Innovation key for Australian manufacturers

In uncertain times, you can earn a lot from those who manage to keep afloat. Hartley Henderson spoke to a couple of success stories and discovered that the willingness to change can be a key to survival.

A recent Manufacturing Showcase in the Melbourne suburb of Dandenong brought together over 550 representatives from a broad range of manufacturing industry sectors to discuss embracing change and identifying opportunities.

The event, which was hosted by the Industry Capability Network (ICN) and the Victorian Department of State Development, Business and Innovation (DSDBI), provided a valuable forum to hear how other manufacturing businesses are evolving through innovation in areas such as product design, R&D, information and communications technology, and leadership.

There was also a strong emphasis on the importance of diversification, particularly in relation to the automotive supply sector, to deal with the structural shift that is occurring in manufacturing industry.

Whilst there are good reasons to be optimistic, it was also recognised that significant challenges are likely to continue to confront Australian manufacturing. There is a need to clearly identify future industry sector opportunities and to understand the requirements for market entry into new sectors including relevant rules and regulations and supply chain requirements.

Electronics diversification

SRX (pictured) is a privately owned Australian enterprise that has annual revenue of around $60 million and employs some 400 people across manufacturing operations in Dandenong, Malaysia and New Zealand.

Over 100 different complex high mix high technology electronic products are manufactured each month in low to high volume runs, and exports have grown from 20 to 70 percent of production in just the last 3 years.

General Manager Australia, Jeff Malone, explains that the company offers complete end-to-end manufacturing solutions which means that customers’ basic initial concepts are worked up by design partners ready for SRX to then build and test prototypes prior to development of a manufacturing plan and establishment of a dedicated production line.

‘We partner with both domestic and overseas designers and innovators relating to a diverse range of industry sectors including medical, defence, telecommunications , automotive, lighting and security. Australia has a strong capability in the development of intellectual property, and some of the best industrial design firms are located in Melbourne,” Malone told Manufacturers’ Monthly.

“In the last 5 – 10 years we have transitioned the business from a focus on the automotive sector and diversified into providing services to other sectors, including medical devices, which now accounts for some 50 percent of production. Also, in the last two years there has been an increasing transition to Box Built products such as the hand-held ultra sound diagnostic system that we manufacture for Signostics.

“A lot of work goes into ensuring appropriate engineering support around new product designs and in-house manufacturing capability. Our production lines are highly flexible in gearing up to produce long or short runs, and they are designed for quick changeovers.

“There is also a strong focus on total product cost, including looking for opportunities to reduce inventory levels in order to free up funds to invest elsewhere in the business.”

Malone sees a strategic need for Australian manufacturing industry to focus more on adding value to production. “Why should we directly ship our intellectual property overseas the way we ship our mineral wealth for value adding. Let’s leverage our local capabilities to add value right here at home,” he says.

“We need to add more value to our products and not compete in a race to the bottom. At SRX we are adding a larger range of product and service offerings, including the installation of a new prototype line.

“SRX provides combinations of offerings that competitors don’t have with a view that if you don’t think differently then you won’t act differently. There is a massive amount of IP being developed in what we are doing, and the emphasis is on value and unique products rather than on cost and mass production piece price.

“Copying of new products in China can be an issue, but we have found that if products are designed and built here they are not so easy to copy.”

Malone believes that diversification and the development of new markets and skills can be powerful strategies in assisting a company to move to the next level. “It’s important to be prepared to take a calculated punt, to continually look for new opportunities, and to understand that new opportunities will often by definition not look like the old opportunities, so be ready to recognise them and act accordingly.”

Multiple transitions

Lovitt Technologies was started in 1954 to support the automotive industry with tooling such as broaches, milling cutters, stepped drills and reamers.

As work in this area dropped away as a result of the introduction of carbide, along with aggressive overseas competition, the company branched into other areas where it could find work. Over the last three decades, these areas have included canning tooling, electronics housings, fibre optic connectors and aerospace.

Lovitt’s Manufacturing Director, Bruce Ramsay, says canning tooling was significantly reduced with the introduction of carbide, and some very capable and focussed competition eventually reduced it to zero.

“Electronics housings ended when a major defence contract came to its conclusion and commercial work came under significant overseas competition. Our fibre optic connectors operations ended abruptly with the dot com bubble bursting in 2001,” Ramsay explained.

“The market left was aerospace and as some opportunities presented, the whole company got behind it. Since the beginning of this century we have built quite a reputation in the aerospace industry and the company is growing significantly.

“Now employing 93 people across two sites, the company produces high level complex aerospace machined components and assemblies for large commercial jets and various military platforms.

“The common thread through all of these different markets and products was to focus on high-end work where our people and machinery could best be used. Lovitt has never set out to be the cheapest, simply the best.”

Ramsay says Lovitt prides itself on a history of investing in the latest machining technology. “Senior management is constantly researching the latest on offer from machine manufacturers. The step from conventional turning and milling to the first CNC back in the early 1980’s has been repeated with the move to 5 axis machining over the last decade,” he said.

“Companies today need to be prepared to change and adapt, and look for a market that can be identified as within reach and where existing people and machinery can be steered in that direction. There is no motivation like desperation.”

Image: James Lauritz Photograhy.