Australia’s manufacturing industry is being warned to innovate or face perishing over the next five years.
Just under half of local manufacturers are innovating — using improved products, services, processes or methods — despite tough global competition and disruptive new technologies.
And compared to international peers, Australia ranks in the middle of OECD countries when it comes to the ability to innovate.
It is ahead of China and Russia but behind the United States and Japan.
Former University of Technology Sydney professor and manufacturing consultant, Graeme Sheather, said Australian manufacturing was in decline and firms needed to transform or go under.
“If they don’t make the change in five years then they won’t be here,” he said.
The number of manufacturers in Australia has fallen from 96,000 10 years ago to nearly 84,000 last year.
Medina Engineering in south-west Sydney is one firm that has moved with the times.
Gus Medina senior started making parts in his garage in 1974.
Now his children, Gus Medina and Jessica Uzelac, are running a high-tech manufacturing business which exports around the world.
It makes parts and machinery for industries including defence, mining and construction and even astronomy equipment.
Ms Uzelac said the firm has had to innovate to survive.
The younger Mr Medina said that has meant spending millions of dollars to upgrade their factory.
“We were having a big issue with overseas competition — we needed to invest in equipment in order to succeed, and that’s what we’ve done over the last 15 years,” he said.
Some of that equipment includes high-tech machines which use 3D models to make parts for products including racing cars and train seats.
Time and cost leaving companies reluctant to change
While firms like Medina are spending big on technology and seeking expert help, only 48 per cent of Australia’s manufacturers are innovating, according to figures from the Bureau of Statistics.
That is compared to nearly 45 per cent of Australian firms overall.
Mark Goodsell, the national director of manufacturing at the Australian Industry Group, said some firms were reluctant to change because of the time and the cost.
“I think there is a lot of research around the world that not every manufacturer will go on a journey of change; some of the figures put it as low as a third or even lower than that,” he said.
According to the NSW Industry Department, just 5 per cent of manufacturers have teamed up with universities or research institutions in the state and only 16 per cent have a formal research agreement.
And some manufacturers are not taking advantage of government and industry programs to help them survive.
Mr Goodsell said some programs were missing the mark.
“There’s quite a few government programs both at the federal and state level,” he said.
“When we last added them up, there was well over 150 so there’s no shortage of individual programs, but it can be bit of a confusing mix.”
“The real trick for government programs is to make sure they are flexible enough to meet the needs of the individual company because every transformation story is slightly different and it’s not really a one size fits all game,” he said.
Professor Sheather is trying to launch a new program in collaboration with the manufacturing industry to help small and medium-sized firms innovate.
His program plans to use virtual reality so manufacturers can learn on-site from firms which have made the transition.
Professor Sheather’s research has found that firms find it difficult to navigate the maze of information about government grants.
“The schemes are confusing, they are mis-aligned with industry needs,” he said.
“They focus on technology innovation — not business innovation — and essentially the innovation programs are too broad, documents [are] unreadable without legal background.”
“So they’ve basically said we don’t want to be involved with government and we’ll do it ourselves; it’s almost a DIY approach to manufacturing change.”
‘Simple skills’ can prevent collapse: manufacturer
With help from business and government grants, South Australian manufacturer Grant Tinney has transformed his business, Precise Advanced Manufacturing Group, from one which manufactures car parts to one which services the railway, mining, defence and oil and gas industries.
“I assessed that not only was the US automotive manufacturing sector in decline but also you could see the signs obviously of the Australian sector going into decline as well with the shutting of Mitsubishi, so that was at that stage where I decided to reduce our automotive exposure,” he said.
He said some manufacturers were afraid of change.
Mr Medina agreed that staying afloat as a local manufacturer required strategy and collaboration.
“If you are not investing in your business these days the future will be very slim if you have to compete against people who have the equipment, and that’s how it works,” he said.
Ms Uzelac said Medina actively networked with industry groups, other manufacturers and universities.
“Before when our pool was smaller we were very isolated, we could compete for work, but now we’ve realised if we don’t work together and that job goes overseas, it will be overseas forever and we’ve lost it.”