A new deal plan for manufacturing – eight keys to the future by Danny Samson

Professor Danny Samson continues @AuManufacturing’s campaign to crowd source a new deal plan for manufacturing with eight keys to unlocking our manufacturing future. Send your ideas or make a submission to [email protected].

Australia’s manufacturing sector has shrunk significantly over the past 30 years, in terms of share of GDP, and absolute employment numbers.

But we have learned some important lessons that can become inputs to a regrown and healthy sector:

1. Government can work effectively with companies and unions, as it used to, smoothing out problems and providing certainty of policy and support.

I was a member of the Australian Manufacturing Council in the 1980s, in which the Industry Minister (John Button) sincerely brought senior parties together to solve problems and develop positive initiatives. This process gave confidence to investors, and fostered improvement processes of industrial conditions.

We need a manufacturing council or similar body in 2020, that has an ongoing presence and influence.

2. The recent demise of the automotive sector is a good case of what happens when government leaves policy to be a pure market play. We lose.

Other governments are much more proactive in encouraging industry to remain in their countries, yet ours demonstrated gross ignorance of the sustainable value of the automotive sector.

I worked deeply within Toyota observing and advising from 2014 to 2017, which could easily have stayed. Further, subsidies would hardly have been needed (now) when our dollar is US60c, as our relative costs are so much lower than when we were at US dollar parity in 2013.

While we can’t blame our government for not having a crystal ball back then, we could have expected them to take a longer-term strategic view, which is required today!

3. As a modern economy, we are hardly ‘industrial’ these days, and we import many of the goods that we like to consume. This approach is said by some to be fine, and that we can be clever product designers and servicers, with other countries having all the factories.

This is problematic because there isn’t a good reason to have design centres here once the factories are gone: just ask the ex-Holden engineers, who were told in 2018 that the Aussie design centre would stay. Why would GM design work stay here, when designers are best when functioning near the value adding operation: the factory?

4. In rebuilding manufacturing, we should acknowledge key drivers and take an unashamedly opportunistic national approach.

a. Let’s use our existing resources (especially mines and farms) and advantages to leverage and try to capture increased share of the value chains that we are already in.

With our incredible natural resource base, we must start moving down the value chain towards further value creation, and link activities together. For example, as renewable energy gets cheaper, let’s increasingly co-locate solar farms with smelters, rather than just exporting raw ore. Where we have smelters, lets produce components and products.

b. Let’s rebrand Australia, investing in it in sectors such as clean green food, where we should be ‘killing it’ in Asia, and also regrow our wool products sector. We still have over sixty million sheep in Australia, and we don’t even scour most of the wool before it goes overseas.

c. Let’s take stock of our existing successful manufacturing assets, support them and supplement them with ‘adjacent’ operations. An example is the family company in Melbourne that makes and exports technology-intensive nappy lining, in a strategic partnership with Kimberley Clark, that should be leveraged and grown, in other words, lets grow our existing winners. Their technology could spin over into other product sectors. We must do this while we still have plenty of ‘jewels’ left in the manufacturing sector. Build on success.

d. Invest much more in modern technologies, Industry 4.0 in particular, so that we can use advances such as artificial intelligence to improve cost and quality. There are also a huge number of new materials technologies, from pharmaceuticals to devices, carbon fibres, building materials that can be ramped up beyond what the pure market forces achieve.

5. We must finally shift from subsidising R&D, to supporting innovation much more broadly than just invention. We have had an imbalance in Australia of a solid enough inventive and scientific capability, with a poor ability to grow innovative organisations. Where is our Sony, Apple, Matsushita, Google, 3M etc?

We can invent new things, but need knowledge and capability in scaleup and market development to be raised by an order of magnitude. Opportunities abound, such as in sports technologies, where we started well and early, and are about to be overtaken by other nations, once again.

6. Lets improve our manufacturing efficiency capability, to become world’s best. Our own research shows that organisations including manufacturers waste fully one third of their resources on a variety of inefficiencies and quality problems.

We have the knowledge and could motivate and educate our businesses to become the world’s most productive and lean.

7. All the elements of a new approach presuppose a more highly coordinated and planned strategy, and a single, integrated policy framework.

I was told 30 years ago by a smart manufacturing CEO that “Australia has no business plan” and we still don’t. Other countries have a coordinated approach, and it works when done well.

We can and should take the known field of ‘manufacturing strategy’, well established at the enterprise level, and apply the lessons at the national level to produce and coordinate, with incentives, a national manufacturing strategy.

This means manufacturing focus, adding value through innovation, productivity through technology, ensuring quality and differentiation, and global partnerships into supply networks.

8. And finally, this all rests on the requirement of inspirational leadership, that I believe can only come from government.

Just as our Federal government has shown strong leadership in dealing with the present pandemic in forming a National Cabinet and taking ‘strong’ decisions, we need a ‘strong’ strategic business plan, much more pervasive than recent insipid, piecemeal and disconnected approaches.

Can we make the present recession into an opportunity for a positive reset?

It is no coincidence that over the past 70 years, Australia has dropped from once being the world’s wealthiest country and simultaneously allowed for the shrinkage of our production/ manufacturing sector and culture.

The present pandemic shows how fragile our economy is, and it naturally gets ‘hollower’ every decade, as other countries build their global market share of value-added products.

We are not lazy, we are just not organised, planned and coordinated as well as other countries!

Professor Danny Samson is Professor of Managementat the University of Melbourne where he is also director of the Masters of Enterprise and of Supply Chain Management programmes. Danny is an industry policy specialist, and CoEditor in Chief at Operations Management Research Message.

@AuManufacturing’s new deal plan for manufacturing is brought to you with the support of Bosch Australia Manufacturing Solutions

Picture: Newcastle Herald/Roy Green at the Port of Newcastle

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