Metal manufacturers surviving troubled waters

With the rise of low-cost economies and their continued improvements in quality and lead time, Australian sheetmetal manufacturers are forced to rethink and modernise in order to survive. Annie Dang writes.

IT goes without saying that the uncertainty in the local economy, brought about by the woes of European economies, the unknown impact of the carbon tax, a high Australian dollar, and China's continuing climb to manufacturing superpower is creating rough waters for the local sheetmetal industry.

Andrew Macquart, president of the Sheetmetal Industry Association, says a combination of economic pressures as well as the dominance of Asia's manufacturing industry has seen the local sheetmetal industry shift its focus to smaller volume production that yields faster lead times.

"Australia's sheetmetal industry is becoming one of quick turn-around, small-run quantities. Traditional large volume producers are continuing to move offshore for lower cost production to countries, such as China where quality is improving and supply is becoming more reliable," Macquart told Manufacturers' Monthly.

According to Macquart, Asia's strong manufacturing sector has a bigger effect on manufacturers who produce their own products in large volumes, such as Rheem or Sunbeam, or companies who make domestic commercial products in volume. 

However as most local sheetmetal manufacturers are in the business of manufacturing smaller volume, on demand products for other industries; its production is harder to be off-shored. But it has not stopped companies from trying, and most often unsuccessfully. 

Macquart, who is also MD of Alumac Industries, a small Sydney-based sheetmetal fabrication company, says that while lower-cost economies provide an attractive landscape for companies to off-shore the manufacture of products that don't require technical know-how to make, the draw backs are often longer lead times and lower quality products. 

Navigating the way

One company successfully riding the waves is sheetmetal manufacturing contractor Advance Metal Products, based in Sydney's south west.

Over the past 10 years the company has made considerable investments to diversify it business including the addition of a product manufacturing arm making industrial and office storage equipment, plus an in-house design team to meet customer demand for cost-effective manufacturer of goods. 

The company's MD, Ian Stone, says the company can now produce or customise in low volumes or on short notice, and with very short lead times.

"It means we can supply more cost-effectively because we can design a product and supply it within two to four weeks, which is the same as shipping time from Asian countries," Stone told Manufacturers' Monthly.

He admits the company has experienced difficult trading for a long period, but these changes have helped to improve business, so much so that he is confident to start investing in some major capital equipment. However, he is quick to mention that the whole process is not all rosy.  

"When you loose major contracts to China, what are you going to do? You're certainly going to restructure, downsize and change your way of thinking. It's what we had to do," he said. 

Stone says that it has been "a long slow climb back to prosperity" and that is the way it is likely to continue for the next five to 10 years in light of the way the economic outlook is for manufacturing in Australia, and also globally.

"I think a common theme for many sheetmetal manufacturers is that we have to contend with imports from low cost-economies, particularly China. 

"We have to navigate our way through this as manufacturers and the best way to do this is to become more flexible. We have to rely more on design and be able to customise and be very flexible with our lead times.

"We also have to work internally because there are a lot of things we can't control outside our business, but there are many things we can control inside the business, and that includes learning to become more lean, establish good training programs, and focusing on better ways to do things within the organisation."

Stone says asking suppliers for cheaper prices can only take you so far, but working to improve business practices can lead to greater efficiency. 

He suggests looking into tradeshows, building an online strategy and developing good promotional materials as some things other sheetmetal manufacturers can do as part of their "internal" focus to promote their business.

Another key factor to consider is to implement practices that will make your business more unique as well as flexible, he says.

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