Manufacturing Actually

Manufacturing is transforming and therefore requires some clarification. Less value is being created at the point of production, which is only one of the many steps in the manufacturing process.

Manufacturing consists of seven steps, actually: (1) R&D, (2) design, (3) logistics, (4) production (or assembly), (5) distribution, (6) sales and marketing, and (7) services. Let’s consider the world’s first trillion dollar company, Apple. Its flagship product, the iPhone, involves an enormously complex, globe-crossing supply chain. The assembly of the iPhone X however is “only 3 to 6 per cent of the manufacturing cost”, and Apple has outsourced this relatively low value-add activity.

Research by the Advanced Manufacturing Growth Centre (AMGC) shows that we are grossly underestimating the number of manufacturing jobs in Australia. The sector employs nearly 1.3 million Australian workers or over 10 per cent of our workforce, rather than the reported 940,000. So why is that? Two reasons:

1) Let’s take all seven steps of the manufacturing process into consideration when we count heads within our sector. It is frustrating to observe domestic manufacturers doing the right thing in moving their activities across the entire manufacturing value chain, just to see them falling out of the stats. They are still manufacturers – like Apple. They just occupy or transform to higher value-add activities, and good on them!

2) Let’s consider all the companies that aren’t usually counted as manufacturing firms, but whose workers solely serve manufacturers. Manufacturers, like all companies, disaggregate their operations. Outsourcing is easier than it’s ever been. Whether you are on the payroll of a manufacturer or on its contractor list: If you work for one, you should be counted as one, rather than be statistically thrown into a conglomerated service jobs category.

As well as showing that the sector’s employment contribution is under-loved, our Advanced Manufacturing: A New Definition for a New Era report reaffirmed a mantra for our organisation. Being an advanced manufacturer, “is not what you make but how you make it.”

An AMGC member we can use to highlight this mantra is B&R Enclosures. This family business was founded in 1955 and three of their four generations are at work to relentlessly increase their adoption of digitalisation to extend its proud history. B&R makes enclosures, racks and cabinets, which keep people and equipment safe. Given its product range, B&R could be perceived as a ‘basic’ manufacturer.

However, B&R is a part of the AMGC-supported Virtual Shipyard project, acquiring the sophisticated digital tools to serve the global supply chains of multinational companies and readying itself for the massive defence manufacturing opportunities coming our way. B&R’s Industry 4.0 journey began with us around 2016 and includes a project to enable real-time tracking of each workpiece throughout its factory, as well as on-the-fly re-prioritisation for effective response to changing customer needs. For defining purposes, when talking about Advanced Manufacturers, the product is irrelevant, the way of making it isn’t.

B&R needed mechatronics, data analytics and cyber-security experts for their projects. In addition, it needed to collaborate with four outside organisations, including the University of Queensland. Now, how’s that for ‘basic’?

We can look with admiration at B&R and other presumed ’basic’ manufacturers who are advancing themselves, and demonstrating that it’s not about what you make, but how you make it. This matters because manufacturing does not only employ a high percentage of our workforce, but contributes mightily to Australia’s innovation ability and requires increasingly qualified personnel.

Every single manufacturer in Australia has the potential to become advanced, and should; for their competitiveness and for the competitiveness of our country.