How to survive the winter of Aussie manufacturing

The Conversation

Manufacturers across the world rely on economies from the scale of production to drive down unit cost. This “mass production” approach, focused on efficiency and uniformity of product, is feasible when volumes of production are high enough for scale to be realised.

But over the last couple of decades, there are emerging trends towards so-called “mass customisation” – which could cause us to rethink our entrenched notions of how we make things.

Over recent decades we have progressively off-shored lower value commodity-based manufacturing. Many local companies that remain successful have generally moved up the value chain toward higher value-add niches or significantly transformed their operations to lift productivity by a variety of means, including automation. Those that have not done so often struggle, especially when operating in a relatively high cost environment which is the reality in Australia today.

Australian manufacturing firms are also generally small by world standards, even for those that have viable export oriented businesses and are connected into global supply chains. Those that do not rely heavily on exports serve a relatively small and dispersed domestic market, limited by the size of our population and geography.

But a globalised market means that consumers can choose from a much broader range, customised to their specific preferences and conveniently sourced from suppliers all around the world, thanks to the explosion in on-line shopping.

These days consumers are increasingly able to specify the design and features of products that they want, including functional and aesthetic features of cars, bicycles, shoes, clothes and computers.

Unlike the era of mass production where quite often choice is dictated by the manufacturer, “mass customisation” is a response to consumer’s demand for far greater control over the features of products that they wish to buy.

But the challenge for mass customisation is producing goods and services to meet individual customer’s needs with near mass production efficiency – that is, trying to optimise both economies from scale and scope.

In manufacturing of higher value-added products, manufacturers can no longer stay competitive simply by driving down the unit cost through greater efficiency.

They need to be both agile and fast to succeed and excel in relatively low volume, but high value manufacturing. In this context, do we need to rethink the notion of a factory; what it is meant to do and how it is meant to run?

The drive towards mass customisation in the clothing industry is one example where the concept of the “production run of one” is starting to take hold. Body scanners capture measurements, which are then fed to ink-jet printers to create customised fabrics or to highly automated weaving machines that create finished items of personalised clothing.

Meeting the challenge of mass customisation may require a rethink of the very nature of factories. How do we design factories when the product is no longer uniform and where profitability is potentially derived from making many small batches of different products rather than large batches of fewer products?

Industrial automation and robotics have played a very significant role in lifting efficiencies for high volume operations of repetitive tasks, but are not generally easily programable to handle a large variety of complex tasks.

The advent of new technology such as additive manufacturing, assistive automation and flexible, scalable intelligent processing is poised to enable manufacturers to excel in low volume high value manufacturing. These technologies, combined with customer-centric design and agile business systems potentially enable manufacturing firms to effectively and economically customise their product offerings to meet specific customer needs.

For manufacturing firms that see mass customisation as key to their competitive advantage, there are a number of ways to achieve agility and flexibility. Factories can be designed to be reconfigurable to do multiple things.

Alternatively, networks of firms that each specialise in specific tasks can work in an integrated fashion to share equipment and capability. This is not dissimilar to the way tech companies share information in precincts or where clusters of firms make various components that are assembled at an integrating facility within a manufacturing precinct.

Yet another model is for large shared multi-user manufacturing facilities where the scale of the operation justifies the investment in a wide array of manufacturing equipment and processes.

Although technology can provide a number of solutions to enable customised, high value low volume manufacturing, agile manufacturing is equally about skills, business models, supply chain partnerships and how a firm interfaces with its customers.

It’s tempting to look for a utopian factory of the future – infinitely configurable with the ability to produce highly customised products at a reasonable cost that delivers value to customers and profits to manufacturers. This will not be possible for many firms.

Many firms will succeed by embracing new enabling technologies to support more evolved business models.

There will be a greater focus on a better understanding of supply chains, smarter collaboration and partnerships, and increasing agility in how a firm can customise its offering to meets customer needs and still manufacture efficiently. This could well be one future scenario for manufacturing in Australia.

Swee Mak does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published at The Conversation. Read the original article.