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Australian Manufacturing – A bright future!

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With the rise of the global Chinese factory and the strength of our currency, manufacturing is under increasing pressure. Statistics provided by the Australian Government indicate that the share of manufacturing in the Australian economy has declined steadily:

  • GDP (2000-10): 10.8% to 8.7%
  • Employment (2001-11): 11.7% to 8.5%
  • Exports (2006-10): 49.6% to 36.1%
  • Private new capital investment (2000-10): 18.6% to 10.7%

A long term analysis shows that manufacturing that was once the foundation of the Australian economy with 25% share of the GDP and Employment in the mid-60’s has lost most of its mojo. The dominance of China’s manufacturing industry is not the only reason for this decline. The manufacturing industry simply can’t match the growth of our mining sector and our shift towards a service oriented economy.

Despite negative KPIs and depressing stories in the news – there is a future for manufacturing in Australia and it is down to simple economics.

Let’s first accept that mass manufacturing is gone. My first job in Australia was to manage the production of oil and air filters for the automotive aftermarket. Everything was difficult as we didn’t have the volume to justify capital expenditure to maintain competitiveness through automation. Needless to say, a few years later, the production was moved offshore.

Our future is in Engineer/Manufacture/Assemble to order (X-to-order) manufacturing and this is where government funding should be directed.

Manufacturing a small batch of unique items overseas doesn’t make sense. Let’s take an example in construction, where Engineer and Manufacture to order, is a good fit. A new building may require a few hundred doors. Most of them will be unique with different fire ratings, dimensions and features, which make it inappropriate for mass manufacturing. There is also an installation component; therefore contracting a local company for the job is beneficial.

Assemble to order locally also has its advantages, even if the basic/standard components are manufactured overseas. This is especially true for manufacturing companies implementing a lean supply chain with their suppliers where WIP (work in progress) stocks are kept to a minimum.

Manufacturing’s future is bright in Australia. We need a strong political focus to make it happen and support industry segments like X-to-order where local manufacturing is a no brainer.

Paul Goepfert

Paul Goepfert

Paul Goepfert is the Marketing Manager for ERP vendor Pronto Software. @PaulGoepfert

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