Manufacturers have two choices – to innovate or perish

Whether they like it or not, change is on the horizon for South East Melbourne’s manufacturers. According to Hartley Henderson, the businesses that will survive are the ones who are prepared to change.

Whilst South East Melbourne is one of Australia’s foremost manufacturing regions with thousands of companies providing over 108,000 skilled jobs, the loss of automotive assembly will have a significant impact on the region.

According to Adrian Boden, Executive Officer of South East Melbourne Manufacturers’ Alliance (SEMMA), South East Melbourne generates around 44 percent of Victoria’s manufactured product, provides 30 percent of the region’s 358,000 jobs, and more than 300 exporters are located in the region.

“There is a need to develop new structure and operational business models for Australian manufacturers with a focus on productivity improvement to ensure that companies survive, grow and prosper,” he said.

Assemco, located in the South East Melbourne suburb of Kilsyth, is a SEMMA member that employs some 50 people and provides assembly services, including cabins for Kenworth trucks, for clients.

The company has achieved impressive productivity improvement results, particularly through the development and implementation of a unique flat-line management system where substantial responsibility is devolved to production workers.

The MyKPI online self managing tool was developed by Assemco’s Managing Director, Danny Vorhauer, with a view to ensuring that the company remains viable in a challenging environment.

“Once we had removed all middle management positions and embedded the MyKPI system into the company, a substantial reduction in people management costs was achieved coupled with significantly improved employee engagement,” he told Manufacturers’ Monthly.

“MyKPI is a self-directing and engaging work process system that promotes, encourages and drives cooperation, accountability and productivity improvement between staff at all levels throughout the business.

“It replaces the traditional and less effective hierarchy management systems that are often heavy on employing managers to oversee and drive staff. This unique flat system has proved hugely successful with staff on average doubling their individual output of work in around 38 hours or less.”

Vorhauer explains that MyKPI is based on delineation of clear work processes that are measureable (by some 450 KPIs), and that employees are trained in these processes with an emphasis on competency and the factors important to deliver core business outcomes.

“Employees have defined process accountabilities and are provided with appropriate resources and dele­gated authority to make decisions and deliver on their part of the system, resulting in greater ownership by each employee.

“A continuous improvement ethic is embedded into all work, which provides an umbrella above incremental improvement to stimulate significant productivity gains by directly rewarding individuals and group process improvements.

“Real time feedback is provided through the MyKPI online reporting system that allows each employee to access performance information and dynamically audit and steer their efforts to achieve best results. Thus the system is able to respond to leading rather than lagging indicators and develop daily corrective actions in line with the demands of the business.

“Ensuring fairness and accountability go hand in hand with provisions for employees to interrogate and challenge performance data to substantiate their actions/outcomes.”

In addition to providing assembly services for client companies, Assemco is now producing its own shock absorbers (branded RedRoo Shocks) for trucks and 4WD vehicles with a strong focus on export markets. According to Vorhauer, these products will compete primarily on quality and uniqueness, and are capable of delivering a 15-30 percent increase in the tyre life of trucks as well as improved ride and handling.

Vertical integration

SEMMA member company Maton employs around 70 people and manufactures a range of high quality acoustic and electric guitars that are recognised as one of the top brands in the world.

The company has a history of vertical integration that Production & Projects Manager, Patrick Evans, says was born initially out of necessity and has been carried through as a philosophy.

“One of the most important aspects of Maton’s identity is its uniqueness. For example, we have always preferred to make our own pickups and this has helped to separate us from the pack. Our competitors mostly use readily available OEM products, resulting in a ‘sameness’ across different brands,” he said.

“On occasions this has been of enormous benefit, particularly in relation to the amplification of acoustic guitars. Rather than fit our guitars with the same systems as our competitors we have deliberately developed world leading systems that have put us in front of our competition.”

Maton also employs vertical integration in the seasoning, storing and treatment of raw materials, especially timber, to ensure quality of tone and reliability.

Evans points out that tolerances required in guitar making are much tighter than in other timber industries and that in the end, Maton’s vertical integration is a crucial part of its unique identity.

“A central focus at Maton is the realisation that the company must continue to evolve in order to remain competitive, and that this requires combining traditional craftsmanship with advanced manufacturing technologies. The aim is to retain quality while boosting production.”

The company has invested millions of dollars in a state-of-the-art controlled atmosphere factory that features locally designed computer programs and CNC machines to precisely cut valuable rare woods from around the world.

CNC machines include Biesse Rover C, SCM Routomat and Multicam. These machines have their own software that interfaces with Rhino for design, Edgecam for machining strategies and code, and Multicam Toolpath for creating machining cycles on Multicam.

“We have embarked on a strong continuous improvement program throughout our operations which is delivering outstanding results. This includes the application of value stream mapping to identify areas that can be more efficient,” Evans says.

“CNC technology has assisted in reducing variation and ensuring that specifications are as tight as we can get them. Also, CNC set-up times have been reduced from one day to half an hour by improved record keeping, standardising, and applying templates to speed up changeovers.

“Our way of making guitars has been redeveloped by focussing on designing the ideal acoustic instrument and then working backwards to establish the methods required to achieve the goal. It is important that our approach to the market is quality driven because if we focus mainly on price then we are going to lose the battle with our competitors.”