Goodbye Holden, hello ‘Advanced Manufacturing’

Published on the 01/11/2017 | Written by Jonathan Cotton

Advanced manufacturing

Can the Australian manufacturing industry reinvent itself for the new era?...

The closing of Holden’s Elizabeth plant – with direct job losses of around 5000 – brings to a close Australia’s almost 100 year auto industry.

Now that the Australian car industry is dead…what’s next?

To answer that question, a new, hopeful-sounding document, ‘Advanced manufacturing: A New Definition For A New Era’ has been released.

Created by the Advanced Manufacturing Growth Centre (AMGC) – a not-for-profit created out of the government’s Industry Growth Centres Initiative – the document has a point and looks to argue it: “There is a growing market for advanced manufacturers that not only create finished products, but add value at every stage of and within the global supply chain.”

High on aspiration, it’s low on specificity: “With the right blend of committed industry partnerships and government support, the future of advanced manufacturing in Australia is bright.”

Essentially, the report calls for a “new definition” of manufacturing – which it calls ‘Advanced Manufacturing’ – that focuses less on production and more “on the entire manufacturing value chain including higher value pre-production and post-production”.

The report added “In May 2017, the Australian Bureau of Statistics recorded 905,000 direct jobs in Australia’s manufacturing sector. Under the new definition this would rise to almost 1.3 million if indirect workers [who] supply inputs and services to manufacturing are included, for example, workers exclusively delivering research and development, design, logistics or services to manufacturers.”

There’s a strong R&D focus: The report finds that “80 percent of Australian manufacturers could become more advanced by collaborating with researchers, increasing their information and communication technology (ICT) spend, introducing a new product-related service or by using patents to protect their ideas.”

The recommendations of the report, in a nutshell, include policy reform (mainly reporting that takes the new definition into account), regulatory reform (the decisions made based on the new definition) and funding reform (to lift funding from its current manufacturing R&D investment of 27 percent to a figure more comparable with Germany, Japan and South Korea, 85-90 percent).

It also outlines three key characteristics of advanced manufacturers and offers them as a blueprint for emulation by local organisations:

  • Advanced knowledge: “Innovation leaders that score highly on measures such as R&D spending, ICT use and number of patents”
  • Advanced processes: “Process winners that make smarter use of technology, scoring highly on capital intensity, use of automation, energy and water efficiency, and new equipment”
  • Advanced business models: “Act as niche market players, scoring highly on measures such as trade intensity, linkages with other firms and greater share of services in total revenue”

It’s all good advice, if more than a little broad.

And yes, it’s in lockstep with what the Federal Government is already doing: $47.5 million into the Advanced Manufacturing Growth Fund was recently announced, supporting manufacturing projects in Victoria and South Australia as part of the $100 million Advanced Manufacturing Fund (other measures included an entrepreneurs program and an R&D tax incentive).

As for the demise of Holden’s Elizabeth plant, it appears that’s spilled milk.

“Manufacturing is more than production,” Jens Goennemann managing director of the AMGC assures us. “Manufacturing today comprises of R&D, design, supply chain and logistics, mass customised goods, post-sales support and services. Companies across all areas can innovate and compete through offering exceptional technical solutions or services, making them less dependent on pure production.”

It’s a sentiment that’s easy to get behind. It’s the digital age after all, and we’re smart, so why not ship the basic, low-value manufacturing work off to someone who does it better and cheaper and get on with the business of building a smart economy? There’s plenty of logic in that, and, for the most part that’s a good idea.

And you can’t fault the creators of this document for trying to point out that the potential for Australian manufacturing is substantial. Most potential usually is.

Still, currently 10 percent of the Australian workforce (1.3 million) finds employment in the manufacturing sector – that’s according to AMGC itself – so it’s not sentimentality to spend more than a moment thinking of the broken eggs going into Australia’s emerging digi-tech omelette.

There’s little point in arguing with market forces and the closure of the Holden plant surely indicates that for Australian manufacturing the writing is well and truly on the wall: Get smart or get left behind.

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