“The reports of my death have been greatly exaggerated”
Once uttered by Mark Twain, the same may well be said for the Australian manufacturing industry.
I know, I know. We constantly hear bleating regarding the sorry state of manufacturing, how plants are closing down and moving offshore. But for every one who goes under, there are those who prosper.
So what differentiates them?
Today’s article is inspired from a series of interviews I heard on ABC’s AM program discussing the state of Australian manufacturing.
There are some excellent lessons to be learned. Lessons you could put into practice regardless of what industry you’re in. And as you’ll see there are many ways to be right.
Let’s start with biscuits!
Family run company Heather Brae began in 1941. It sent biscuits to Australian Diggers overseas and it’s still making biscuits, tarts and shortbread in Melbourne’s northern suburbs.
Bassam Wakim is the company’s managing director. He says, unlike car makers, he doesn’t get any government handouts.
BASSAM WAKIM: Look, it’s very tough and it gets tougher every year. I know of four similar sorts of biscuit – cookie manufacturers that have gone into administration in the last four years, so it is quite tough, but we’ve been fortunate to have good growth. We’ve had 20 per cent growth in the last year.
We need to be innovative. We’ve got a full-time person that just does product development for us. I’ve been in the industry for over 20 years, so we’re always looking out for new ideas, new products and just stay ahead.
TONY EASTLEY: Are you confident about the future?
BASSAM WAKIM: Yes, I am. I mean, I’ve got young kids and I’m confident that one day I could hand all this over to them.
TONY EASTLEY: Other food manufacturers have gone by the wayside. What lessons have you got for those who are suffering?
BASSAM WAKIM: We’ve stuck to our core business, biscuits and cookie manufacturing. We haven’t ventured out into other areas. We’ve reinvested, we’ve trained our people, but probably most importantly, we’ve been able to understand our costing.
So these days there’s a lot of flak on the supermarkets, but if you can’t supply the supermarkets at the price they want it for, you just have to walk away. So, I think a lot of the problems others have had were to supply products where there just wasn’t enough profit in there.
TONY EASTLEY: And in a way, you go against the grain of common thought and that is you’re not exporting.
BASSAM WAKIM: We’re not doing much export, that’s right. Look, with our sized company, there’s still a lot of scope for us in Australia, so that’s our main focus. But, that’s not to say that we’re not trying to export. We’re trying to do that as well.
ANCA based in Melbourne makes computer controlled machines that make grinding and cutting tools used for making anything from hip joints to components for Apple iPhones.
Their clients include Boeing, Toyota, Rolls Royce and Harley Davidson. It also develops its own application software. The company employs 800 people and says its success is based on developing smart ideas and exporting their products around the globe.
Company founder Pat Boland has deliberately targeted a niche market.
PAT BOLAND: So it’s a very technical, very specialised product we’ve got, but the world is our market. If you’re selling from Australia you’ve got to have something that the world wants. And in our field it’s technology and it’s the quality of our software, the quality of the machine, features of the machine and so on, accuracy of the machine, that’s what customers are buying. And we have to, as you say, it’s like the Olympic Games, international business. You’ve got to be a gold medallist or you’re on the plane home.
Our particular model is that to an American customer we appear like an American supplier. So we’ve invested in all the after, pre-market, pre-sales activities, technical support. Our customers in America or Germany or Japan don’t have to know that they’re dealing with an Australian company.
TONY EASTLEY: What areas do you think in manufacturing are likely to blossom in the future?
PAT BOLAND: The only future is really at that premium end. If you’re trying to compete on cost there is just no room in Australia. The only space you can compete on is on the smarts.
WA company Hofmann Engineering says current conditions are the toughest they’ve experienced. The company says innovation and flexibility are the keys to successful manufacturing.
At a time when Australian manufacturers are being driven out of business by international competition, Erich Hofmann is selling gears, parts, and equipment to the world.
ERICH HOFMANN: These large gears here we’re making for Africa. So these will go to South Africa. And as you can see, we’re building six of them.
Fifty per cent of what Perth-based firm Hofmann Engineering makes is now sold to overseas customers.
We’re doing these large double helical gears. They go to Texas.
We make the world’s biggest gears. Five months ago we designed and manufactured a gear that went to China which was 13.3 metres, which is to our knowledge the biggest made in the world so far. And to export it to China is quite a coup, because normally all the stuff is coming the other way.
Hofmann Engineering employs 650 people with plants in WA and Victoria as well as Canada, India and Chile. When companies were closing down during the 2008 global financial crisis, Hofmann was buying up big, and expanding its reach.
Government tax breaks on research and development are critical. The company spends $33 million a year driving the innovation and flexibility to help survival.
The Jubilee Spring Company at Ourimbah on the New South Wales Central Coast employs 35 full time workers. Spring-making may seem like old fashioned manufacturing, but to survive and be a success they’ve had to adapt and innovate.
TONY EASTLEY: What sort of springs do you make here?
JOHN GUEST: We do everything from components for Cochlear ear implants, heart pace-makers, right through to mining equipment, bulldozing equipment, sewer equipment, aviation equipment.
TONY EASTLEY: You’ve even got mouse-traps over there.
JOHN GUEST: Yes, the Government came to us and said that Woolworths and Coles were having problems getting a supply of mouse-traps so we redesigned the mouse-trap ourselves and we turned it into a recycled, recyclable mouse-trap. And we probably sell between one and two million of those mouse-traps a year – totally Australian made.
Aside: Yes, you read that correctly – someone really did invent a better mousetrap!
JOHN GUEST: You have to diversify. If you don’t diversify in this industry you’ll never survive. You have to do anything that’s thrown at you.
We have big equipment down there to coil big springs and we have very small equipment down there to coil small springs.
And I think the biggest problem with a lot of companies today is they’ve stayed on one line, one market and if that market drops away at all, they’re finished.
JOHN GUEST: We have quite a young base but we’ve had an older base that are coming through retiring now. So a couple of years ago we made a decision to bring on quite a lot of young people in. And we’ve doubled them up with our older staff so that they can retrain and we’ve had a couple of apprentices. And as a family business you’ve got to try and look to the future.
TONY EASTLEY: I get the impression at the Jubilee Spring Company, personnel, the people are very important.
JOHN GUEST: When new products come around we have think tanks on things that we want and have to do.
We ask everybody’s opinion – everybody. All our toolmakers. Our people say look we can do this better or we can do that better or this isn’t the way to go. You’ve got to be prepared to listen; you’ve got to work together.
Reading these examples (and there are more on AM’s site www.abc.net.au/am/) the common theme is “innovation and diversity”.
These organisations are clearly focused on what their customers want and need. The best of them think of themselves as Australian but they also think of themselves as global companies. They take their ideas from wherever they may find them. They are looking globally for new ideas, new ways of improving their business, new technologies. They’re not parochial.
They’re inherently focused on their market. They are not focused on asking governments for support.
What’s your story?
A new financial year is almost upon us. Right now’s the time to focus on what you need to do to ensure this year gives you everything you want from your business.
And while I’m sure you’re not going to spend $33 million on innovation, if you’re not continually sharpening your skills and tools you will be left behind.
Every one of us needs input from multiple sources – multiple points of view to make sure we’re not going down rat holes and to help recognise opportunities when they present themselves.
And our Two Heads program does exactly that. You’ll get our input in short, effective bursts and I guarantee you will get value. And if you book in and pay before 30th June, you can claim it as a tax deduction this year while taking the sessions whenever you’re ready.
Call us on (02) 9499-7958 to book yourself in.