PRODUCTIVITY SPECTATOR: Beating Chinese competition

Productivity Spectator

Codan CEO Donald McGurk knew there was a problem when one of his African distributors called demanding why he was letting a rival advertise Codan's top selling metal detectors at a discount.

A boom in amateur prospecting has made Africa one of Codan's fastest growing markets and McGurk hadn't authorised any discounting for his highly demanded product.

When they investigated the discounting claims, they discovered a product that was identical in every way, right down to the logo. A Chinese manufacturer had reverse engineered Codan's metal detectors and had started exporting to Africa.

Here is where the story gets interesting. The company has taken a number of steps to protect its IP but rather than tie itself up in legal wrangling, Codan has hit these counterfeiters where it hurts most. The manufacturing process that McGurk has introduced is so efficient that they've undercut their competitors on price. So much so that their Chinese rivals threw in the towel and asked to make a deal. Codan does use contract manufacturing in Malaysia, but it is the techniques developed at its plant in Adelaide that has allowed it to outfox its Chinese competitors.

Donald McGurk has just been appointed to a top national body to work on securing the future for advanced manufacturing in Australia. He is a fine man for the job. Codan uses the Japanese Kanban technique to streamline the manufacturing process. It's a version of ‘just-in-time' that was invented by Toyota. If you want to know more, McGurk will show you how it works in the video above and how that has allowed Codan to completely minimise the working capital tied up in inventory, while still maintaining product delivery times that are far quicker than its major US competitors.

Australian manufacturing has always depended on our ingenuity and ability to create new products. Next week we'll feature an interview with James Fazzino of Incitec Pivot (you can read a preview in Robert Gottliebsen's recent article A bad smell for Australian agribusiness, 11 May).

Fazzino has recently returned from visiting plants in the US where they have been very successful implementing lean manufacturing techniques. It's making those American plants much more competitive and now Incitec Pivot is bringing them to plants here. Fazzino believes that these techniques are ideally suited to Australia – our egalitarianism fits well with the emphasis on collaboration and a flat management structure. He makes another critical observation: by exporting our gas supplies as LNG we are increasing its value three to four times. If we exported that natural gas as advanced chemicals, we could grow that value to 20 times.

Australia should be doing more with our abundant natural resources. We can do manufacturing well, but we have to be smarter about it.