Volume 1: Beyond the Horizon: Canada's Interests and Future in Aerospace – November 2012

Part 3
Analysis and recommendations (continued)

Chapter 3.5
Small businesses in Canada's aerospace sector

Small suppliers are part of a healthy aerospace "ecosystem." Besides providing components to companies in higher tiers, small firms help drive industry growth, as they are less likely than larger players to offshore their operations, more likely to buy their own supplies from Canadian companies, and motivated to expand.

Trends in the global aerospace industry, however, mean that smaller firms are facing unprecedented challenges. To reduce the risks associated with supply chain complexity, OEMs and tier 1 integrators increasingly prefer to deal with a smaller, more manageable number of proven suppliers. In addition, since OEMs are no longer willing to bear the main burden of developing new products, small suppliers are required to undertake more and more research and design activity.

In the face of these challenges, many small suppliers feel that they have only two options:

  • Get bigger and win more business in higher tiers.
  • Develop a niche offering that offers a unique competitive advantage.

As stated in the Final Report of the Small Business Working Group, "[Small businesses] want to excel as suppliers and contribute value-added products and services to the primes, systems integrators, and government departments while providing high-quality jobs for Canadians across the country. They seek opportunities to prove their innovative products and services to end customers, and to design to build, rather than to build to print, to be competitive and attractive to their customers."

It is expected that seven recommendations will directly facilitate the pursuit of these strategies:

  • Recommendation 3 on the creation of a new large-scale technology demonstration program.
  • Recommendation 5 on a national initiative to enhance collaborative research.
  • Recommendation 6 on the simplification of application and reporting procedures for government programs, and the use of a "one-stop" internet portal to provide information on, and links to, those programs.
  • Recommendation 12 on supplier development initiatives.
  • Recommendation 13 on industrial and technological benefits plans in the context of aerospace procurement.
  • Recommendation 15 on the promotion of aerospace and space-related studies and workplace experience.
  • Recommendation 16 on support for up-skilling.

Access to financing is another issue often raised by smaller firms, both in and outside the aerospace sector. Where they have difficulty obtaining commercial loans, smaller businesses may turn to a number of federal organizations and programs—such as the Business Development Bank of Canada, Export Development Canada, and the Canada Small Business Financing Program—and to provincial government support programs.