An audit to plan for a future made in Australia – by Julie Harrison

Not enough is known about the nature of Australian manufacturing and the issues it faces to plan for a future made in Australia. Here Julie Harrison argues for as comprehensive audit to help move us forward.

There’s an axiom of business that says you can manage what you measure – when you know the parameters of your business you can see how to improve it.

But what about an industry? What if your industry – manufacturing – is so varied and diffuse that it’s difficult to see exactly where you are in relation to your peers and the rest of the industry?

If you can’t see the measurements, how do you manage them?

I think it’s time to take a closer look at Australian manufacturing, because its important performance metrics are not always clear and rarely collected in one place.

Manufacturing has also come back into focus with the federal government’s $22.7 billion Future Made in Australia programme which is in addition to the National Reconstruction Fund and the many state-based manufacturing grant schemes.

These initiatives are important considering the challenges faced by manufacturers, which include technology change, upskilling, decarbonising, potential trade wars, global supply chain resilience and international factors such as the BRICs’ ‘dedollarisation’ agenda.

While manufacturing has many examples of success, and a booming advanced manufacturing sector, it’s hard to see exactly where we are in manufacturing.

How does a government formulate a system of tax breaks, R&D incentives or grants if it doesn’t know exactly where the money has to be spent?

How can a government shape a useful trade policy if it can’t see which manufacturers are likely to be exporting in five- or ten-years’ time, or which ones will be growing to meet a domestic market?

What we lack is an audit of the manufacturing industry. And I don’t mean a list of the grants we can apply for. I mean an accurate map of what we’re making, who’s making it, where their products go and where the future opportunities and risks lie for Australian manufacturers.

We are one of the largest-employing industries in Australia and knowing more about how we work can only be an advantage.

Here are some ideas:

• Snapshot: a Manufacturing Audit conducted by the federal government could be either a one-off, or a semi-regular data-collection exercise, in which Canberra gains insight into manufacturing operations in Australia: their operating costs, cost of goods, profit margins, labour costs, emerging markets and export performance. The focus needs to be not just on the cool ‘future’ industries but also on existing sectors which form the foundation of Australian manufacturing, and which give us the biggest opportunity to integrate new technologies.
• Red tape: An audit of the manufacturing industry could include a clear view of the legislative and regulatory requirements placed on Australian industry, with a comparison to the foreign businesses that export to Australia. What good would this do? Well, for a start it might show that federal and state governments can assist local manufacturing by choosing to not do certain things, which creates a lower-cost alternative to funding programmes. What is the cost of these rules, and how does it compare to our trading partners? An audit of the regulatory load might create a fast and cheap way to boost manufacturing productivity.
• Trade: what is the cost to the economy of allowing cheap imports into Australia, when those imports have government support in their country of origin and face no tariff when they land in Australia? What cost is shifted to local manufacturers who must comply with higher environmental and labour standards than do foreign businesses, while also facing tariffs if they export? An audit of trade rules could inform better industrial policy.
• Technology: an audit of Australian manufacturing might reveal the extent to which technology adoption can enhance productivity, efficiency, scale, quality etc. In Australia we tend to not be the early adopters of manufacturing technologies because of our small scale. At the same time, technology can improve a manufacturer’s performance dramatically. A manufacturing audit allows for a mapping of peers’ experience with technology. We should learn from one another’s technology implementations, rather than having to start from the beginning. There will always be concerns around IP ownership, however this reveals a role for government: as the trusted intermediary who can extract non-identifying performance data and make it available to the rest of industry.
• Education and Skills Training: a challenge for manufacturers lies in attracting the next generation to trades such as heavy manufacturing, equipment repair, electrical work, wiring and plumbing. These trades don’t get the headlines, but a manufacturing sector must have a reliable supply of them. How can we create a robust educational and training framework that supports diverse career paths and ensures industry has the skills it need? A good place to start would be an accurate map of what is required, by sector and location, and how the skills pipeline might be built. It’s crucial that we reenergise our TAFE and university systems to address the shortages in these foundational skills and we must look at the shortages in teaching staff for primary and high schools.

A manufacturing audit could reveal the full spectrum of manufacturers and give us understanding of the industries that have remained stable over time, as well as those that are emerging and those disappearing.

If we measure it, we can manage it.

Julie Harrison is the Chief Executive Officer of Harrison Manufacturing Company, Australia’s largest producer of lubricants and high-end industrial additives. Julie also serves as the Group Director of the broader Harrison Group, overseeing six companies across Australia and New Zealand, with a combined workforce of 170 employees. As a Certified Practising Accountant (CPA), Julie is a strong advocate for quality corporate governance and research and development.

Picture: Julie Harrison