IT can reverse manufacturing's decline: CSIRO

Information technology will be essential if Australia is to breathe new life back into its ailing manufacturing sector, research from the CSIRO has found.

The nation's peak science and research body this week released a discussion paper urging Australian manufacturers of all sizes to sieze the market advantage offered by the judicious use of IT.

It has advocated for a smaller, individualised mode of manufacturing - enabled by technical innovations - that will differentiate Australian businesses on the global market.

The discussion paper, “Equipping Manufacturing for the Information Age” encourages local manufacturers to go after smaller runs of high-value customised products.

“Leave the Chinese and Indians to mass production, it’s not an area where we can compete but we can be competitive in customised, high value niche markets,” said Nico Adams, research scientist at the CSIRO and an author of the paper.

The Australian manufacturing sector’s contribution to the gross national product has declined by almost 2.5 percent over the over the past ten years, due in part to Australia’s small scale and remote geography.

The Department of Industry approached the CSIRO to assist the sector to be more competitive and to better understand what have been identified as ‘significant hidden costs’ holding it back.

In response, Adams said it is time for manufacturers to make better use of cloud technologies and to break down information silos and end manual handling.

“A lack of standards and compatibility between systems has resulted in silos of information that businesses have attempted to overcome through costly manual processes which has eaten away at profitability," he said.

Manufacturers were failing to overcome technological hurdles, such as supply chains unable to communicate orders without human intervention, or designers developing prototypes in one CAD system which may not be recognised by the manufacturer’s CAD system.

Adams pointed out that the issue was more pronounced at the small to medium business level where an investment in ICT solutions may be considered too costly. Major enterprises can nonetheless fall into the same traps.

“Even established ERP systems can be data silos if they don’t readily talk to each other - even when two companies are running solutions from the same supplier,” he said.

The paper also identified the opportunity for Australian manufacturers to embrace "servitisation" - the transition from pure production to the supply of product and services.

This global trend involves the manufacture of a product with a tightly integrated service that allows a business to diversify their revenue and product mix to include the provision of after-market services.

"At this point we are seeing it more in Australia as an offering to the mining and defence industries, but there is scope to expand into other markets," he noted.

But how do SMEs begin to bridge the divide?

“The first step is to generally lift the game with investments in basic technology. Simply being able to receive an order business to business across the internet without any human intervention is a great place to start," Adams said.

“Another option is to consider offering digital services around the item you are manufacturing or embrace customisation through additive technologies such as 3D printing.”

The report concludes that local manufacturers should:

• Develop workers with not only general computer/internet abilities but also more advanced skills around data, networking and the 'Internet of Things';
• Encourage and develop materialisation technologies that more rapidly turn digital, customised data into physical outputs;
• Develop collaborations and networks at local and global scales that are not only engaged at the human communications level but are sharers of data, resources, and processes;
• Improve supply chain interoperability and material flow efficiencies,
• Move manufacturing industries increasingly into the service spaces – the servitisation of manufacturing; and
• Develop appropriate business models that maximise the potential that these new technologies provide.