Features, Weld Australia

Productivity: An essential ingredient for sustainable economic growth

The Productivity Commission’s recently released Annual Productivity Bulletin 2024 shows that Australia’s labour productivity fell sharply in 2022-2023, as a record-breaking increase in hours worked failed to generate a corresponding increase in economic output.

COMMENT from Geoff Crittenden    CEO, Weld Australia

Labour productivity fell by 3.7 per cent – well below the long-term average growth rate of 1.3 per cent. This result was driven by a 6.9 per cent increase in hours worked by Australians – the highest annual increase in history.

The capital-to-labour ratio also fell by 4.9 per cent in 2022-2023 – the highest recorded decline in Australia’s history. This means that while a record number of Australians had jobs, employers did not invest in the equipment, tools and resources needed to fully realise employees’ skills and talents and turn our strong employment growth into strong productivity growth.

Similarly, the manufacturing industry saw a 1 per cent decrease in labour productivity and 1.1 per cent decline in overall output. Such statistics signal an urgent call for action to address these productivity challenges, particularly as the manufacturing industry remains a crucial pillar in the Australia’s economic framework.

Sustainable economic growth

Productivity gains are essential for sustainable economic growth, and they hinge on increasing efficiency rather than merely working harder or longer. With Australia’s labour force participation rate already at peak levels, further growth in income cannot be sustainably derived from just putting in more hours or increasing our workforce.

Productivity is essential to any nation’s economy, serving as a building block of prosperity. When productivity rises, more value is generated per hour of work, which translates to increased economic output and, consequently, higher standards of living. Productivity fuels economic growth without necessitating a proportional increase in input, such as labour or capital investment. This efficiency gain enables an economy to expand its goods and services, reduce prices for consumers, and increase wages for workers without triggering inflationary pressures.

Robust productivity growth can lead to greater spending power for governments, allowing for enhanced public services or reduced taxes, and can create a surplus for investment in crucial areas like education, infrastructure, and innovation. As a catalyst for global competitiveness, productivity growth is a necessary ingredient of sustained economic vitality and social advancement.

Productivity in Australia’s welding industry

Recognising the significance of productivity to the broader economy sets the stage for a closer look at the welding industry, where its importance is equally critical for driving growth and innovation.

Streamlining operations to complete welding tasks more efficiently translates directly into cost savings and competitive pricing. Productivity is often synonymous with quality. Advances in welding techniques and technology not only boost the rate of production but also enhance the quality and repeatability of the welds themselves. This reduces rework, bolstering a company’s reputation and operational efficiency.

Effective resource utilisation is another by-product of heightened productivity. When operations are optimised, material, labour, and equipment are used to their fullest potential, minimising waste and fostering a leaner inventory management system. This efficiency extends to energy consumption and consumable use, for improved sustainability.

From a client perspective, heightened productivity equates to expedited project completion times. This is crucial for meeting delivery deadlines, maintaining a solid customer service record, and ensuring repeat business. It also influences safety standards within the industry; efficient workflows reduce the exposure of workers to potential hazards, thereby lowering the incidence of workplace accidents.

Innovation, too, is a natural outgrowth of a focus on productivity. As companies strive for improved processes, they are often propelled to adopt cutting-edge technologies and methodologies, potentially unlocking new business opportunities and market expansions.

Measuring productivity in the welding industry

So then, how is productivity measured in the welding industry? Among various metrics, arc-on time per welder per shift is a significant indicator of performance.

Firstly, arc-on time directly correlates with output. Welding is a manufacturing process, and like any such process, the time spent actively working on the product determines the speed and volume of output. By measuring arc-on time, companies can quantify the active time welders spend creating value, enabling a clear view of their contribution to production targets.

Secondly, tracking arc-on time encourages operational efficiency. It prompts a closer look at how time is managed, pushing for a reduction in idle periods and optimising workflow and processes. It is not uncommon to find that a substantial portion of a welder’s day is consumed by activities that do not include welding, such as setting up, grinding and cleaning. Identifying and minimising these periods can significantly enhance overall productivity.

Understanding arc-on time can guide workforce development and training programs. By analysing this metric, a company can identify skill gaps and training needs, ensuring that welders are proficient and can maximise their arc-on time. This focus on skill enhancement not only boosts productivity but also promotes a culture of continuous improvement and professional development within the workforce.

For varying labour hours, the operating factor is also an important metric – it gives a more accurate indication of a workshop’s productivity. To determine the operating factor, a simple sum is used: arc-on time divided by total labour hours, multiplied by 100. The average operating factor in Australia is currently 20 per cent. The operating factor is an indication of how much of a welder’s day is spent welding.

Weld Australia’s productivity improvement projects

Image: Weld

Weld Australia is set to undertake two projects designed to improve the productivity of Australia’s welding and fabrication industry.

Our first project will involve the measurement of welder productivity as defined by the number of arc-on time per welder per shift.

According to member reports, the average arc-on time for a welder in Australia is approximately two hours. However, in countries such as Germany and the United States (which have equivalent Workplace Health and Safety standards to Australia), industry works on an average of five hours on-arc per welder per day. This is obviously a marked difference.

Simplistically, if Australia could increase its productivity to internationally competitive rates, we could effectively double the welding capacity of our industry. This would go a long way to solving the issue of labour shortages and capacity constraints.

Weld Australia will undertake in-depth research into Australia’s welding practices and productivity and compare this to the situation in Germany and the United States. We will then review possible solutions, such as leveraging Trades Assistants to complete tasks like griding, set up and cleaning, or using robots and cobots.

The second project Weld Australia is working on is a productivity-based training scheme. Under this program, Weld Australia would help fabrication businesses conduct their own staff training. We would provide advanced learning resources, train their trainer, accredit their training facility, and then certify welders according to ISO 9606 or AS/NZS ISO 1554.

Fabrication companies would be able to quickly qualify production welders able to successfully undertake fillet welds, rather than waiting three years or more for a Certificate III or IV trained welder. Weld Australia is currently seeking grant funding, which would enable us to implement the project at little to no cost for members.

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