Despite Australia recently saying goodbye to local car manufacturing, research and business experience suggests something of a “renaissance” is in sight for local manufacturing.
“There is clear evidence of competition within Asia-Pacific economies to attract manufacturing and other forms of investment. Rising labour costs in countries like China, along with the implementation of AI and robotics across Asia-Pacific, present Australian companies with a genuine opportunity to compete on the basis of advanced technological capability and a highly skilled workforce,” said John Tuck, a partner at law firm Corrs Chambers Westgarth and co-author of research conducted in partnership with Deacons Hong Kong and Employment Law Alliance.
“I believe it was widely accepted that automation, robotics, machine learning, AI and the gig economy are all rising in prevalence in industrialised countries, where businesses are always striving for efficiencies and cost savings in the areas of high-cost labour.
“But what is surprising, are the findings that many countries and economies with ready access to huge, relatively inexpensive and underutilised labour forces are also embracing these disruptive trends with a passion.”
Many Australian businesses are also finding that a return to local manufacturing is delivering longer term cost benefits, in addition to being able to support local jobs.
“We originally thought … we’ll go offshore, everyone has to go to China and produce things. We were like: ‘We'll do it half the price and you can design what you want, and we'll make it overseas’,” Disrupt Sports co-founder Gary Elphick said on the My Business Podcast.
“[However] it just didn’t work. We just end up with the biggest production headaches ever.”
According to Gary, because of the cloud of uncertainty cloaking their industry at present, local manufacturers are “really hungry” to embrace new ideas and projects.
“While the cost element goes up, because you’re being more efficient, you can cut down on [other costs],” he said.
“There’s no warehousing, there's no insurance, there's no multi-distribution along the lines. All those things add up into the product cost. By eliminating those, everyone maintains a good profit margin, including the manufacturer, and you get the product you want for the same price.”
Additionally, Gary said the issue of quality is one that cannot be overlooked.
“Looking back at what our returns rates were when we were working overseas, we were looking at close to 20 per cent returns,” he said.
“You think unit cost is this, yes it’s a lot cheaper; but when you factor in the returns, and the fact that the people are having to complain about it, and you’ve got customer service people … that stuff all adds up.
Gary added: “We’re now at under a quarter of a per cent, which is pretty much unheard of in any retail manufacturing. It shows you the level of the quality raises, which then means you don’t need as many staff, which means that it’s more efficient, which then means that they make more stuff, that we make more. The whole system starts to get some traction along the way.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.