Growing your footprint in Australia and overseas

Last month Ken Henry, the former Treasury secretary, told the Australian Industry Group's national forum that more Australian manufacturers should consider looking offshore for their labour to stay competitive, citing Tasmanian boot-maker Blundstone as an example.

Acknowledging the political unpopularity of doing so, he mentioned that the high dollar was likely to be a strain on manufacturers hoping to remain competitive.

Offshoring and engaging with Asia (Henry is currently writing the government's white paper on the Asian Century) to take advantage of cheaper labour were ways that Australian manufacturing could play to its strengths. Blundstone was singled out as an example of the possibilities.

"Well we were needing to compete against people who'd already made the decision, and for that matter people who never made a product in Australia," Steve Gunn, Blundstone's CEO, told Manufacturers' Monthly about the company's controversial 2007 decision to close its factories is Tasmania and New Zealand and move its labour operations to Thailand and India.

"There was a stage where we were employing across Australia and New Zealand something like 430 people. These days it's around about 115."

The public sadness at the job losses was understandable, and the anger at "losing" another Australian brand wasn't hidden, but some were saying Blundstone did well to hold on for so long, and Gunn believes that the company functions much more effectively now.

He cited the pressure the company and other Australian manufacturers were under, with freer trade and cheap imports working against them. Capacity was also an issue.

"Well we were needing to compete against people who'd already made the decision, and for that matter people who never made a product in Australia," he said.

"They were able to make better quality products, a higher feature set; we weren't making a better price – it's only because we were price-matching.

"We were constantly letting people down with supply because – as soon as something went wrong at the factory it becomes affected. Whereas nowadays we have got more flexibility in the chain if something goes wrong in the chain it's still a problem, but it's a problem that we can do something about. 

"And we've gone from saying no all the time to saying yes fairly regularly. And that certainly transforms the way the market relates to you."

Indeed, even before it outsourced its labour, Blundstone was importing components such as uppers to make its finished products. 

"Before we moved our manufacturing away from Australia, a significant amount of the components were from overseas," Gunn said.

"So it was always – we were only part of the value-add."

But if you move so much of what you do overseas, can you still rightfully call yourself an Australian brand?

In a timeline of milestones on the company's website, the 2007 move overseas isn't mentioned. Perhaps it's something they'd rather not emphasise.

At what point do you lose the right to call your brand an Aussie one? 

"Well, first of all we're a strongly Australian company, 100 per cent Australian owned, family-owned company, operating in Tasmania," explained Gunn.

"And we're still providing employment for a significant number of people. I get quite concerned about definitions or segmentation of the manufacturing market."

The boot company's CEO believes if you're going to be a purist about it, you're not going to be left with very many Australian brands at all.

"The first thing I'd say is there's very few companies that are operating a truly 100 per cent Australian supply chain," he said.

"They may well be bringing components from overseas and assembling it in Australia, but they can't say they're 100 per cent Australian."

He points out that a brand – manufacturing or otherwise – has to recognise its strengths and in what areas it is competitive. Pretending that one can compete where it's impossible to is silly.

"That's a fool's paradise. What we've done is say, 'What can we do really well and can we add value? Can we have sustainable employment that doesn't need government support?'" he said.

"The [clothing] industry has long been a protected industry: it could only survive on the back of government tariff protection. Can we still bring profit back into Australia for the benefit of the Australian economy?"

Gunn pointed out that company still employs well over 100 Australians, mainly in white-collar positions, but also making gumboots.

"The gumboots are still made here – about a quarter of a million pairs," he said. "And the gumboot business has grown since 2007."

What's also come along, relatively recently, has been the use of recycled PVC in the gumboots. 

"We have introduced in the last two or three years gumboots that have the waste material, the waste PVC is re-ground and put back into the products, so there's a percentage of the product that is recycled material," he said. 

"And that's a percentage to soak up some of the waste material that we create. And that went to market three years ago and hasn't affected the way the product performs, it just required us to modify our arrangements to ensure that we were designing it in, rather than just treating it as a waste we didn't even worry about."

Sustainability is part of Blundstone's brand. Gunn pointed out three other initiatives: the choice of environmentally sound tanneries, being a signatory to the Australian Packaging Covenant, and building a more environmentally office to run the business in.

Before the interview's over Manufacturers' Monthly asks "what about the sustainability of the manufacturing industry itself? Didn't Gunn once controversially say that there's no future in manufacturing?"

He laughs heartily at this, saying the ABC badly misrepresented him.

"The question [asked on the 7:30 Report in a story about the closure of the Hobart factory] was 'where do you see the future of Australian manufacturing?'" he recalled.

"And my answer was 'I don't think it's got any future in the area of bulk processing.' And unfortunately 'in the area of bulk processing was edited out!' "

So what advice would he share if he was asked the question again (and was quoted faithfully)? 

He suggests pragmatism.

"I think that the country needs to embrace that we want to be a net exporter, so that means that if we want people to buy the things that we're good at making, we have to accept that we're going to buy what other people are making," he said.

"That's just the way the world is these days, and it's neither right nor wrong, it's just reality."