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Are Australian's tough enough to maintain a manufacturing industry?

January 31, 2019

How our relatively "easy ride" affects our manufacturing competitiveness and what we can do about it.
 

The conclusion from a recent French Television documentary we took part in (see below video) was interesting - claiming it has been easy for all of us to let Australia's manufacturing industry decline as we have it so good here in the lucky country. Life is easy, healthcare is excellent, weather is great, there is no war, no famine, no political unrest, no neighbouring country challenges. And who could argue those macro-political, environmental and lifestyle factors? So, does the "she'll be right" attitude prevail if something does happen in our core industries in Australia?

 

I am not sure the people of Elizabeth in South Australia feel that way after Holden's demise but when you dig a little deeper on this much publicised situation in the north of Adelaide, things are better than expected. According to Kyam Maher, the South Australian Minister for Manufacturing and Innovation, "75% of businesses supporting Holden were expected to go out of business after the closure, but the reality is 75% are still in existence and have transitioned or transformed". Most GMH employees have moved on and found employment elsewhere. Australia's manufacturing industry is in an upswing after a torrid 20 years. So, what is really going on out there? Is this French documentary maker correct in calling out a key contributor to our malaise around manufacturing decline being our laissez faire attitude?

 

75% of businesses supporting Holden were expected to go out of business after the closure, but the reality is 75% are still in existence and have transitioned or transformed.

 

May I suggest you watch the short doco then read on (for reference Ailytic have a bit part at around the 21 min mark. Click on the gear icon and select English subtitles if you do not speak French):

 

 Australia: A Country without Workers

 

 

Factors cited by research as contributing to our manufacturing sector decline in past decades include:

  • Poor Terms of Trade
  • Decreasing productivity
  • High wages and overall costs
  • Too much focus on natural resources
  • Skewed investment towards land value and housing

There is no doubt these are all true, but countries that do have a thriving manufacturing sector that previously did not have one did some important things to succeed. Most notably, they fought for it. They fought for it because it was likely their only choice - regionally, structurally, environmentally, socially, economically and from an availability of natural resources perspective - they either consciously chose to develop the industry through relentless focus on innovation, quality and engineering or they had to develop it by encouraging investment and not enforcing a minimum wage because if they did not they had nothing else except subsistence, unemployment, and civil unrest to fall back on.

 

Regions that are strong in manufacturing invariably lack the safety net of a long term supportive, diversified and economically protected environment. That is, over the last 60 years or so, successful manufacturing regions have been completely different to Australia. They have often suffered civil and economic upheaval, been through wars, recessions, and tough times - Germany, China, Vietnam, and Mexico as examples.

 

When times are tougher, you become leaner, meaner, and more productive. During recessions, productivity actually increases as Freakonomics mentions here. People work harder, spend more energy focussing on what really matters and are driven towards efficiency and productivity. Perhaps we have not had enough tough times to ensure we develop the right mindset for a productive manufacturing sector? If we were to suffer a prolonged recession or depression, would the government be forced to relax wage restrictions? Would we tighten our belts and do what needed to be done? And would the overall negative impacts of a recession create the short-term difficulty that stimulates change and adaptation? I am not advocating we find out.

 

We take a little of the documentary as being on the mark - the bit about needing some mongrel in any business to have the guts to transform and continuously improve. The good folk at GMH sure tried with enormous grit and determination. They tried everything but the best was not good enough in their case.

 

A certain initiative, focus and relentless desire to find out what is really happening day to day in any business is imperative, as often things can be turned around in cost management with small steps that accumulate. Management and Operators alike need to get into the minutiae, gathering insights about why equipment is not running at the expected throughput, why an operation has to add short term and expensive contractors to deal with variable work loads and demand. Asking questions about different ways of scheduling production. Synchronising production and maintenance activities. Ensuring multiple "what-if" options have been run on a planning scenario before choosing the best course of action.

 

In amongst all of the seemingly minor opportunities any business is the she'll be right attitude that contributes to industry going gently into the night. So while we "transition" away from making things - to the remaining manufacturing industry in Australia and in the words of Dylan Thomas, rage against the dying of the light.

 

There is opportunity everywhere to improve efficiency if you know where to look, perhaps most notably within the walls of your organisation and operation. Tasman Sinks (Oliveri) and Rossi, two SA businesses referenced in the documentary are certainly hard at work on the things that will hopefully keep them alive for decades to come.

 
 
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