This Year’s Model: Priorities for Australian Manufacturing in 2019

Manufacturing entered 2019 with a lot of momentum built up over the past 2-3 years. 85,000 jobs were created by the industry in 2018, among the highest of any sector according to the ABS.

It has been a period of growth with change, as a new model of manufacturing success emerges from the twin currents of technological innovation and the globalisation of supply chains.

As 2019 unfolds, companies will need to continue to meet existing challenges in energy and skills but also be conscious of emerging developments in digitisation, waste management or the implications of a possible change in federal government.

Every business has its own priorities, but across manufacturing industry some common themes dominate. Many are debated politically but they will not all be fixed by grand policy shifts alone – there are things individual companies are doing to address or lessen the downside effects or take advantage of opportunities.

Skills

Many manufacturers report their growth plans are constrained by skill shortages. It is a complex problem that can be sourced to a range of demographic and economic changes over the past few decades including older school leaving ages, reduced commitments and funding of trade training, imbalance between the perceptions of university and VET as career enablers and unduly pessimistic perceptions of industry.

To gain work-ready entrants for the workforce, companies are starting to look to new modes of engagement with local schools and with vocational and university level education. They are reframing their recruitment practices, the way they describe the jobs they have or careers they offer and are exploring rapid cycles of learning and work based on specific skill sets and microcredentials, higher apprenticeships and other forms of work-integrated learning.

Internship programs as well as other innovative models of student-industry activity are growing and are a great way to get new thinking into a workplace as well as potential future employees.

Energy efficiency

The battle for policy outcomes to underwrite reduced energy prices and greater reliability will continue as will companies learning how to be more canny energy purchasers. However, significant gains can and need to be made in energy demand for us to regain competitiveness. One consequence of Australia’s historically low energy prices is that Australian households and industry are estimated to be up to 30% less energy efficient than the better economies. Both levels of government are increasingly focused on supporting industry efforts to improve energy efficiency.

Rapid technology advances and new government programs means that it pays to constantly trawl for solutions and support and re-assess payback calculations. Resources are already available for common manufacturing energy guzzlers likes compressed air and refrigeration. A great starting point is knowing where and when your energy is being used.

Waste

China’s decision to severely restrict the unsorted waste it accepts from countries like Australia is already having significant effects on our household and industry waste streams.

As is happening with energy efficiency, there are more government programs emerging to provide advice and financial support for recycling and the circular economy. These focus all along the waste cycle from redesigning products for reuse to developing products or technologies that increase the use of recycled materials, and processes to better sort waste streams.

Standards in the built environment

The Infinity cables recall, building cladding fires and the Opal Tower failure are the tip of a much larger problem identified in the nation’s construction industry. The Senate’s comprehensive assessment of the problem confirms the view that non-conforming building products (NCBP) remain a significant issue for the community. The problem lies with weaknesses in the application of building standards and poor enforcement, allowing the supply of poor-quality product and the delivery of substandard services from actors in the construction supply chain.

Australian manufacturers have felt disadvantaged by frameworks that appear (when applied) to more strongly impact local manufacturing than offshore supply. A lack of robust surveillance, check testing and enforcement plus a hollowing out of technical capacity in industry leading to an overreliance on paper trails in lieu of explicit knowledge may have contributed to serious decline in the quality of our built environment. Manufacturers should educate their customers on the risks of opting for low-priced building product that may be non-conforming. If NCBP are encountered then report it (see the ABCB portal here). This is now a legal obligation in Queensland.

Employment and safety regulation

At both state and federal level, a raft of new regulations and proposed laws is emerging – to increase regulation of casuals, labour hire, so called wage theft, gig economy workers, workplace safety penalties and exploitation in global supply chains. These ideas are coming from both current Governments and confident Oppositions. The ALP policy playsheet for workplace relations reform is extensive. However, some reforms have bipartisan support.

In workplace safety the debate is centring on industrial manslaughter and the increasing penalties for the highest levels of negligence by those who lead and manage companies. Under current laws, courts have recently imposed prison terms on company directors for workplace fatalities.

Manufacturers depend heavily on the productivity of their workforces. Manufacturing requires more vigilance on safety than many other industries. So, employment and safety practices are important. Companies would be wise to reconfirm their employment arrangements and safety systems are compliant and working as intended.

Innovation

The wave of digitisation that is sweeping manufacturing, and many other sectors, is rapidly changing what is manufactured, how and where it is made and how manufacturers are making money. It is dealing higher cost nations like Australia back into the global manufacturing game if we have the right mindset and policy settings.

It needs management, employees and a skilling system that can all absorb new trends rapidly; a mindset that understands and values data as much as physical goods; a mature view on cybersecurity; and a greater willingness to seek unique capability though collaboration with other companies and with research institutions. The number of manufacturers, including SMEs, seeking collaborative partnerships with universities and research organisations is increasing. Manufacturing start-ups are emerging from innovation incubators. Both are healthy signs for the industry’s future.

Mark Goodsell is Head of the Australian Industry Group in NSW and the National Director of Manufacturing.