It has become imperative for Australian manufacturing, especially in the automotive sector to work smarter to overcome the increasingly difficult challenges of the global marketplace.
Some Australian automotive manufacturers are recognising the need to invest in new business models in the face of significant evolution in the industry. AutoCRC Chief Executive Officer Jim Walker believes automotive manufacturers will increase their chances of having a sustainable future when they apply their skills and experience to other industries and new markets.
Jim Walker explains that key design, engineering, production and project management skills honed in automotive will serve businesses well in almost any manufacturing sector. While a company initially may be limited by its physical assets, such as tools and equipment, the business can secure its future by applying its core technology to new applications.
While moving outside the company’s comfort zone can be daunting, and will require creativity, due diligence and investment, the outcome can be new products using old technology or installation of new technologies to produce improved products for existing customers or different product for new products – all of which may open growth beyond local sales through exports.
He cites the partnership between SMR Automotive, the University of South Australia and AutoCRC to produce the world‘s first plastic automotive mirror using multi nano coating technology as a successful case study.
The Adelaide plant operates three shifts a day five days a week and exports its high technology product to the USA for fitting to one of the most traditional vehicles on the market – the Ford F150 pickup truck. This Australian innovation is 50% lighter than traditional glass mirrors and the weight of the entire mirror assembly is reduced by a further 15%, which cuts emissions. In addition, the design simplifies the manufacturing process because the number of parts is reduced.
According to Jim Walker, the message of this local success story is that Australian manufacturing can be sustainable – the advanced manufacturing innovation not only makes the vehicle more environmentally sustainable but also makes the SMR Australia business more competitively sustainable in the global automotive marketplace.
A number of suppliers including Futuris Automotive Interiors, Dolphin Products and Metalsa have grasped opportunities to be involved in both business excellence and R&D projects through AutoCRC/ASEA, recognising the need to be forward-thinking and innovative in their approach to opportunities and future business.
Value creation in industry
At a recent AutoCRC Sustainable Manufacturing seminar, the South Australian Advanced Manufacturing Council Chair Prof Göran Roos said value in industry can be magnified when it is derived from different domains.
Prof. Roos said that given the Australian automotive industry’s present and future situation, it is essential that suppliers diversify outside the industry. He said a good target is 30% of turnover outside automotive.
Value creation in industry connected with automotive is significant. According to data from Sweden SCB, every $1 in increased demand for a locally produced car will generate an additional demand for a wide range of materials, tools and equipment, products, and services.
University of South Australia’s Associate Professor Peter Murphy supported this view and told seminar delegates that each manufacturing job creates another 2-5 jobs in the community. He noted that Australians are good at developing technology but slow at applying it to their own industries to add value to existing manufacturing. The fact that Australian manufacturing is in serious decline is cause for great concern.
Manufacturing employs more scientists and engineers than any other sector and is the key driver of innovation; without it essential competencies such as science and engineering will not prosper. Prof. Murphy said that given the high cost of labour in manufacturing, Australia must compete on the basis of innovation.
Maintaining skill sets for innovation
Computer aided engineering (CAE) is one of the sectors and skills at risk with a declining automotive industry. Managing Director of Compumod Warwick Marx told the AutoCRC seminar that ‘smart work’ is disappearing offshore with manufacturing. He said there are now fewer people involved in CAE work in Australia, particularly those doing high end business case analysis.
He said it is unfortunate that a lot of engineering design in Australian manufacturing is now basic work in product life extension to keep existing infrastructure going, such as rail systems. In a model where a single CAE employee does only basic tasks, there is little interaction and few peer learning opportunities, with the end result being a loss of the critical mass of expertise that is very hard to replace.
Mr Marx characterised the result as a shift in the economy’s structure from ‘designer manufacturer’ to ‘asset manager’, adding that while short term gain may come from offshoring design engineering, industries will miss opportunities for new developments because the capability to compete smarter and better has been lost.
Deloitte Touche Tohmatsu manufacturing partner Damon Cantwell encouraged automotive manufacturers at the seminar to put the passion back into manufacturing. He said that compared to other economies, Australia boasts stable economic, trade, financial and tax systems based on a government that invests in manufacturing. Reasonable cost and availability of labour and materials and a sophisticated supplier network will support talent driven innovation.
Automotive – the key to a manufacturing future
The AutoCRC seeks to facilitate automotive suppliers to grow their businesses in non-automotive markets. Some of this work is achieved through the Automotive Supplier Excellence Australia program managed by the AutoCRC.
AutoCRC’s Jim Walker said Australia must protect and nurture the sophisticated research, development, engineering and manufacturing capabilities that underpin innovation in the automotive industry.
He explains that the value creation capabilities of the automotive industry will be lost to the nation if crucial parts of it close down or move overseas. When a factory closes and production moves offshore, the researchers, designers, development engineers and the skilled production people soon follow.
Describing the automotive industry as a critical contributor to the value creation capabilities that help maintain sophisticated industries such as defence, medical devices, intelligent transport technologies and others, Jim Walker comments that it is important for Australia to transition to manufacturing advanced products and systems to be globally competitive in a high cost economy. He adds that it requires an ‘ecosystem’ of advanced suppliers, equipment makers and customers sustained by medium technology manufacturing, such as the automotive industry.