Is manufacturing dead in Australia? We've had the likes of Holden and others that have disappeared away. What's going on?
We've got Adam Piper and Jimmy Eckert from Products for Industry (PFI) to talk about the state of our manufacturing industry.
Is the Manufacturing Industry Dead?
Is manufacturing one of the declining industries in the country?
Jim: I’m going to say, “No.” There's bespoke manufacturing, and that's where we come in. If you want a good quality product, an interface with the client, and after-sales support, you can't get that from going overseas.
Not at all. I've imported a couple of bits and pieces from China over the years, and I got this thing that they called a manual. It was not a manual so I usually just work out how everything went together. There's no after-sales support whatsoever. There's no business backing to make sure that you've actually got something.
Adam: Our manufacturing industry just needs the government backing to keep it moving in the direction that it is.
The Composition of the Australian Economy SNAPSHOT as of 14 January 2022 according to Reserve Bank of Australia
The Manufacturing Industry Needs the Government’s Support
What can the Australian government do to support our manufacturing industry?
Adam: The sovereign wealth of the country is dependent on innovation and export. Export is the biggest interest we really should have because if we're importing, we're sending money out of Australia but if we're exporting, we're bringing money into the country.
The reason Holden became what it did in the country was because of the government backing and support to develop that economy in the country. The government needs to get behind it. Tax incentives, tax breaks, all of these things make people want to produce more out of Australia.
Holden left the country because everything was five times more expensive. Wages, energy, cost of living, supply and transport, are five times more expensive than anywhere else in the world, so it's not feasible for them to produce here.
We understand that Australia has a higher cost of living, and with that comes higher wages and everything that goes with it. But if that's higher and we can't produce in comparison to Southeast Asian countries, which can do it for a lot less, our innovation has to be up and our capability has to be more than what everyone else's.
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Manufacturing Can Benefit From Some Changes in the Schooling System
Do you think this is something that's going to be solved in our generation? Or do you think it's something that just needs to be tweaked within our schooling system to be able to have people want to invest more time in looking at a career that's going to be based in Australia?
Adam: We've got to accommodate the technical people that we are training and developing through the universities in the country to stay within the country. A lot of people I talk to say that the best people typically go overseas. If they're producing for other companies overseas, it's not great for our sovereign position.
We're seeing now that we're not achieving multiple resumes for roles. We're seeing a couple, and the cost of getting that person is increasing because the supply-demand ratio is just out.
The HAILI Rocket Program Curriculum
Do you think that we're in a spot where we can grow and love building and producing to be exporting? What do you think needs to be changed with our schooling system?
Adam: We have a programme called Science of Rockets, which is a HAILI hybrid rocket motor. We designed and developed this, and it goes into schools as a STEM programme.
It is focused on teaching kids adaptable skill sets. Kids can basically tear down the rocket motor, and then they put it all back together. It's a legit rocket motor. They live fire and everything.
The STEM Programme also teaches them about the opportunities that are out there in the manufacturing industry in Australia. You can start as a tradesman and do what I've done, that is, move into project management and then move into sales. You can start there and keep moving forward.
When I was at school, we didn't even know that manufacturing existed. All I knew was construction and mining.
Jim: When I was going to school, there's a massive push to go to university and be an engineer. I thought let's go from the bottom up. I don't want to be that guy that's coming at the top and saying, do this, do this.
I was in the Navy beforehand, and I think the engineers that we had and respected the most were the ones that were sales first and then transitioned to engineers. It's the same in our game as well. A lot of the project managers have been tradesmen beforehand, and it gives us a better understanding and an overview of how the project should go. You can relate to the trades and you can walk in their shoes.
Adam: The future of Australia has to stem from school. These STEM programme and the PFI Aerospace, which is another area of our company that's developing incredible technology. And it's trying to provide innovation and everything to local industry, socioeconomic division.
I think the HAILI Rocket Program is a long-term solution to a big problem and that's going to change around the way Australia is working.
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What do you think is the biggest problem or show-stopper of the manufacturing industry in Australia? Do you think it comes down to people's disposition that it's cheaper in China so just go straight to China?
Adam: I would say the cost of execution—energy, labour, logistics and transport. It's the same reason why GM pulled out. Those are the key fundamentals of any business. For you to produce competitively on the global stage, it has to be at a competitive rate.
We're also hindered by the Australian dollar versus the US dollar. We prefer to work in the local market. We support Australia.
Before COVID, we had been solely 100% Australian-designed, built and delivered. When COVID happened, everyone stopped but we grew 40%.
For a long time, we weren't winning decent projects because of the cost of manufacturing in the country. We were honest and we'll walk into a meeting saying we're not going to be the cheapest but we're going to be the best solution. I can commit that we will be the best and you'll never have anything but support from us. You can go for a cheaper price, but that's a one-time transaction and the ongoing cost of that will hinder you in the future.
We can't compete with the cost point of overseas manufacturing and we've got to be realistic about it. Sometimes, we don't engage when we're asked to quote on something that's not bespoke, it's very straightforward; anyone can send that to Thailand or China and have it done a lot cheaper. We focus on the in-between.
There's a company that sells a case packer. They sell a mincing machine here from Italy and a case packer from France. But no one provides that solution in between to get that whole thing to work because every site, every product, every skewline has a different arrangement to what it needs to finalise that manufacturing.
Jim: We can go in there and look at a project and do the design, the layout, the electrical automation, the whole installation, and then the after safety.
Adam: You can weigh up the pros and cons, and sometimes it's about a price point. Sometimes you don't compete. If it comes in a catalogue, I don't want to look at it. I'm not going to compete with a catalogue. If it's in a catalogue, it's also in ten other catalogues, and we don't have one in ours because we don't have a catalogue. We're going to design it from scratch. We're going to do all the R&D, which comes at a cost, especially with the engineers that we have. They're incredible.
But you don't want to have your team building a wheel if there's already a wheel that you can get for a tenth of the price. You want to better utilise the scales of the economy where you can and then make sure that you're creating the most efficient business that you can through any of the bespoke solutions.
Digital technologies can help companies gear towards high value-add manufacturing through custom solutions and more efficient production. The Department of Industry, Science, Energy and Resources shares this figure of 'smile curve' that Australian manufacturers can capture by adopting technology and strategically shifting their market focus.
Adam: If you can't produce at a good margin, then you have to innovate in a great way to have something that nobody else has that stops manufacturing cost from being a problem. If you have innovation that's world-class, you don't have that competition.
Innovation is what we have to focus on as a business. Everyone else is building conveyors so how can we design them better back right at our stage? How can we engineer them to cost lower? What do you need to be addressing when you engage with every client? What are they looking for?
I thought about some of the awesome sculptures that people created with a chainsaw, which is not easy to use. I think it's the same as that. If you already had great ideas, it's just going to make it happen faster.
Adam: When they say automation and robots, they just think it's a loss of jobs. But before there were excavators and diggers, everyone dug with shovels, and we all moved on after an excavator and digger were invented.
The car automated the horse. Automation is not removing jobs. It's just creating better jobs.
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Adam: It gives opportunities like Jim and myself to progress into project management, sales, and all these other fields. We get to learn about them. The whole team is full of tradesmen, not high-level university-qualified guys.
For example, with the CNC machinery, it doesn't mean that we don't have 15 guys on the press. But why should we put a very good and very confident mid-40-year old fitter and turner to do 12,000 stainless steel bosses on a lathe? That's not right for that man's mental health. A CNC has its place, and so does a manual.
In the next episode, Adam, Jim and Josh are going to talk about the reasons that manufacturing and PFI are thriving.