Each week it seems that another manufacturing company has collapsed or is relocating its factory to India or China.
The strong Australian dollar and high cost of labour in Australia are both cited as key reasons behind the demise of manufacturing.
But some manufacturers in Australia are expanding and thriving despite these adverse conditions. Professor Roy Green, dean of the faculty of business at the University of Technology in Sydney, told SmartCompany there can be a resurgence in manufacturing.
“Some manufacturers will cease to exist but those which will survive are going to be characterised either by producing very bulky items that are difficult to import so there is a natural tariff barrier or manufacturers that are agile and specialised and are producing products that can operate successfully in market niches both locally and in global markets and supply chains,” he says.
“In particular we are seeing a growth in what are sometimes called micro-multinationals; that is, SMEs but ones that are born global and which have a global mindset and see their strategy as being global and not limited to the Australian marketplace.”
Textor Technologies in Melbourne is a prime example of Green’s “micro-multinational”. The business manufactures high tech fabric used in fibre fluid management which trap and transfer moisture in nappies, tampons and wound dressings.
Textor turns over around $20 million a year and makes a quarter of a million square metres of fabric a day.
But despite this huge output, walking around the gleaming high tech factory floor is a shock as there are only eight workers on the factory line and the whole line is driven by computer.
Phillip Butler, owner of Textor, told SmartCompany the business operates 24 hours a day and out of its 50 employees it has 13 employees and two have PHDs.
“This company is an example of modern manufacturing; modern manufacturing is not dirty and bashing metal things, it’s about productivity and sustainability and material science,” he says.
“We are a family business committed to a long-term concept, it is capital intensive and technology intensive but it is not labour intensive.”
Butler sat on the Prime Minister’s Task Force for Manufacturing and describes the situation facing manufacturers as “kind of like the perfect storm”.
“Manufacturing generally is about very, very tight margins, the actual process of manufacturing is a very competitive global business,” he says.
“If you apply fundamental maths, if you have a successful manufacturing business at 80 cents to the dollar, at parity the maths says you can’t be successful anymore.”
Butler says the strong Australian dollar means Textor’s labour, energy and overhead costs have gone up 30% and its selling cost for export has gone down 30%.
“So to do nothing in manufacturing is a formula for disaster, so the approach we are taking is to aggressively grow the business by recapitalising the business and going after these global markets,” he says.
Textor now exports to India, Vietnam, Singapore and Korea and is investing significant sums of money in “radical new technology” for a global rollout.
“The exchange rate is a disaster for manufacturing but it’s actually a great advantage as most modern production equipment is made in Europe and now is the best time ever in our lifetime of purchasing capital equipment out of Europe because the euro is so low in comparison to the Australian dollar,” Butler says.
“Now is the time for Australian manufacturing to be recapitalising, to be redefining its business models and to be putting in the equipment that is really needed to drive a sustainable, highly productive work environment.”
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Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
