Adapt or Die: What does the future hold for Australian manufacturing?

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Despite the high-profile collapse of the car industry, it’s not all doom and gloom for Australian manufacturing. But while jobs growth has been steady for many in manufacturing, the outlook for continued jobs growth isn’t great across all the sub-sectors.

To take advantage of opportunities for future growth offered by the emergence of global manufacturing megatrends, Australia needs to invest in R&D, and the development of new skill sets that lead to product innovation and efficiency improvements and can harness automation to enhance human capabilities not just replace jobs.

State of the Nation

Over 22,000 manufacturing jobs were added to the national economy last year, which puts paid to the idea that Australian manufacturing is in terminal decline.  Admittedly that growth followed the loss of 190,000 jobs between 2008 and 2015. But this partial recovery is still evidence that not every sub-sector in Australian manufacturing is struggling.

Food processing accounts for almost a quarter of Australian manufacturing jobs, employing over 200,000 nationally.  And while the Australian car industry may have fallen victim to cheaper overseas production costs, that’s not always an option for food processors.

“The finite lifespan of food means processing facilities need to be close to where it’s picked,” says Sean Goonan CFO of food processing company  Beak and Johnson.

The effect of digitisation on Australian food processing has been to bring suppliers closer, says Goonan, rather than send production overseas.

Food manufacturers can go directly to suppliers for raw or partly processed ingredients used in production such as spices or nuts, that historically they might have sourced at a higher cost locally or through a broker, he says.

Australian food processing also has great food safety and quality controls, and robust mechanisms for product withdrawals. It's a unique selling point in overseas markets where food scares have been a reality such as China who emphasise food security, and even the UK.

But it’s not just food processing that’s seen jobs growth in the last year. Paper products, printing and recorded media, fabricated metals, and furniture manufacturing all reported an increase in jobs last year.

Despite that, the Federal Department of Employment is still predicting further job losses in some sectors. Add to that the emergence of new global manufacturing trends and the challenge for the future of Australian manufacturing will be how successfully it adapts to change.

Going Global

In late 2016 the CSIRO published its roadmap for unlocking future growth opportunities. It identified five global manufacturing megatrends:

  1. Made to Measure: technology driven made-to-measure solutions replacing mass production
  2. Service Expansion: from single product to service product bundles
  3. Smart and Connected: optimising operations through data capture and analytics
  4. Sustainable Operations: driven by resource scarcity and a quest for green credentials
  5. Supply Chain Transformations: promoting collaboration and vertical integration

The trends bring opportunities for growth in manufacturing that include customised high-margin solutions, sustainable manufacturing, and selling service bundles. The CSIRO also argues when combined with globalisation and digitisation these trends make Australia’s longstanding disadvantages – including geographic remoteness and high labour costs - less important.

To take advantage of those opportunities Australian manufacturing needs, among other things, to invest in workforce skills and training to attract, retain and develop the best and the brightest. In the era of fin tech disruption and digital start-ups, manufacturing is not the first choice for the next generation of innovators.

“Manufacturing is not viewed as being very sexy”, say Goonan.

Brand Manufacturing needs a makeover; as a safe place in times of economic uncertainty manufacturing is the ideal environment to cultivate creativity.  It just needs to sell itself to a tech-savvy generation with a reputation for a short attention span.

If it hopes to harness the energy and creativity of millennials, manufacturing needs to introduce itself early as an option with the interactive flexibility they’re looking for. It also needs to make a real connection between theory and practice for students in tertiary education, and build better pathways for employees transitioning from other industries or sectors.

Developing the existing workforce is as important as attracting new blood.  Which according to the CSIRO means building digital literacy, strategic management, customer interface and STEM skills. Promoting diversity is also key, and it’s something Goonan is starting to see.

“40% of the CVs I get are from women”, he says.

Australian’s lingering reputation of mass production lines characterised by industrial dirt is out-of-date, but the industry needs to work harder to promote itself as the world-leading innovator it can be if it's to reach it's potential.

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