Reshoring manufacturing & Industry 4.0 – view from Australia
The Australian-Made movement is bringing manufacturing back to domestic shores. But for the drive to reshore to succeed, we need to be more competitive against our advanced Asian neighbours. The need for digital transformation across the entire Australian manufacturing sector has never been more critical, especially now that a global recession appears to be looming.
According to the McKinsey & Company Economic conditions outlook, September 2022 survey inflation, energy prices, geopolitical instability and rising interest rates were flagged as the potential risks to economic growth in the Asia Pacific region in the next 12 months. Rising inflation concerns saw supply chain disruption worries slip down to the fifth-most-cited risk to economies.
Closer to home, the Australian Bureau of Statistics’ Monthly Business Turnover Indicator, August 2022 found that compared to July 2022, the manufacturing sector recorded a 4.1% increase in business turnover. It was in the top three of 13 industries to record the largest rises in monthly turnover. This follows July’s data, which found that after recording five consecutive monthly rises, the manufacturing business turnover fell by 3.8%.
Since COVID entirely disrupted the market and rising inflation is threatening the economy, manufacturers must renew their focus on digital strategies to continue to grow their businesses, be competitive and meet the growing demands of the market. Our ability to compete on a global scale will only be achieved if there is widespread adoption of advanced industry 4.0 technologies, automation and innovation as an opportunity to help businesses remain strong.
Reinforcing the need to reshore Australian manufacturing
The reshoring trend was instigated by the desire to future-proof critical supply chains due to high market demand and ongoing pandemic-induced disruptions. What we learned through COVID is that those companies already producing goods locally, with advanced manufacturing at their core, have the flexibility to pivot quickly and support Australia’s needs.
This flexibility will prove to be even more valuable if we are headed for a recession. However, the Ai Group’s Australian Performance of Manufacturing Index (Australian PMI®), September 2022 recorded a 0.9-point increase to 50.2 points in September 2022 (a score above 50 points indicates expansion). September is only the second month of stable results since February. While chemicals and machinery & equipment were two of the seven activity indexes that did not contract, inventories were stable and new orders indicated strong growth. Sales, deliveries, and exports were mildly positive too.
Regardless of what industry and economic data show, it’s important that manufacturers not lose sight of the opportunities that challenges can create. For example, the reshoring trend of recent years has provided opportunities to reduce manufacturing disruptions whilst maintaining customer satisfaction through better supply chain management.
'Australian Made' can be badge of manufacturing quality
There is a strong demand for Australian-made goods, particularly since the beginning of the pandemic. It opened many people’s eyes to the importance of Aussie-made products and how we can all play our part by prioritising Australian products to help strengthen the economy and boost our job market.
One area of enormous potential for the manufacturing sector is batteries, which is forecasted to increase up to tenfold over the next decade, according to a report conducted for the Australian Government by Future Battery Industries CRC. It revealed that by 2030 battery industries could contribute $7.4 billion a year to Australia’s economy and create up to 35,000 jobs.
The nation is uniquely positioned to capitalise on this growth via our Australian-made battery plan. We should be able to manufacture batteries locally, given the vast natural resources required, including lithium. Most of these resources are currently shipped offshore for processing. Energy storage systems are in high demand by the rest of the world, and therefore making the most of this opportunity is critically important.
Industry 4.0 advanced technologies at the core
As Australian manufacturers look to reshore, they must first implement a digital strategy that puts Industry 4.0 technologies and innovation at their core. It needs to incorporate goals and key performance indicators that address business-specific pain points to ensure that the necessary return on investment for this Industry 4.0 implementation is achieved.
To ensure their digitalisation journey is successful and achieve local and global competitiveness, the digital strategy requires buy-in across the business, from the C-level management to the factory floor staff and all the support and admin people.
A recommended approach is implementing a Cloud Enterprise Resource Planning (ERP) solution as the backbone of their Industry 4.0 transition. It will help organisations seeking to reshore by providing intelligence, visibility and analytics whilst reducing additional IT infrastructure investment. Ultimately it will ensure efficiency is weaved into every aspect of their relocated manufacturing facilities.
An additional benefit a Cloud ERP system will provide is that it automates and integrates core business processes such as taking customer orders, scheduling operations and keeping inventory records and financial data. It will give a manufacturer one source of truth and enable the complete digitalisation of their business to make the reshoring transition as seamless as possible.
Using their ERP system with Industry 4.0 technologies like artificial intelligence (AI), machine learning (ML), advanced automation and automated warehousing using robots and drones, manufacturers that reshore can also address the workforce challenges and rising labour costs that Australia, like most countries, is experiencing.
Buying Australia-made products could be essential to domestic economy
Australian manufacturers must equip themselves with the Industry 4.0 advanced technologies available to them to be able to reshore. Otherwise, they risk not only stalling their economic growth but also miss a critical moment in history to reinforce and strengthen our manufacturing heritage.
Buying Australian-made products is not just a trend. It’s something that is essential to our economy and our communities are embracing it for the long haul. Those companies that pursue the opportunities in front of them and adopt closer-to-home production will experience the benefits for decades to come.
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