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David Chuter, IMCRC CEO and managing director, outlines why now is the most important time for manufacturing in Australia.
When it comes to manufacturing leadership, resilience is a key theme we have been discussing at the Innovative Manufacturing Cooperative Research Centre (IMCRC) this year.
Manufacturers, like most, now fear the uncertainty of 2020 and beyond.
Just as Australia was recovering from the shock of this summer’s devastating bushfire season, the World Health Organization (WHO) declared COVID-19 a pandemic on 11 March. The pandemic has had a huge impact on people’s lives and every aspect of the Australian economy. Even before then, COVID-19 was destabilising our workforce and supply chains. Due to our over-reliance on China and others for imports, manufacturers have simply not been shielded from significant negative impact and disruption.
I want to be clear that while it might seem counterintuitive, there has never been a more important time for manufacturing in Australia, and it strikes me that there are three areas that stand out.
First, we continue to see an unprecedented interest from manufacturing businesses putting up their hands to help with design, manufacture and supply of critical healthcare items, which is to be applauded as long as it is well coordinated and able to provide good growth prospects for those businesses. This is the short game.
Second, now is the time (and many for once may be “time rich”) to closely examine and rethink business models and adopt new approaches to manufacturing, technology, collaboration and innovation. Advances in digital technologies and new, collaborative business models enable manufacturers to navigate these challenging times and consider the actions needed to ensure their companies will not only survive but find ways to innovate and become more resilient in the new world of disruption and uncertainty.
And third – the longer game – now is the time to consider what our sector must look like (in the not too distant future) if we are to have the national capability and capacity to withstand disruptive times. We have clearly been found out – perhaps we did not realise what we could no longer manufacture (although I would argue those in the automotive industry knew what we were losing when we stopped making cars, particularly the deep capability within the supply chains) – and we cannot afford to be found out again.
So, how can manufacturing leaders address these three key areas and build resilience and position their companies in this new world? Here are five suggestions to consider, several of which I learned in the automotive industry during the Global Financial Crisis (GFC), and which enabled us to successfully accelerate out of that crisis and take an Australian business to the world.
- Recognise and protect your value drivers.
In times of economic uncertainty and adversity, your intuition might tell you to downsize your business and reduce your most expensive costs or assets.
The better response, if you can, is to be counterintuitive.
Be clear on how you create value for your customers, and how your assets, products, services and people fit into that. If your people – their ideas, know-how and potential – are your key value drivers, then it’s likely they are likely the ones who will help you come out the other side of adversity. Other than cash to remain solvent, for many businesses the most important assets are people, both within the business and within the broader ecosystem such as suppliers.
If you have no other choice but to let people go, consider first whether supporting mechanisms can help (e.g. the Commonwealth’s JobKeeper program), and also how you could refocus and retarget the efforts of your existing people to chart a new direction for your business. For example, could an engineer lead an innovation program, or upskill in new technologies such as artificial intelligence, robotics and data analytics?
Let your team know you are in the trenches with them and be transparent about when your plans and approach change. If your people have both an individual and shared sense of purpose, they are more likely to stay busy and motivated and focused on building the business in times of challenge and adversity – adding significant value.
- Prioritise breakthroughs over continuous improvement.
Right now, the acronym volatility, uncertainty, complexity and ambiguity (VUCA) is most apt. Ensuring your business is not only agile enough to respond to different circumstances but able to find opportunity in times of uncertainty is essential.
For example, as mentioned above, many local manufacturers have stepped up to support Australia’s health sectors. Additive manufacturers have shifted their focus to design and 3D print masks and ventilator parts in response to Personal Protective Equipment (PPE) shortages. Distilleries across the country are adjusting their production processes to manufacture hand sanitisers.
Continuous improvement is no longer enough for a business to survive during times of economic decline. What is needed is disruptive innovation and new ideas that create commercial breakthroughs. Take the opportunity, while productivity is slow, to learn new technologies, find new ideas and potentially discover new business solutions. Understand the difference between your business and your business model, invest in the latter and make sure it is both unique and competitive.
- Collaborate on shared problems.
If there is one silver lining during turbulent times – it’s that you are not in a world of your own. Technological, climate and health issues affect everyone in the manufacturing ecosystem, which, in turn, presents an opportunity to collaborate with universities, suppliers, customers and even competitors to solve shared problems.
How can you collaborate? Work out who you could start a conversation with. Review, for example, your supply chain for potential partners. Consider working with a university or the CSIRO to discover breakthrough ideas that will prepare your business for a future that is likely to be more localised, more sustainable and more collaborative.
- Mitigate risk through co-funding programmes.
When cash flows are drying up, the natural reaction is to avoid investing in anything associated with risk, or perhaps anything at all. Government-led co-funding organisations are a great way to mitigate risk since they can provide you with the financial ability to work on innovative projects that you might not otherwise be able to justify in uncertain times.
Support programs such as CRCs and Industry Growth Centres offer matched cash funding to help drive research and development and competitive initiatives. Working within these programs may present opportunities that your business may not have been able to access on your own. So, now is the time to explore these co-funding options, invest in manufacturing innovation and discover breakthrough ideas to help you accelerate your way out of disruption.
- Build resiliency through local supply chains
As the COVID-19 crisis has shown, Australia’s position as a net importer creates fragility for supply chains, especially when it comes to raw materials that cannot be transferred by air freight.
Even if air freight is viable, the costs and delays of not being able to transfer critical tools and components by sea can cause significant issues for manufacturers, and the cost of disruption may outweigh the costs saved through offshore sourcing.
How can manufacturers manage risk and build resiliency around their supply chains? Perhaps the answer is to re-think the structure of your supply chains in Australia, away from being driven by the cost-benefit of buying from China and other markets, and towards collaborating with local suppliers.
IMCRC participant UAP (Urban Art Projects) is a good example. UAP initially thought all of their custom manufacturing would need to be completed in China, but with changing global trade conditions in recent years together with investments in key enabling technologies, UAP discovered it was more cost-effective to manufacture locally and, subsequently, has been able to upskill more local workers. As co-founder and managing director Matt Tobin told The Australian last year, robotics and innovation have allowed UAP to re-locate 32 per cent of its manufacturing from Shanghai to Brisbane over the past two years. There are many examples of this happening, but few are sufficiently publicised as a “peer to peer” incentive to others.
As a CRC focused on innovative manufacturing, our mission has been to push manufacturers, especially SMEs, to think differently and embrace change in the face of digital disruption.
In times of volatility, uncertainty, complexity and ambiguity, we know true leaders will look for opportunities to strengthen their people, processes and supply chains. You can do this by managing the concerns of your people with empathy. You can look intensely at how you can build resiliency through collaboration, break-through innovation and new business models. You can play both a short game and a long game.
And in the face of uncertainty and crisis, you can find a new way to succeed.