Australia has enjoyed a rich history of manufacturing over the past 60 years and over this time, included the following sectors:
- white goods
- automotive vehicles
- prams and strollers and carseats
- furniture making
- electrical and electronics
- agricultural machinery
- automotive components
- food processing
- construction materials
The total spectrum of manufacturing sectors expanded beyond this list. It is interesting however, that while Australia experienced population growth over this period, the on-shore manufacturing has decreased along with employment.
I am sure there are a number of political and economic reasons to support why this has occurred and given I am not a political expert, I therefore have no comment about the politics of it. However, as an engineer and business leader with over 20 years experience I am eager and interested to learn what government is doing to re-ignite manufacturing.
Classic Manufacturing Model:
If we look at the automotive industry as an example, I believe it has been grossly underestimated what the true impact will be when it finally closes down by the end of 2017. I believe this is a classic example of the iceberg model, where the visible portion seems to only focus on the vehicle assembly plant, their respective brands and direct work force. Like the classic iceberg model the overall or holistic impact is significantly greater and extends well beyond the vehicle manufacturer.
The vehicle manufacturers need a component supply chain which is in the form of Tier 1,2,3…. level suppliers and extends well beyond these first, second and third level of relationships. The automotive component suppliers engages a broad services industry. The Automotive industry is a great example of an industry which produces a consumer item that has engaged thousands of people (directly and indirectly) in employment and stimulated the cashflow in the economy through product sales ( first time and repeat buyers), maintenance, spare parts, services etc.
Like automotive manufacturing, many other manufacturing sectors within the same type of traditional technology space have moved off shore or have experienced market contraction.
The Manufacturing Future:
Lately, there has been much discussion about Australian needing to transition from these traditional manufacturing technologies into advance manufacturing, and focus and develop into high value sectors like bio-medical and pharmaceuticals. This is good in theory, but what are the strategies that government and government agencies formulating in order to attract investment to establish the advanced manufacturing sector?
I believe it is important to have a future strategy which includes the establishment and development of new areas like “advanced manufacturing”, but these strategies need to address key deliverables like what the traditional manufacturing sectors have provided such as:
- employment opportunities on mass
- attracts first time buy and repeat buyers
- establishes maintenance, spare parts and services sectors
- provides export market opportunities
The concerning component of this for me is that regardless of which side of politics you stand on, I haven’t really seen anything which stands out as a solution going forward at a local, state or federal government level.
Do government agencies and associated groups understand what industry really needs?
Traditional manufacturing infrastructure has been and is being replaced by warehousing and distribution infrastructure. This raises another question: Once the implementation of the integrated logistics and the associated warehousing and distribution activities (which currently fuels building and sophisticated materials handling projects) is complete, what next? Within these sectors, the focus will most likely be on LEAN in order to eliminate waste and maximise profits. What happens to innovation, development, creativity, growth and the respective talent and know-how that was in this space before?
I am all for future gazing and focusing on forward and progressive thinking. However, this needs to be underpinned by a balanced approach; this country needs to attract investment to establish industries which will engage varied skills or technologies, employ a diversified range of people across blue and white collar and stimulate the economy with cash.
High value advanced manufacturing is great in theory, but typically the type of industries in this space ( such as biomedical, FMCG, etc ) are highly automated (reducing the need for direct employees) and do not provide many opportunities to establish service industries to support the in-the-field or service use of the respective product.
According to the recent CEDA (Committee for Economic Development of Australia) report on the future of the Australian workforce, it is projected that up to 40% of jobs today will disappear within the next 10 - 15 years, which equates up to 5 million jobs.
I acknowledged there has been growth in mining resources, building and construction, and in healthcare while manufacturing has declined.
Mining resources, great for the value it brings to the economy, but is limited in its employment opportunities and is highly dependant on foreign exchange rates and demand from overseas countries and competition due to its value.
Building and construction, great employer especially when there are government funded infrastructure projects. Employment is contract or project based and is good while it lasts and the end result in most cases is the delivery of infrastructure which has an asset value. The question which comes to mind here is that once the contract or project is complete, how much does it contribute towards the economy? How does the asset generate value, create jobs and deliver in a sustainable way, ongoing economic stimulus?
Healthcare, this is a vital industry to our society due to the obvious benefits it provides to our people. This is a regulated industry (and so it should be) to ensure best practice is provided to those in need of care. It is encouraging to see that this industry is growing, but lets not confuse that it forms part of the essential services the nation needs to operate, along with defence, emergency services, education and policing.
According to manufacturing.gov, Advanced manufacturing is defined as:
“a family of activities that (a) depend on the use and coordination of information, automation, computation, software, sensing, and networking, and/or (b) make use of cutting edge materials and emerging capabilities enabled by the physical and biological sciences, for example nanotechnology, chemistry, and biology. This involves both new ways to manufacture existing products, and especially the manufacture of new products emerging from new advanced technologies.”
CEDA describe Advanced Manufacturing in Australian as something which manufacturers typically engage in “which is about variability, complexity and extensive customisation with high value- add. This usually involves low-volume, high-value manufacturing, with a customer and export focus and nimbleness in manufacturing that allows manufacturers to provide a customised and responsive solution to the market.”
In the 2014 CEDA Report on Advanced Manufacturing: Beyond the Production line, it indicated that “In reality this transition will most likely mean fewer overall jobs in what is described as traditional manufacturing. However, these new jobs will be higher skill, higher paying and make a bigger contribution to the economy.”
I am an advocate of change and firmly believe that this is a vital aspect of growth and success. However, I don't believe in change for the sake of change, but understand and appreciate that is it required more so in order to adapt to the environment as it evolves with changing requirements; change is required in order to not be left behind.
If it is conceded that entry or transition from tradition manufacturing into advanced manufacturing is what we should pursue as a nation because it contributes in a positive way towards the economy, then I believe we need a holistic plan on how to get there. If the research is correct (I have no reason to doubt it) indicating that 40% of the current jobs in the market will disappear over the next decade and only a small portion will be replaced within Advanced Manufacturing (albeit requiring a higher skill level than today) then I ask: How is this good?
The Wrap Up.
How is it good to be transitioning to a model which is acknowledged to result in significantly fewer job opportunities to produce (high value) items for consumers of which, (potentially) half will be unemployed?
Regardless of the market value of what is produced, it means nothing if we have a population that can not afford to buy because they are unemployed.
What do you think?
Director - ANBA Pty Ltd
ANBA LinkedIn PageAndrew's LinkedIn Profile
Director - ANBA Pty Ltd
ANBA LinkedIn PageAndrew's LinkedIn Profile
Andrew Baldacchino, applies his 20 years of industry experience and world class practises in simple, logical and effective ways to help businesses and their people to develop innovative solutions and implement strategies to improve sustainability and brand value in the market place.