Protect Your Manufacturing Heritage By Moving To An Advanced Manufacturing Model

Mitsubishi closed their manufacturing plant in South Australia due to the comparative high costs of production, it is time to rethink bulk manufacturing in Australia

The South Australian economy for many years had a strong manufacturing sector, such as the automotive manufacturers GM Holden and component manufacturers in the North of Adelaide and the now closed Mitsubishi and component manufacturers in the South. Automotive manufacturing is not the only manufacturing sector in SA, however the economic and market forces that contributed to Mitsubishi leaving SA, and Holden downsizing production provides a lesson for other smaller manufacturers. Right now SA manufacturers are faced with high costs of production, and a high A$ which is near parity with the US$, which subsequently pushes up the price of Australian Products abroad. For many international markets Australian made products are just too expensive at the current A$ level, and are no longer competitive. If manufacturers are to survive in South Australia then the need to address these cost of production and regain the international markets.

So what can SA manufacturers do to address this potential loss of International markets?

It is not in SA’s Interest to have the manufacturing sector just get up and leave, as we have built up years of knowledge and expertise, and in many cases companies have substantial intellectual property invested in manufacturing in South Australia. The time is upon SA business to look to the future and effectively plan for the next 10 years where an A$ has been forecast to be high. Manufacturers must address these cost pressures through rationalising their manufacturing while at the same time protecting their well invested intellectual property.

But how can manufacturers do this?

The South Australian government has identified this challenge of a loss of competitiveness in recent years and is now encouraging “Advanced Manufacturing” in SA, where cost is not the primary factor, but instead just one of the important factors along with quality, and Research and Development. Australia can no longer compete in low cost manufacturing with other countries in our region such as China due to our comparative high costs of production. Advanced Manufacturing works when Bulk manufacturing is undertaken abroad, to keep costs down, and then the final high technology manufacturing is completed at home. This allows a company to maintain cost advantages through the overseas manufacturing while at the same time protecting your intellectual property. Assembling the bulk components, and installing the high technology components of the product in your home market will go a long way towards protecting the most important assets manufacturers possess: Intellectual Property. This can be a complicated task, particularly with if your home manufacturing base is located well away from the low cost manufacturing centres in East Asia.

Manufacturing in China can be achieved at a fraction of the cost to bulk manufacture in Australia

In order to make Advanced Manufacturing work it is important to undertake bulk manufacturing of components in geographic locations that do not pose a substantial time disadvantage. With the growing costs of production in China in recent years SA manufacturers need to look beyond a reliance on the China solution if they are to find sustainable low cost manufacturing to compliment the advanced manufacturing in Adelaide. I would advocate a look at other markets in South East Asia to undertake bulk manufacturing, and cut the transport time. The Advantage South East Asia possesses is that the freight transport corridor stops in Singapore on the way to and from Australia. The closer the manufacturing centre to Singapore the quicker it can be on a ship heading to Australia, where advanced manufacturing can then be undertaken.  

The ASEAN Free Trade Area means that South Australian companies now have greater access to South East Asian markets such as Indonesia, Malaysia, Thailand and Vietnam. To plan for the Advanced Manufacturing future it is important to look north, but consider the opportunities on Australia’s northern doorstep.

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