Federal Industry Minister Greg Combet has warned manufacturers banking on a fall in the Australian dollar that they need to change their business models.
Combet’s warning comes ahead of Labor’s soon to be released industry and innovation statement, which is reported to include recommendations for the creation of a new body to monitor major project developers’ use of Australian manufacturing products.
A spokesperson for Combet’s office told SmartCompany he was unable to comment on reports of the content of the statement.
However, Combet told The Australian the innovation statement would be based on Australia’s open market-based economy and warned against looking back to the past days of protectionism.
He warned the high Australian dollar is “here to stay” and said “the economy has to adjust to the reality of a higher dollar.”
“We are at a time of quite significant structural change in the economy,” he said.
“The high dollar is driving a lot of change and … in manufacturing in particular, business models have got to change the economy.”
Michael McLean, chief performance officer at manufacturing advisory firm Manufacturship, told SmartCompany manufacturers could not blame the sector’s problems on the high Australian dollar and the issue is productivity levels.
“We need to use the low interest rates at the moment to fund money in investment to buy new technology which gives us the capital to make things cheaper,” he says.
“Management is not utilising the new technology and equipment to make the most out of the labour.”
McLean says Australian manufacturers need to change their model and cites the example of the Electrolux plant in Orange which operates under a lean manufacturing model “but in a sensible way but without jeopardising quality.”
Every workstation at the manufacturer is told its output per hour and profit per hour.
“So it’s not just about producing the part, it’s about producing quality and that reduced warranty and service claims around Australia,” McLean says.
“It’s not labour or the dollar that is the issue, we have less unions as well and less disputation in Australian workplaces as well, we need to focus on management.”
McLean says there are five things manufacturers should do to adapt to the changing economy:
Suppliers must make whatever they make right the first time in every step of their production processes.
The plan to make such products must be visual in manufacturer’s offices and factories to see what, where, who and how those customer orders are tracking.
“Businesses must know they have to “build to plan” and if not build to plan, use cause analysis by involving their people in brainstorming issues, constraints in hindering performance to plan delivery and quality,” McLean says.
“Manufacturers need to understand their true contributors to the cost of goods sold,” he says.
Manufacturers should ensure delivery is on time and in full.
Capture all this in a business plan which is developed top down and bottom up. “Communicate, communicate and listen to your operations people,” McLean says.
Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
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