INDUSTRY NEWS

55% of manufacturers with off-shored operations planning to return by 2023

More than half (55%) of Australian manufacturers with off-shored operations intend to bring them back to our shores by 2023, according to a survey of 500 senior manufacturing employees in December last year.

This is largely being driven by market volatility caused by the pandemic and strained relations with neighbouring countries.

Western Australia, the Northern Territory and South Australia are poised to lead the charge with a focus on creating local jobs and growing priority sectors such as downstream lithium processing, defence and space, according to the Australian Manufacturing Outlook survey, commissioned by PROS. Those states are aiming to capitalise on their respective geographic advantages.

Almost a quarter (22%) of respondents had already reshored at least part of their operations after they were caught short during the pandemic.

Reshoring has been driven by the need to future-proof critical supply chains in the face of market change and disruption, to minimise risk and protect jobs in key industries. This is coupled with the Australian Government’s support through the Modern Manufacturing five-year plan and strong consumer preference (89%) towards our nation producing more products, according to research conducted by Roy Morgan.

Three-quarters of those surveyed (78%) believe Australia possesses the technology, people and economic strength to support the creation of an agile manufacturing base, which would better protect and reinstate the local production of goods. Recent quarterly GDP data (released in December) also revealed a growth of 3.1 percent, as Australia pushed through the height of the pandemic.

However, Australian manufacturers are underprepared to compete in a digital economy, with 82% of survey respondents still in the planning process or yet to implement eCommerce channels to sell to domestic or international buyers; only nine percent also have market-aware, dynamic pricing strategies.

“The economic recovery is well underway, but Australian manufacturers must equip themselves with eCommerce and dynamic pricing capabilities, otherwise we risk not only stalling the economic growth already achieved but missing the right moment in history to reclaim our manufacturing heritage,” said Haley Glasgow, APAC Head of Strategic Consulting and Alliances at PROS.

“Australia is incredibly well-placed to leverage smart technologies like artificial intelligence and digital selling channels. To reinvent themselves, investment must be made by the government, industry and companies themselves.

“Accelerating the sales process with AIpowered insights can also deliver prescriptive guidance on product recommendations, identify cross-sell and up-sell opportunities and proactively mitigate churn risk. This investment can improve the buying experience, order accuracy and accelerate business growth as the economy recovers,” Ms Glasgow explains.

Hayley Glasgow

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When the pandemic forced the Morrison Government to accept the importance of manufacturing, we began to hear a lot about the need to build sovereign capabilities in Australian industry.

The Government still uses that rhetoric. The problem is that it doesn’t seem to be happening.

One of the most effective means by which the Government could match its words with deeds is through procurement policy.

Under good procurement guidelines, Government departments and agencies, and Government Business Enterprises (GBEs), are required to consider sourcing their equipment from local producers.

That doesn’t mean that an Australian product must always be chosen. But it does mean that price alone should not be the sole determinant of what product to buy.

If an Australian manufacturer is selling products at slightly higher price than a foreign competitor, buying Australia would still be a better investment if it means getting goods of superior quality.

And, producing superior products with superior local materials is what builds skills in the workforce – it creates the sovereign capabilities we keep hearing so much about.

So, you’d expect that a GBE like Snowy Hydro would be keen to buy Australian whenever the procurement guidelines indicate that would be the best option.

The Hon. Senator Kim Carr, former Minister and Shadow Minister for Innovation, Industry, Science and Research

Robust procurement strategy is essential for local manufacturing

"Buying Australian is a better investment, it means getting goods of superior quality."

But it isn’t what’s happening at Ryan’s Corner, near Port Fairy in Victoria, where the Danish firm Vestas is building a wind farm.

In March, Vestas cancelled a contract with the Portland engineering company Keppel Prince to build wind turbines for the Ryan’s Corner project.

The turbines would have been constructed from steel made in Port Kembla by Bluescope. But now they will instead be built in Vietnam, from what industry sources say is below-cost Chinese steel.

This highlights another problem, in the way our trade agreements are used to undermine Australian sovereign capabilities because goods can be transhipped across borders and get tariff concessions.

In this case the steel is said to be much cheaper than Australian steel, but it would only be two per cent of the total cost of the project. For Australia, the imported steel is much more expensive in the long term.

INDUSTRIAL COMMERCIAL SECURITY MACHINERY PROTECTION

Vestas’s decision resulted in 42 Australian workers losing their jobs, and Keppel Prince – the only wind turbine manufacturer on the Australian mainland – is struggling to find replacement contracts.

Snowy Hydro’s role in all of this is that the GBE is effectively underwriting the Ryan’s Corner wind farm – it has agreed to buy 70 per cent of the electricity generated by the wind farm.

The wind farm would not exist without Snowy’s involvement.

Yet, when I asked Snowy executives about this at Senate estimates, they admitted no responsibility for what has happened.

Previously, Snowy had supported construction of a segments factory at Apollo Flat in NSW, using Australian materials.

But Snowy Hydro’s CEO, Paul Broad, rejected the suggestion that it should have insisted that Vestas do the same at Ryan’s Corner

“We know nothing about wind farms – how they’re built or where they’re manufactured,” Mr Broad said.

Mr Broad said that Snowy Hydro would only be buying the output from Ryan’s Corner, and was not bound by the Government’s procurement rules.

In the same hearing, I asked Senator Zed Seselja, the Minister representing Energy Minister Angus Taylor, whether it was Government policy to use local steel in the construction of wind farms, as it is in shipbuilding. Senator Seselja’s response was that he would reply later in writing.

That is disturbing, because he ought to have been sufficiently well briefed to be able to reply immediately, and because it leaves Keppel Prince and the 42 workers who have lost their jobs in limbo.

Australian steelmakers and Australian manufacturers who use steel products are familiar with the threat to local industry caused by dumped products.

Ryan’s Corner is shaping up to be the latest example of what happens when price alone guides the choice of materials in construction.

Wind turbines and other renewable energy projects are transforming the way we live, and the way the world does business.

Why would we not want Australian materials and Australian manufacturers to be involved in such projects?

If the Government’s procurement rules do not require the use of local steel in wind farms, they should be amended.

Otherwise, the Government will continue to be all talk and no action in building sovereign capabilities.

Kim Carr is a Labor Senator for Victoria and a former Minister for Innovation, Industry, Science and Research.

Engineering graduates trump those with creative arts degree

by Barry O’Hagan

Graduates of Australian universities are far more likely to satisfy their employers if they hold an engineering or related degree than is the case if they hold a creative arts degree. Satisfaction levels are ranked at 90.5% and 78.3% respectively, according to a survey last year by Quality Indicators for Learning and Teaching, which is funded by the Australian Government Department of Education

This is the second year running that engineering graduates have topped the rankings in the organisation’s survey of the graduates’ direct supervisors from 3,430 employers.

The survey also revealed above average satisfaction with graduates in agriculture and environmental studies, as well as education, with 88.3% and 87.6 % respectively. Among the worst performing study areas were society and culture, management and commerce, and architecture and building.

The 2020 Employer Satisfaction Survey (ESS) also ranked employers’ satisfaction ratings with the universities and other higher education institutions that the students graduated from. Bond University was ranked in top spot, followed by University of Divinity and Australian Catholic University. The University of Western Australia sits at the bottom of the table.

Employers appeared equally satisfied with male and female graduates. However, employers rated females three percentage points higher on their adaptive skills.

The survey found that employers rated the skills of younger graduates higher than those of older graduates aged over 30. Younger graduates were rated significantly better than older graduates with respect to all attributes with the exception of their adaptive skills. For example, employers rated younger graduates’ collaborative skills at 91.1 per cent compared with 83.6 per cent for older graduates. Younger graduates were also rated significantly higher than older graduates in terms of overall satisfaction, with graduates aged 30 or under rating 86.3 per cent compared to graduates aged 30 years or older at 82.3 per cent.

Employers rated graduates from a non-English speaking background more highly than graduates from an English speaking background in terms of overall satisfaction and all other graduate attributes, according to the survey. For example, employers rated non-English speaking graduates employability skills three percentage points higher than English-speaking graduates, 89.2 per cent and 86.5 per cent respectively, though this difference was not statistically significant.