SME Manufacturing in Australia – Looking Forward
by Stephen Tritton
It’s been a hot topic of late – does manufacturing in Australia have a future? As many of you would be aware, there has been comprehensive media coverage of the struggles and projected closures of large multi-national manufacturing operations including Ford, GM Holden and Toyota just to name a few. The conversations are not just limited to the downturn in the car industry with textile names such as Pacific Brands and well-known names such as Sidchrome moving their manufacturing operations offshore and being in the public limelight.
Surely you will agree that these are difficult economic times. Some company strategies are just to survive from quarter to quarter until we reach the economic recovery phase. Many economists believe though that the downturn in manufacturing here has been overstated, that the job losses by these manufacturing closures are a blip with the economy generating more jobs in a single month than the losses being realised. Regardless of the varied views of employment, government subsidies (and lack thereof) and those of the multinationals, what does the future hold for SME manufacturers in Australia and how can you capitalise on the changing manufacturing landscape in Australia?
There are quite obviously a multitude of areas we could examine but let’s take a pragmatic look at risk, competition and technology in this article with the focus on manufacturing and ERP/MRP/Kanban software.
Ask yourself the following questions…
- Am I fully aware of and managing the risks to my business?
- Who are my competitors and what are their points of difference?
- How can I leverage software technologies to drive efficiencies?
Businesses need to control costs and avoid unforeseen and unexpected exposures. It’s these risks to business that, unless manufacturers examine in detail and implement sound risk management strategies and solutions, have the potential to be catastrophic to the financial well-being of a company. Let’s examine one of these that you may not have delved into before – your Supply Chain.
Supply chain examination is imperative to ensure there are no interruptions to your manufacturing operations due to suppliers not meeting your raw material requirements. Most manufacturers have implemented lean supply chain management but some points to consider include whether you have investigated how much a supply chain interruption would cause a manufacturing delay, and possibly an unhappy customer, and do you have a second source of materials to minimise the associated risks? Other items often not evaluated include financial stability of suppliers and your outbound supply chain to ensure your clients receive their goods in the fastest, most cost effective, path possible. Do the research. Ask the questions.
Australian manufacturing firms are generally small by world standards. Many do not rely heavily on exports and serve a relatively small and dispersed domestic market limited by Australia’s population size and geography. With this in mind and with customers being able to choose from a diverse international market, one of the ways of minimising competitors offerings is by “mass customisation” – the ability to produce goods to meet the individual needs of a client with near mass production efficiency. You can’t be a commoditised manufacturer that makes items other people make. You have to tailor your output to a niche where you have the competitive advantage that can help outweigh the higher cost base.
There are some obvious and not so obvious challenges that come from this. The need to manufacture higher value-added products typically comes with an increased unit cost and lesser efficiency. The challenge of mass customisation may require a rethink of your present processes and systems from process routings to “just-in-time” supply chain optimisation through to automation improvements. These include, but are not limited to, robotics, process routing efficiencies and manufacturing planning and operations software. Whilst you probably don’t need to squeeze out every last cent from a manufacturing process, you certainly need to identify wastage and inefficiencies – both time and materials - to reduce costs and maximise profit.
Having an all-encompassing ERP system will ensure you are able to have the data you need to make timely, informed decisions to ensure you are ahead of the curve and being proactive rather than reactive as we see in many SME manufacturers today. The days of disparate systems are over. Having to migrate data from one system to another or from one spreadsheet to another is not only too time consuming and fraught with errors but does not give your management team the information they need at their fingertips to make the business-critical decisions you are expecting from them in today’s immediate answer business climate.
Many firms will succeed and thrive by embracing new technologies to support more evolved business processes. Things are changing fast. Technologies advance and rapidly become pervasive due to the compelling benefits they provide. Manufacturers need to stay on top of the latest software or be left behind in the grease. Imagine only having to enter data once. Imagine having a central location of truth for your company. Imagine a system that warns you of a capacity overrun, a resource undersupply, a breach of profit margin or a cash flow issue 6 months from now. Image a system that monitors the performance of your sales team, that allows you to model an idea you have or that allows you to be kept up-to-date on the KPIs of your business whilst you are traveling.
It’s called an Enterprise Resource Planning (ERP) or Manufacturing Resource Planning (MRP) system and they have been around for a number of decades already. You might already have one but let me ask you these questions…
- When was the last time you upgraded it?
- Has your business outgrown the system?
- Is the cost/benefit of your present ERP/MRP providing compelling value?
- Do you find your business developing other systems around yours to make up for the shortfall in functionality?
If the answer is yes to any of the above, what’s stopping you from evaluating alternatives?
The modern ERPs and MRPs are inherently connected and mobile. They have functionality you could dream about and are usually flexible enough that any unique needs your business has can be integrated directly into the ERP/MRP.
It may be that you are reticent about walking away from that substantial time and money investment you made years ago on a solution, or it may be that you have no solution in place, but wish to explore one – the bottom line is that “knowledge is power”. If you find yourself asking questions regarding software solutions that you don’t have the answers to - go and find someone to answer those questions.
With the knowledge of the constant need to evolve and stay relevant in the present manufacturing climate in Australia, can you afford not to explore this? Make the contact.