Winning in manufacturing requires a new game plan



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Andrew Stevens, CEDA Director and Chair of the Advanced Manufacturing Growth Centre

Andrew Stevens is Chair, Advanced Manufacturing Growth Centre and Independent Non-Executive Director, MYOB Group. He is a member of the Business Council of Australia, the Council of Governors of the American Chamber of Commerce in Australia, and on the Business Advisory Council of the Australian School of Business at the University of New South Wales.

Advanced Manufacturing Growth Centre Chair Andrew Stevens looks at why we are still using the old "manufacturing rule book" when these rules no longer apply as manufacturing enters the world of robotics, machine learning and big data.

In sport, we wouldn’t try to win a premiership today using a game plan from the 1970s or 1990s – so why are we doing this in our manufacturing sector?

The truth is that the old manufacturing rule book no longer applies to the rapidly – and dramatically – changing field of making things, and if Australia wishes to remain globally competitive, we must adapt our manufacturing plan to win.

Game-changing advances in technology, big data and analytics, machine learning and robotics are not futuristic fantasies of what may come – they have arrived and play a large role in the success of manufacturing facilities around the globe. The familiar view of the traditional assembly lines of identical, finished goods is not the reality any more, and manufacturing is no longer simply about production.

As part of this revolution, international purchasers and consumers – Australia’s export customers – now expect their goods and services to be tailored to meet their distinct business needs or tastes. They want to be able to choose between products and solutions with different service attributes.

The question is, how can Australia win at this new frontier of globally smart manufacturing?

In short, we need a new game plan. A plan that introduces strategies that take advantage of our strengths and align with a competitive frontier that is quickly evolving.

The Advance Manufacturing Growth Centre has developed a vision for Australian manufacturing as part of a year-long investigation that we believe will accelerate our sector’s distinct competitive advantage.

These insights are contained in the recently released Sector Competitiveness Plan, which calls for a massive mindset shift in Australian manufacturing.

In the plan, we introduce a competitiveness and innovation framework that recommends our manufacturers follow a 21st century strategy of “value differentiation”. That is, to offer global customers a unique point of difference with a good or service that is exceptional in its technical leadership and value-added services.

Value differentiation

Value differentiation is now determined by how far the innovation boundary can be pushed and how deeply customer relationships can be integrated into the brand experience. It’s very little about competing on price, which leads to diminishing returns over time.

 

Value differentiation may mean contributing new intellectual property, either pre- or post-production, and may include research and design, planning, engineering, innovative packaging and ongoing services in maintenance and customer engagement.

For example, Laing O’Rourke recently launched the world’s biggest 3D printer that will despatch wax moulds for concrete components from NSW to any construction site in the world. As its director told us, at a time when buildings are still being made in the same way the Pyramids were erected, Australia has the power to be a disrupter.

Manufacturers – and arguably all companies – need to continually invest in technical improvements to achieve superior performance and a unique value proposition to compete on value differentiation.>

Areas of growth

Another area of huge potential explained in the Sector Competitiveness Plan is integration into global supply chains. Intermediate goods – components that form part of another product – make up 41 per cent of global trade, but Australia’s performance is just one per cent of total exports.

Multinationals such as Boeing and Thales Group already link many local firms into their global supply chains because they recognise that our successful manufacturers offer advanced technical leadership and superior service. However, I’m confident we can achieve much more.
To gain a competitive edge will mean Australian manufacturers need to expand their focus to new markets and territories. Our evidence suggests that we still rely on the established markets of Europe and the US and have limited penetration in strategic regions such as Asia.

Beating the competition

The prize in following this new game plan is real and substantial. We estimate the manufacturing industry’s economic contribution to the nation can increase by as much as $36 billion over the next 10 years.

Manufacturers on the winning team will offer something unique in terms of technical performance combined with exceptional advice and flexibility. This is the winning formula.

The Advanced Manufacturing Growth Centre was established by the Australian Government as part of its Industry Innovation and Competitiveness Agenda. For more information, go to www.amgc.org.au

 

Read CEDA's 2014 research, Advanced Manufacturing: Beyond the product line.


 


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