State Of The Industry: An Australian Manufacturer’s Observations
By Paul Hughes, Managing Director, Integra Systems
2021 marks Integra Systems' 30th year in operation so, as you can imagine, my team and I have experienced quite a bit when it comes to manufacturing in Australia, although I'd say nothing quite as unique as the seas we're currently navigating.
Despite continued cross-sector jitters due to the COVID pandemic, I've observed some trends emerging in Australia’s manufacturing sector that promise to be good for the collective soul of the industry as they continue to evolve. Manufacturers and customers alike just need to be more mindful than ever of how to support each other and see each other through to the other side (see our Advance Australian Manufacturing initiative as an example of how Integra is pitching in to support other manufacturers).
I've recorded some observations of how we can turn what may initially feel like a negative situation to our advantage. Some of these observations have come from Integra's attendance at the Land Forces convention in Brisbane, and seeing the changes in Defence procurement, but others are just general thoughts from working at the coalface of Australian manufacturing from day-to-day.
Homeground advantage – the value of loyalty
As import options dried up with the brakes applied to global trade, Australian businesses are starting to re-think the importance of local supply chains. This has resulted in a definite exponential increase in demand for Australian manufacturing.
In an about-face to the trend of recent decades, local manufacturers have a definite edge. The tables started turning in mid-2020, and now companies are seeking out Australian manufacturers for variety and high volume, as well as small-batch manufacturing. I think there’s greater respect for Australian manufacturing and greater loyalty because companies want to secure a safe and secure supply chain.
As a result, local manufacturers can better reward their existing customer bases for their loyalty. It’s easier to identify the opportunistic customers who are still thinking they can use Australian manufacturing to plug a hole until things get better – then leave us high and dry! However, given local manufacturers can only fill so many orders, we now have more choices as to who we want to work with, and undoubtedly, that means preferencing existing customers in acknowledgement of good relationships and long-term loyalty.
I’ve had colleagues say to me they've chosen not to rock the boat or change payment terms or tighten things up because their loyal customers will always be there, but they're also trepidatious about taking on any new customers during this period. That's certainly been the case for us here at Integra Systems too. It's a matter of identifying the new customers who are waking up to the advantages of Australian manufacturing, rather than simply looking for a stop-gap solution.
Defence: sovereign capability, cultural change and manufacturing opportunity
The constantly shifting sands of global politics and international relations are also having an impact on local manufacturing. Specifically, the defence industry is seeing value in high-quality manufacturing, and they realise Australian manufacturers have that capability. With many of those in defence, sovereign capability has become a major focus.
Defence is a long way ahead of other industries, which has resulted in funding in sovereign capability happening for a couple of years now. It's meant the defence industry has put money into innovative Australian companies and supported them to make goods here locally, which makes sense in the event of a conflict potentially occurring.
This defence posture is driving a sense of urgency. There is always a lot of talk around defence projects and long lead-times but the industry is now starting to see the need to get rubber on the road and ensure the supply chains are established. It's time for action, and it's this sense of urgency that is also encouraging a broader cultural shift procurement.
Expectations and the value of communication
The current environment has led to some remarkable improvements in customer/manufacturer relationships. With materials availability impacting turnaround times, customers are proactively talking with their suppliers about their concerns and how, from a customer point-of-view, they can support manufacturers.
People seem to be prepared to rally around each other, which has seen relationships strengthen rather than whither. I've personally been thrilled by the camaraderie I've seen, and the huge amount of underlying loyalty and respect the Australian manufacturing sector and their customers have for each other.
For instance, Integra has a major supermarket chain as a customer. A couple of items we were supplying had been sourced offshore but we did some digging and uncovered an Australian alternative to future-proof the supply chain, even though it would cost them a bit more. They were adamant they did not want us absorbing the cost and they were willing to take on the extra charge for the sake of securing that supply chain.
Many Integra customers have proactively set up fortnightly or monthly check-ins with Integra to keep across their ordering processes and supply of raw materials, so we can alert each other to any possible pinch-points. This kind of communication is also important for manufacturers, like us, to ensure we're not over-stocking.
As you can see, there is a lot more collaboration happening, which is a really good thing for customers and suppliers. While there is still uncertainty, everyone is working for a common goal with less of a 'what's in it for me' attitude. Everyone wants good value for money, and the change in supply chains and processes is not necessarily cheap but it’s a fair price to pay for something that’s going to be of good quality and value.
So, how is Integra operating in the current environment?
I recently penned a letter to our customer and supplier community where I outlined how Integra was positioned in handling the ongoing disruptions created by COVID.
One of Integra’s core values is the manufacture of Australian products in Australia so, in honouring that, we have endeavoured to protect our customers’ supply chains by sourcing and manufacturing everything here in Australia. The focus for us is to continue pushing forward with innovation, and we are doing everything we can to facilitate the growth of our customers and our relationships.
In recent times, Integra has implemented several new internal practices. This has included a laser materials storage tower, which enables our fibre-optic laser to run unmanned overnight, doubling our previous laser-cutting capacity. We've also installed a batch powdercoating system, significantly reducing lead-times on painted products.
In 2020, we invested in a Cobot (computer robot), which has been deployed on several projects including riveting and welding. There are plans to use the Cobot to eliminate repetitive labour-intensive tasks and support our workforce with upskilling opportunities.
As well as expanding our production team, we've worked on our Industry 4.0 capacity, which has led to some significant productivity gains and established new quality benchmarks. This has involved combining live machine monitoring, Integra’s ERP system and CAD data into an integrated touchscreen solution deployed factory-wide via a 42” touch screen kiosks at each workcentre. We've called the solution K4.0 and it forms part of our DigiSMART Collection. We've been fortunate to use our own manufacturing facility as the prototype but we have now commercialised K4.0 for other manufacturers.
Engaging regularly with our customers to keep them as informed as possible and expanding capacity as much as we can alongside increasing demand has allowed us to reward the loyalty of our customers, facilitating an environment where we can better support those who’ve supported us. We hope Integra can offer an example for other businesses grappling with the upheaval of COVID, and a state-of-industry that offers as many advantages as it does disadvantages.
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If you would like to learn more about the K4.0, click here.