requires a sharp focus on resource allocation to maximize returns. By making thoughtful, targeted investments, businesses can significantly enhance productivity while laying a strong foundation for growth.”
Jesus Ballesteros, Partner and National Manufacturing and Distribution Advisory Leader

In their own words

What specific strategies and initiatives has your company implemented in the past year to enhance productivity, along with the results you have observed from these efforts?

How can we help?

Addressing productivity issues with strategic management consulting

BDO’s suite of Management Consulting services entails Change Management, Digital Advisory, and Strategy, Value Creation & Analytics to drive meaningful and cost-efficient transformation. We help organizations harness the power of strategic clarity, people, technology, and innovation to help them adapt and thrive. By leveraging robust data analytics, we uncover insights to optimize processes, reduce costs, and align strategies with your goals, delivering sustainable and measurable value creation.

Contact us

Smart manufacturing: Are we there yet?

As digital transformation becomes increasingly vital, Canada's manufacturing and distribution industry stands at a critical stage. This industry, which includes diverse companies from large-scale manufacturers to distribution-focused enterprises, is progressively integrating advanced digital systems and automation processes.

Leveraging smart manufacturing is essential not only for modernizing processes but also for enhancing efficiency and profitability. Embracing digital transformation is now a strategic imperative, necessary for maintaining competitiveness in a rapidly evolving marketplace.

We assessed the current status of the industry to understand what steps leaders are taking and their position in their digital transformation journey.

"The rapid evolution of AI and advancement of digital transformation is reshaping manufacturing and distribution. Smart manufacturing, a key driver of Industry 4.0, helps businesses enhance efficiency, improve decision making, and stay competitive, turning disruption into opportunity."
Paul Dostaler, Partner, National Manufacturing and Distribution Industry Leader
A female worker with a tablet revises a conveyor belt machine in a food factory.

Digital priorities

According to the survey, 37% of respondents identified enhancing cybersecurity measures as the top priority, with digitizing supply chain operations being the next most important at 28%. (See figure 5).

It is encouraging to see that cybersecurity is a top digital priority for respondents. Our cybersecurity leadership team at BDO emphasizes that it remains an underfunded area within the manufacturing and distribution industry. Historically, the common belief has been that these sectors are not prime targets for cyber attacks due to the perception that they lack sensitive data or valuable assets worth stealing. Nevertheless, the proliferation of technology, exponential growth in connected devices, and increasingly interconnected supply chains have significantly increased the exposure of the industry to attacks. Vulnerabilities now encompass operational systems, connected devices, and supplier networks, thereby exposing manufacturers and distributors to a broad range of risks.  

From ransomware attacks that halt production and disrupt billing processes to payment fraud schemes and supplier vulnerabilities, the threats are diverse and costly. Moreover, the surge in connected devices and sensors introduces additional risks, as these devices require stringent security measures to prevent tampering and unauthorized access. Despite these risks, many organizations in the industry still lack formalized cybersecurity program management and robust risk practices. As manufacturing and distribution networks become more integrated and interconnected, protecting these systems is no longer optional—it is essential for operational continuity, financial security, and reputational resilience.

Digital priorities



Digital priorities
Priority Least important 1 2 3 4 Most important 5 Don't Know /
No Answer Provided
Enhancing cybersecurity measures 6% 7% 21% 29% 37% 0%
Digitizing supply chain operations 7% 7% 25% 31% 28% 2%
Improving customer experience through digital channels 4% 6% 21% 40% 26% 3%
Migrating to the cloud 9% 12% 27% 29% 21% 2%
Advanced analytics and AI 19% 10% 21% 30% 20% 0%
"To manage cyber-related risks effectively in the current digital landscape, manufacturing and distribution organizations need to adopt a proactive strategy. This includes considering technological advancements, strengthening supply chain defences, enhancing employee awareness, and incorporating cyber resilience into their operations."
Rocco Galletto, Partner, National Cybersecurity Leader
Two male professionals sitting at a table, discussing, in a textile factory setting.

How can we help?

Securing your business

Our Cybersecurity services help manufacturers and distributors safeguard their businesses. We assist in building robust cybersecurity frameworks, assessing risks, and strengthening your defence systems. Our team helps you protect your business by optimizing your people, processes, and technologies and prepares you for potential disruptions through incident response planning.

Contact us

Transformation efforts

Digital transformation continues to accelerate in the manufacturing and distribution landscape, with larger companies leading the way in implementing advanced systems and automating processes. Smaller businesses, while still in the early stages, are also making strides as they recognize the critical role of digital tools in boosting efficiency and addressing the traditionally narrower margins in this industry.

According to our survey, 33% of respondents were actively implementing an existing digital transformation strategy, reflecting the growing commitment to modernization across the sector. However, 11% reported having no plans for digital transformation, often citing limitations such as constrained corporate structures, budgetary pressures, or a perceived lack of necessity. Another proportion of the respondents also reported having fully undergone their digital transformation, and therefore no longer needing it. (See figure 6).

This divide highlights the varying speeds of adoption but also underscores a shared understanding: digital transformation is no longer optional for businesses looking to remain competitive in an increasingly connected and data-driven world.

A top view of five professionals in a printing factory discussing at a meeting table.

Status of digital transformation efforts



Status of digital transformation efforts
Digital transformation status Percentage of current transformation efforts
Implementing an existing digital transformation strategy 33%
Developed a digital transformation strategy, but not yet implementing it 21%
In the process of developing a digital transformation strategy 21%
We want to develop a digital transformation strategy, but we haven't started yet 11%
No plans for digital transformation 11%
Don't Know/No Answer Provided 2%

Additional insights

Learn about the advantages of digital transformation in manufacturing and methods to implement Industry 4.0 practices.

Learn more

ROI expectations

It all eventually leads to the critical question of whether these investments deliver the expected return on investment (ROI) or if they are missing the mark. Among the leaders surveyed, the answer was encouraging: 66% rated the return on investment of their digital transformation initiatives at seven or higher out of ten.

Yet, 31% of respondents indicated a gap between their investments and desired outcomes, highlighting the challenges inherent in implementing transformative technologies. These findings emphasize the importance of aligning digital strategies with clear objectives, robust planning, and measurable benchmarks to ensure these initiatives yield tangible business benefits. (See figure 7).

How would you rate your return on investment (ROI) from your digital transformation efforts?



How would you rate your return on investment (ROI) from your digital transformation efforts
Don’t know/No answer provided 1-6 rating 7-8 rating 9-10 rating
3% 31% 50% 16%

Additional insights

An effective digital strategy requires aligning business objectives with technology investments. Learn how to achieve this alignment.

Learn more

Benefits and cost savings

For respondents actively pursuing digital transformation, we explored where they’ve seen the greatest benefits and cost savings. The results highlight the tangible impact of these efforts as more than 40% reported improvements in at least one area of their business.

The most significant gains were observed in production and operations, cited by 61% of leaders as the primary area of benefit. Close behind, 54% identified supply chain and logistics, showcasing the critical role of digital tools in streamlining workflows, optimizing resources, and enhancing efficiency across these functions. (See figure 8).

These findings demonstrate how targeted digital transformation initiatives can unlock value, reduce costs, and improve performance in the areas that matter most to manufacturers and distributors.

Close-up view of a professional holding a tablet with a warehouse management system screen in a warehouse.

Observed benefits and cost savings



Observed benefits and cost savings
Observed benefit Areas where benefits/cost savings were identified
Production and operations 61%
Supply chain and logistics 54%
Customer service and support 53%
Administration and overhead 53%
Marketing and sales 41%
None 1%
A close-up view of a modern high-tech robot holding a microchip.

Challenges and barriers

While the benefits of digital transformation seem intriguing, we wanted to understand the other side and reveal the challenges that businesses must overcome to unlock their full potential. For respondents actively planning digital transformation, high costs stood out as the most significant barrier, cited by 31% of leaders.

Other hurdles included resistance to change, observed by 19%, a lack of skilled personnel at 18%, and data security concerns, reported by 15%. Such challenges require careful navigation to ensure progress isn’t stalled. (See figure 9).

The flip side of innovation isn’t necessarily a roadblock but a call for deliberate action. Overcoming these challenges demands strategic investment, effective change management, and a skilled workforce—the critical components needed to bridge the gap between aspiration and achievement in digital transformation.

Top digital transformation challenges



Top digital transformation challenges
Challenge Identified digital transformation barriers and challenges
High costs 31%
Resistance to change 19%
Lack of skilled personnel 18%
Data security concerns 15%
Inadequate technology infrastructure 8%
Regulatory compliance 4%
Other 3%
Don’t Know/No Answer Provided 2%

Artificial intelligence (AI)

AI is steadily making its way into the manufacturing and distribution industry, but adoption remains cautious. While some businesses are exploring AI's capabilities to streamline operations and enhance decision making, many have yet to harness its full potential. Challenges such as implementation costs, lack of expertise, and uncertainty about ROI continue to create hesitance, leaving significant opportunities untapped.

Our survey results paint a promising picture: 48% of respondents were already leveraging AI applications within their business operations, while 51% have yet to adopt this transformative technology. AI’s potential aligns closely with the principles of Industry 4.0 and the push toward smart manufacturing, where interconnected systems and real-time data drive smarter, faster decisions. (See figure 10).

Respondents anticipated that AI would play a key role in optimizing efficiency, enhancing planning and decision making through advanced analytics, and ultimately boosting profitability.

"Manufacturing and distribution businesses need to proactively integrate AI into their strategic planning, particularly as evolving economic conditions push businesses to optimize operations. From streamlining regulatory compliance to driving productivity and efficiency, AI presents immense opportunities—but only for those willing to invest wisely and seek expert guidance in navigating this transformation."
 Paul Dostaler, Partner, National Manufacturing and Distribution Industry Leader

Are you currently using AI applications, such as robotic process automation (RPA), generative AI, or machine learning (ML) in your business?



Are you currently using AI applications, such as robotic process automation (RPA), generative AI, or machine learning (ML) in your business?
Yes No Don't Know /
No Answer Provided
48% 51% 1%

In their own words

Over the next five years, how will AI impact your business? What are the biggest opportunities for AI in manufacturing?

Additional insights

Discover how big data and AI technologies, including GenAI and RPA, improve decision making and increase resilience in the manufacturing sector.

Learn more

Unsure about AI's impact on your manufacturing business? We debunk four common myths about using data and AI in manufacturing.

Learn more

How can we help?

Accelerating your digital transformation efforts

BDO Digital can assist you with digital transformation by defining strategies and implementing solutions that facilitate technology adoption and integration. Our hands-on approach ensures close collaboration to identify challenges, set objectives, and create a clear roadmap for integrating data analytics and AI solutions. We support you throughout the implementation process, ensuring that every step aligns with your business goals, enhances operational workflows, and delivers measurable results.

Contact us

Navigating regulatory and compliance requirements is a vigorous balancing act, particularly for manufacturers and distributors. As trade policies tighten, environmental standards evolve, and data privacy regulations expand, these requirements are no longer just rules to follow—they are catalysts for innovation and strategic decision making. Achieving effective compliance in this environment involves integrating it into operational processes, which can help businesses build trust, improve efficiency, and identify opportunities for sustainable growth.

Regulatory challenges

Among the most pressing regulatory challenges, health and safety standards topped the list, cited by 56% of respondents as having the greatest impact on their operations. Following closely, data protection and privacy regulations were identified by 52%, indicating the growing importance of safeguarding sensitive information in a digital-first world.

Environmental regulations and employment and labour laws, each cited by 44% of respondents, were also among the top challenges. This reflects a commitment to sustainability and responsible workforce practices, likely linked to the Canadian Fighting Against Forced Labour and Child Labour in Supply Chains Act, which demands ethical compliance in supply chains. (See figure 11).

These priorities reveal the diverse pressures shaping the regulatory landscape and the need for businesses to remain agile in addressing both immediate compliance demands and broader strategic goals.

Two businessmen are conversing while holding coffee cups in a factory.

Top regulatory challenges



Top regulatory challenges
Regulatory challenges Percentage of challenges affecting businesses
Health and safety 56%
Data protection and privacy 52%
Environmental 44%
Employment and labour laws 44%
Product safety standards 42%
Trade policies and tariffs 42%
Modern slavery legislation 6%
Other 5%
Don't Know/No Answer Provided 3%
Three professionals, one female and two males, standing and conversing

While our survey was conducted at the beginning of the fall of 2024, prior to the U.S. election in November and the potential tariffs conversations, trade policies and tariffs were already a notable concern, cited by 42% of respondents. The evolving nature of trade regulations highlights the fluidity of the regulatory environment and the need for businesses to continuously adapt to stay ahead of emerging risks.

"In our conversations with manufacturing and distribution business leaders, one question we posed to drive these discussions: What is your plan for navigating the looming tariffs mandate? Many voiced concerns about the implications for their specific production lines, the operational adjustments required, and the potential impact on their bottom line. The consensus is clear—staying informed on evolving trade rules and responding with strategic, proactive planning isn’t just important; it’s essential."
 Charmaine Goddeeris, Director, Indirect Tax

Additional insights

Discover how Canadian businesses can prepare for the implications of the proposed 2025 tariffs.

Learn more

Compliance challenges

Compliance introduces an additional layer of complexity and resource demands for companies across the industry. Manufacturers and distributors are under continuous pressure to comply with rigorous requirements while maintaining operational efficiency and profitability.

Among the most pressing concerns, 28% of respondents identified high compliance costs as the top challenge, reflecting the significant financial burden of adhering to ever-expanding regulations. Limited resources, cited by 19%, further amplify the strain, as many organizations lack the labour force or expertise to manage it effectively. On another note, 15% highlighted difficulties in integrating compliance frameworks with existing systems, a challenge compounded by legacy technology that cannot easily adapt to modern requirements. An equal proportion, 15%, pointed to the sheer complexity of regulations, which can vary significantly across jurisdictions and often require specialized knowledge to interpret and implement. (See figure 12).

Three professionals, one female and two males, standing and conversing in an automotive factory setting.

Top compliance challenges



Top compliance challenges
Compliance challenges Percentage of challenges impacting businesses
High compliance costs 28%
Limited resources 19%
Integrating with existing systems 15%
Complexity of regulations 15%
Keeping up with regulatory changes 13%
Lack of internal expertise 5%
Other 2%
Don’t Know/No Answer Provided 3%

How can we help?

Navigating evolving customs and trade updates

BDO’s Customs & International Trade team offers solutions for cross-border trade issues. Careful planning can reduce costs through duty recovery or minimization. We support you with a strong customs compliance plan to help improve importer profiles and lower the risk of penalties and delays.

Contact us

Investment strategies in Canada’s manufacturing and distribution industry reveal a cautious yet growing engagement with government grants and tax incentives. While these programs offer significant financial support for innovation, clean technology, and infrastructure upgrades, their adoption remains uneven.

Many businesses recognize the potential benefits, but barriers such as complex application processes, resource limitations, and a lack of awareness often deter participation. As a result, while a notable portion of companies actively pursue these opportunities, others remain hesitant, potentially leaving critical funding on the table.

Investment ability 

Economic conditions continue to shape investment strategies across the manufacturing and distribution industry. While 15% of respondents reported that recent shifts have significantly constrained their ability to invest, the majority—36%—have experienced a more moderate impact. Notably, 13% of businesses indicated that their investment capabilities remained unaffected, reflecting the varied ways in which economic pressures influence operations depending on organizational size, structure, and market positioning. (See figure 13).

Impact of economic conditions on investments



Impact of economic conditions on investments
Not at all Slightly Moderately Significantly
13% 36% 36% 15%

Future investment plans

When it came to future investment priorities, leaders identified multiple key areas for significant investment. Digital technology upgrades were the most selected option, with 57% of respondents planning to invest in this area over the next 12-24 months. Close behind, 52% of participants also identified investments in facilities and equipment, reflecting the ongoing need to modernize infrastructure and optimize operational efficiency. These areas of focus indicate a strategic push to align with the demands of an increasingly digital, smart manufacturing and distribution environment. (See figure 14).

Two professionals discussing while looking at a tablet in a factory and machinery setting.

Future investment areas



Future investment areas
Investment areas Percentage of identified investment focus areas
Digital technology upgrades 57%
Facilities and equipment 52%
Expanding production capacity in current footprint 44%
Marketing and sales 40%
Research and development 39%
Sustainability projects 21%
Other 5%

Investment grant applications

Canada's non-dilutive funding landscape can be challenging for businesses, due to its combination of federal and provincial programs offering grants, tax credits, and concessional loans.

Manufacturers, in particular, face challenges with grant programs due to strict eligibility criteria, such as revenue thresholds, business age, and innovation requirements. Additionally, some manufacturers may not view themselves as innovators, which can influence their decision to apply for these programs.

In reality, manufacturers are innovating daily through new product development, process improvements, and advanced equipment design—innovations that often qualify for funding. While grants can be restrictive, tax credits like the SR&ED program provide more certainty and clarity. Unlike grants with set deadlines, tax credits are legislated and available to all taxable Canadian corporations, offering businesses a more predictable path for investment planning.

This is reflected in our survey results. While 46% of respondents have applied for government investment grants or tax incentives specifically aimed at investment in technology, equipment, or machinery, another equal proportion have not (46%). This division is likely a result of the challenges businesses encounter when navigating these funding options, but it also indicates potential for broader participation with increased awareness and more accessible pathways for supporting sustainable technology investments. (See figure 15).

Has your company ever applied for government grants or tax incentives to invest in technology, equipment, or machinery?



Has your company ever applied for government grants or tax incentives to invest in technology, equipment, or machinery?
Yes No Don’t know/No answer provided
46% 46% 8%

New grant impact

The recent government grants for clean tech investments have sparked renewed interest among many manufacturers and distributors, with over 40% of respondents indicating that these incentives have influenced their investment strategies. Specifically, 25% were considering increasing their investments in clean tech, while 19% have already made the leap, reflecting a growing confidence in the opportunities these grants present.

However, the impact has not been collective. Another 44% of respondents reported that the announcement of these programs had no effect on their investment decisions, highlighting a degree of hesitation or uncertainty within certain segments of the industry. This divide emphasizes the importance of continued education and outreach to help businesses recognize the long-term value of clean-tech investments, especially as legislative changes continue to shape the funding landscape. (See figure 16).

With many manufacturers already innovating through product development and process improvements, these grants offer an opportunity to further accelerate sustainability efforts without the burden of dilutive funding.

"It is promising to see nearly half of the respondents swiftly adopting clean tech investments after the recent legislative changes. Although the other half hasn't yet shifted—likely due to the brief time since the credits' introduction—early adoption is crucial within the decade-long incentive window. Continued education and awareness should encourage more companies to seize these sustainable growth opportunities."
Martha Breithaupt, Partner, Tax, Credits & Incentives

Has the announcement of new government grants for clean tech investments impacted your investment plans?



Has the announcement of new government grants for clean tech investments impacted your investment plans?
Yes, we have increased our investments in clean technology. Yes, we are considering increasing our investments in clean technology. No, it has not impacted our investment plans. Not sure yet.
19% 25% 44% 12%

How can we help?

Maximizing government grants and incentives

BDO helps you navigate the complex landscape of government grants and tax credits, ensuring your clean tech and sustainable investments are supported. We guide you through the application process, maximizing available financial opportunities to fuel growth.

Contact us

The pillars of progress

The future of manufacturing and distribution hinges on innovation, sustainability, and labour concerns. As the industry faces these challenges head-on, it’s not simply about overcoming obstacles—it’s about seizing opportunities that will drive future success.

Ultimately, leading the future of manufacturing and distribution will require a bold, strategic vision. Innovating purposefully, embedding sustainability at the core of operations, and investing in talent development are the keys for today’s leaders to shape a resilient, future-proof industry. The road ahead may be complex, but for those who lead with foresight and agility, the opportunities to drive growth, improve efficiency, and enhance competitiveness are limitless.

A female engineer holding a laptop and kneeling while installing a charging station.

We deduced the key themes around challenges and opportunities lying ahead for the industry:

Smart manufacturing and innovation are at the heart of this transformation. From AI to automation, new technologies promise to enhance operational efficiency and unlock new business models. However, it seems that some leaders are unsure of how to effectively integrate these innovations into their organizations. The fear of lagging behind in a rapidly evolving landscape is real, but the future will belong to those who act decisively and foster a culture that embraces change.

Sustainability, once a peripheral concern, is now firmly embedded in the strategic agenda. Manufacturing and distribution leaders are challenged with reducing carbon footprints while maintaining cost-efficiency in a highly competitive environment. The push for cleaner, greener operations is not just a regulatory necessity—it’s a market expectation. Yet, balancing environmental goals with the pressures of global competition, supply chain disruptions, and rising input costs demands strategic decisions.

Labour issues, particularly talent shortages and generational divides, add another layer of complexity. The skills gap threatens to stifle growth, while concerns about automation replacing jobs further complicate the landscape. But within this challenge lies an opportunity to rethink workforce development, embracing both upskilling initiatives and cross-generational collaboration to build a future-ready workforce.

Turning insights into action

As you plan for the future of your manufacturing and distribution business, we trust these insights will serve as a valuable resource to inform your decision making. If you have questions or would like to explore the survey results further, our industry leaders are ready to engage with you.

We understand the complexities you face, from managing growth and improving operational efficiency to navigating regulatory challenges and driving innovation. Our team can help you find tailored solutions to address these obstacles, as well as uncover new opportunities for expansion, sustainability, and digital transformation.

Three multi-ethnic professionals discussing in an automobile factory.

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