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It’s not about labour costs

Modern manufacturing has nothing to do with labour costs and everything to do with innovation across business models, balance sheets, and products, attendees at a National Manufacturing Week panel discussion heard this month.

“I am fed up hearing about high-cost manufacturing in Australia. That is yesterday’s thinking. That is not today’s thinking at all,” Phillip Butler, Chairman of Textor Technologies said during the Australian Advanced Manufacturing Council’s SME Showcase. The event was part of NMW, Australia’s only fully integrated annual manufacturing exhibition and the largest national gathering of industry decision-makers.

The world of manufacturing had changed, and as a result labour costs represented only around 5 per cent of selling costs at Textor, Mr Butler said. The company supplies cutting-edge advanced fabric, which traps and transfers moisture, used in baby nappies and personal sanitation products to global heavyweight Kimberly-Clark.

Chaired by Northrup Grumman Australia Chief Executive Ian Irving, the panel included Robert Thompson, Vice President Production, Anatomics, David Brim, co-founder and Chief Executive at Tomcar Australia, ANCA Group founder Pat Boland, David Marino, outgoing Chief Executive at Quickstep Technologies, and Textor’s Phillip Butler.

In a broad ranging and inspiring session which detailed the hard-won road to success for each firm, ANCA founder Pat Boland was asked whether science and technology were critical to success in manufacturing.

“You are not going to sell out of Australia on the basis of cost. So it has got to be the features that are the key thing. That is what you are going to be selling and underpinning those features is really the technology. So it is absolutely critical to have something to offer, to have a better mousetrap,” Mr Boland responded.

Mr Boland also said real-world experience was vital.

“To me it is almost chicken and egg because you need a leading-edge customer to give you problems to solve. It is that step of getting into the market and getting to know what your customer’s problems are, because once you know what your customer’s problem is you have an opportunity to solve it.”

Anatomics’ Mr Thompson agreed that trial and error in the real-world was where success was established.

“Through small-business-to-small-business relationships we managed to iron out a lot of the bugs in terms of logistically how you can sell to a market on the other side of the world, and then we replicated that model in other markets,” he explained.

Tomcar’s Mr Brim said there was huge opportunity in manufacturing in the digital age.

“The technology surrounding the product is just as important. We are freer than ever to disrupt. Anything you can imagine you can make these days and the tools are there. I think the future of manufacturing in Australia is high value add to niche products — that we don’t compete on the scale, we compete on quality and innovation,” he said.

Quickstep’s David Marino said it was about having relationships in the right markets.

“There is not that one silver bullet that actually allowed Quickstep to enter into the global supply chain. First and foremost we had to have something unique, and be able to show a new technology and the potential for what the future could look like and how we could create value in that future.

“We had to really get out there and establish relationships with customers and that took a lot of time, a lot of energy, and a lot of face time with customers to really understand their businesses, understand their processes and how we could provide value inside that supply chain,” Mr Marino shared.

Mr Butler said keeping manufacturing in Australia was important for many reasons, not least of which was the ability to innovate and adjust processes and products.

“When you are running machines you don’t learn anything when things go right. You only learn when things go wrong. And if you are not there watching and observing you can’t do it,” he said.

Mr Butler said most people tended to think innovation related only to the design of a product, but process innovation was also critical.

“Business model innovation is also important — the way in which you get your product to market, the way in which you treat your balance sheet, working capital, all of those things are important,” Mr Butler said.

“You have got to be the best in the world at what you do. It is about understanding where you fit in the global supply chain. The whole thing comes back to your credibility and your branding, that you have got that reputation, and most importantly you can continue to innovate,” Mr Butler said.

He said Australia should not “beat itself up.” “We are still embryonic. We are at the bottom of the curve in my opinion. We have got a lot of incredible skills in this country. Forget about all the arguments why we can’t do things,” he said.

Mr Irving concluded the panel by commending the risk-taking and achievements demonstrated.

With a background in the establishment of industrial capabilities delivering key defence exports for Australia, Mr Irving said current technological trends were to Australia’s benefit.

“We are able to access these tremendous manufacturing techniques, we are able to market globally and connect with our customers globally, connect with supply chains globally and we’re able to transfer designs very easily around the planet,” he told NMW attendees.

“I think Industry 4.0 will help us ensure we can maintain manufacturing – and continue making things in Australia. I think it is vital personally. That is what I am looking to do with my company, Northrop Grumman. We are looking to bring things into Australia and manufacture them here,” he said.

“We do need to be more innovative, we do need to take more risks as a nation, we do need to back ourselves to win, and I think we have got some great examples here of those that have done that and the results that they have had,” he said.

2018-01-09T11:59:03+11:00 May 18th, 2017|