Government assistance for manufacturing – a changing focus

Manufacturers could be forgiven for seeing recent media coverage and budget tightening as suggesting a bleak future for the sector.  The reality is quite different, with significant opportunities on offer for manufacturers to seek support for their activities – assuming they are the ‘right’ ones.

Across state and Federal governments, a shift in the focus on government assistance has been on foot for some time. 

There are a couple of key themes to this that are worth noting. The first is the focus on transformation.

Manufacturers are being encouraged to consider their business models, and to make the move ‘up the value chain’. In many ways the market has spoken here, and it is a trend that had taken root long before the recent closures in automotive manufacturing.

For decades Australian manufacturing had lost jobs and businesses that were focused on commoditised manufacturing, with typically low levels of technology and differentiation.  Over time, many of these businesses learned the hard way that competing on cost alone in the Australian context was not sustainable. 

One of the common threads of more recent Government programs has a focus on assisting those manufacturers who are trying to identify what sustainable business looks like for their organisations into the future.  This can be seen in the Victorian Government’s Investing in Manufacturing Technology initiative, the South Australian package in response to automotive closures in that State, and the Federal Government “Jobs for Tomorrow” Growth Fund.  Last week’s budget saw the Export Market Development Grant program extended, a $50 million Manufacturing Transition Grants Program, and $484 million for an Entrepreneurs’ Infrastructure Program (while we are yet to see the detail, the title gives a fair bit away).

These programs are based around assisting manufacturers to improve their product and process innovation activities, consider new export markets, or look to adjacent product opportunities in domestic and international markets that might be viable.  As a whole, they recognise that Australian manufacturing has and will continue to change, and the basis of competition for successful local companies will not be cost based.

The other key theme is around facilitation. 

Government funding support to various Co-operative Research Centres, and the two innovation precincts that appear to have survived the budget (manufacturing and food) provide practical opportunities for manufacturers to engage with the research community to shift to a more high-tech type of manufacturing model.

By definition, these are more medium term prospects for manufacturers (although there may be the more immediate silver bullet in regard to digital and advanced manufacturing techniques for certain companies).  In conjunction with the efforts of various Universities, these programs provide a framework for those manufacturers seeking to access new ideas and concepts to try to find a competitive edge.

All of this begs the question about the best approach individual manufacturers can take to accessing assistance.  As with the most effective government programs, these are based on manufacturers being proactive in regard to understanding what their future looks like. 

It is always preferable for manufacturers to be seeking to understand (at least) three key variables at any given point in time.

The first is knowing the next stages in product and process innovation for their business.  In our experience, lack of information is not the issue here.  Trade shows, publications, industry associations and online intelligence all offer significant insight in this regard (as does an on-going dialogue with customers about how their needs will change over the medium to long term).

The second is to ensure internal systems exist to identify, sort and prioritise this information.  It is critical that this includes comprehensive benefit analysis tools that ensure individual companies comprehensively understand how their businesses can benefit from a certain investment in innovation – and the cost of not acting.

Finally, excellence in the implementation of the investment, including understanding what other business processes need to change to optimise an investment in innovation is key.  Examples here include fully integrating new products into an existing production process, rather than simply bolting them on, or ensuring sales teams are fully briefed of the features of functions of new products before they are introduced.  Too often companies don’t capitalise on their innovation investments, creating a vicious circle when they don’t fully realise benefits along the way, which in turn impacts their decisions to invest the next time.

Despite a tough budget, there are support mechanisms to assist manufacturers at each stage of these processes.  All government can do through industry assistance is provide a framework – it is up to individual manufacturers to ensure they are continually identifying and evaluation opportunities for investment in innovation.

And a final comment in regard to levels of assistance.

While they appear at first glance to be light, these days governments are much more diligent at evaluating the effectiveness of their programs.  The best way for the manufacturing sector to encourage more targeted support for their future is to make use of the framework that is being provided, and evidence to government that its focus on transforming Australian manufacturing into a more sustainable future is working.

 

 Damon Cantwell is the Manufacturing Partner at Deloitte

 

Image: business.vic.gov.au