The Australian manufacturing industry needs to be more globally aware, says Chris Stathy, managing director of valve and compression fitting manufacturer, Philmac. And with the strong Australian dollar, the threat to manufacturing is not just coming from Asia, but from Europe and North America.
Stathy spoke to Manufacturers’ Monthly about his thoughts on creating a globally competitive manufacturing sector in Australia.
“Many Australian manufacturing businesses perhaps aren’t as globally aware as they could be, because they are not necessarily actively exporting,” Stathy said. “However, that doesn’t mean they can just be ignorant of what’s going on around the world in a competitive sense,” he added.
“These days what we’re finding is that the threat is not out of Asia as much as it is more of an emerging threat out of Europe and North America,” he noted.
The exchange rate between the Australian Dollar and the US Dollar and Euro is a major factor in this.
“Having said that, I think there are significant benefits of having manufacturing in Australia,” Stathy said.
But this is more about getting the whole supply chain working effectively, than just directing capital at improving the manufacturing process to reduce cost. Manufacturing is just one link in the chain.
“It’s critical to get the supply chain to work efficiently – both in a financial sense, and also in an operational sense, in order to minimise working capital and operating expenses. And it’s a lot easier to do that if the source is local as opposed to being two or three months away from an overseas supply source,” Stathy said.
“The issue is, if you are dealing with long supply chains, you have really got to carry a lot more inventory, because you can’t respond to variations in demand as quickly as you might if you could just turn a factory iron off, for example,” he noted.
In Philmac’s plant, the staff can turn product around within a week, Stathy said, whereas if they were purchasing stock from overseas they would wait around two months for it.
“So, as a consequence, we need to carry a significant amount more safety inventory to be able to maintain a reasonable supply to our customers as opposed to just turning the machine up and making more product,” he said.
“So it’s really about the whole of the supply chain. But to get that working efficiently is equally as important as making manufacturing cost effective,” Stathy pointed out.
Prior to the Global Financial Crisis, some sectors of Australian manufacturing were experiencing high levels of demand, perhaps, as Stathy suggested, enough to create a degree of complacency.
“Now I’m not talking about the automotive sector or the white goods sector, for example, which have been thumped around pretty heavily – each of those sectors is clearly linked into a global supply network.
“It’s the next tier down where manufacturers tend to make more niche products – I guess you’d say for smaller markets – and they are not necessarily so exposed to overseas competition,” Stathy said.
Now that the Australian Dollar has risen, overseas competition has, of course, become much more of an issue for manufacturers – both of niche products and in the major sectors.
The need for more efficient and more effective manufacturing processes and smoother, faster supply chain networks is now much more apparent.
Stathy said this comes back to leadership: “Leadership not only in business, but also leadership in unions, and leadership in government, to start to get the message out about the benefits of having an efficient manufacturing operation in this nation.”
About the interviewee: Chris Stathy was recently awarded the Medal of the Order of Australia in the General Division for his service and commitment to Australia’s water and manufacturing industries.