Manufacturing - of Course Australia can be Competitive
Manufacturing in Australia – alive and well, but challenged daily
Manufacturing has always made an important contribution to Australian economic development and, despite the modern day challenges, Australia retains a highly competitive manufacturing sector.
But our manufacturers face a wide range of challenges including manufacturing effectiveness, dynamic markets including global competition, dealing with technological change and actually getting to the right markets and being competitive.
Getting the basics right
Manufacturing has evolved significantly throughout its history and yet the basic principles remain the same. If you can physically manufacture 100 widgets that’s your capacity, if your production output is 90 widgets that’s your throughput, and if we get 85 widgets at the end of that production run that’s your yield – that’s what you can sell to make your business some money!
nem deals with manufacturers of all shapes and seizes right across Australia; and almost without exception there is room for improvement in the very basics of the business and by increasing throughput and yield we see a direct improvement on an organisations financial returns; and yet, owners and management involved in the challenges of day to day manufacturing operations, often fail to see what is in front of them and what needs to change. And very often when they do, there is a failure to implement the necessary change and crucially, to make change stick.
Getting the basics right is essential if other challenges are to be addressed successfully and critical to getting the basics right are management attention to the manufacturing systems, processes and measurement. After all, what you can measure you can manage is still an adage that’s true today as it always was.
Dealing with dynamic markets
Australia is home to one of the most volatile manufacturing sectors in the world with data from the Advanced Manufacturing Growth Centre (AMGC) stating the average Australian manufacturing industry swells 20% above its trend size in upcycles and 20% below its trend size during downturns.
Any organisation that has been through the recent mining boom will recognise the level of these swings; but this volatility is more than double what manufacturers in France, United States and Germany experience.
To deal with these swings AMGC suggest manufacturers develop Superiority with an unassailable competitive advantage and offering products or services for which there are minimal substitutes during downturns. Having Diversity across various product segments, service offerings and/or markets being targeted. And finally, having Flexibility and being able to manage costs flexibly or swiftly shift your business focus to industries with solid demand during any downturn.
Dealing with dynamic markets requires a sound strategic plan and a thorough understanding of your business, your competition and your markets; and any plan must cover the management of key business risks, particularly market and competitor risks, and crucially the strategy must translate on to the shop-floor and not sit gathering dust in the Boardroom.
Managing with technological change
Technological change is relentless, we can only choose to accept the risks and opportunities it presents – or ignore them. Statistically manufacturing organisations that leverage advanced manufacturing techniques and technologies tend to be more resilient in the face of large market swings.
The emergence of advanced CNC machinery, laser cutting tools, and adaptive manufacturing techniques present both threat and opportunity. Organisations with a solid Strategic Plan and Management attention to these threats/opportunities are better positioned to deal with threats as they emerge and benefit from opportunities that occur.
Australia has a strong R&D culture with good industry links between CSIRO and University programs creating potential for manufacturers to leverage technological change and to advance their product development and manufacturing techniques. The Federal Government encourages this through the provision of R&D Tax Incentives and the excellent ‘Accelerating Commercialisation’ program, both designed to encourage innovation.
Dealing with technological change has to be a core competency of manufacturing organisations, and not just on the shop floor but in the supply chain as well; without this ability, any business risks going backwards – even if you stand still, the market will eventually overtake you!
Getting to the right markets and being competitive
Australian manufacturers face the challenges of dealing with both their local market and a small but geographically dispersed national market. Some also seek the opportunity offered in a global market place with seemingly limitless competition and opportunity.
It’s often hard to know where to start?
The obvious starting point is to identify the business’s Competitive Advantage, what makes you as a manufacturer competitive?
And then consider the most Attractive Markets to you, what are the markets where your competitive advantages come in to play?
Often, we see manufacturers competing in the “wrong” market segments where they have no advantage and end up competing, you’ve guessed it, on price. And price reductions tend to be contagious, it’s not long before lower prices creep in to your core markets where you do hold a competitive advantage.
nem call this cama™ and, the unique combination of competition and markets. Getting this right is critical in effectively engage with the right customers.
Information gathered is from publicly available sources; nem often recommend our manufacturing clients start by utilising the Federal Governments ‘Entrepreneurs Program’ to establish a benchmark of where they are and what opportunities to improve exist – and best of all this program is free.
For more information on the Entrepreneurs Program and how it might help your business email: firstname.lastname@example.org as well as for details on the ‘R&D Tax Incentive’, ‘Accelerating Commercialisation’ and nem’s proprietary cama™ methodology.
Author: Richard Moss, Partner nem Australasia
This article is based on research and opinion available in the public domain.