Over the last few months, the movement towards favoring local Australian made goods has gained momentum. The ‘shop local’ movement started to gain momentum throughout the drought and bushfire season and has continued to be driven by COVID-19, which revealed the vulnerability of the country’s supply chain and dependence on global manufactured goods. As a result, Australians have become wary of foreign-made products and have begun to opt for ‘Australian Made’ to support the local economy and job creation.
The question now is how Australian manufacturers can improve their price competitiveness versus overseas suppliers to maintain this Australian Made loyalty longer term.
1 – Breaking down the supply chain silos to provide more visibility
Customers today have an instant gratification attitude and an order-to-delivery expectation of one or two days, partly due to the ‘Amazon effect’. This forces companies to constantly have a wide variety and amount of inventory on hand ready for immediate shipment. Conversely, the pressure to control costs is pushing businesses to reduce inventory levels.
The only way to effectively deal with this dichotomy is to develop and maintain a streamlined supply chain with full visibility from purchase order to delivery. Integrated supply chain visibility solutions enable optimum product availability while at the same time minimizing capital tied up in inventory. Unfortunately, achieving full integration and visibility is a major challenge due to the siloed nature of many organizations’ supply chains.
2 – Optimizing operational labor costs
Labor costs are probably the highest line item on the company balance sheet and being one of the highest-paid nations globally makes this labor cost issue one of our barriers to competitiveness. Therefore, a successful cost reduction strategy must sufficiently balance resourcing and cost controls. While laying off some of the workforces may seem like the quickest and easiest solution to reducing labor costs in manufacturing, it may not be the best way to resolve the issue. The cost of finding and training new employees is extremely high.
Lean production eliminates non-value-added processes within manufacturing. When implemented efficiently, lean production significantly increases workforce productivity, reduces inventory, and cuts production throughput times considerably. Fundamentally, with a more efficient production process, employees can produce more units, which reduces the labor cost per unit.
Overscheduling is also a significant source of labor costs in any plant. When decision-makers have access to incorrect data about production demands, their scheduling is just the best guess. However, using predictive scheduling software based on sophisticated algorithms, it is possible to optimize employee scheduling. This allows managers to look ahead at the incoming production demand and make the scheduling decisions from that data. This ensures the business is adequately resourced to meet the demand and eliminates unnecessary labor costs.
3 – Reimagining the work environment
Incorporating new factors around social distancing, enhanced hygiene protocols, or additional workforce resilience should be considered. To comply with social distancing guidelines, warehouse employees should all be given protective equipment to wear and there should be strict one-way routes through the warehouse.
Our current situation has presented an ideal opportunity to push forward with digitalization plans. All office staff should now be able to work completely from home, and Customer Care call center functions can work as normal with the team connecting remotely.
Most administration tasks within warehouses can be fully digitalized and therefore paperless. Customers can also access products they want to buy through an eCommerce site, allowing them to check pricing and stock availability.
4 – 24-hour work cycles to reduce numbers of staff onsite concurrently
Companies should be adapting shift patterns, rotas, and rosters to support employee well-being and operational capacity during the Coronavirus pandemic. Workforce planning and management can help organizations adjust to both the immediate crisis and the uncertain future we all face.
By gaining better visibility and control over the fundamentals, organizations will be in a better position to navigate the changing landscape and will be able to anticipate and respond to volatility in demand and factors influencing the supply of labor.
5 – Investing in technology
Now is the perfect time for manufacturers that want to take advantage of the desire to buy Australian goods to ensure their businesses are running at their optimal level from an IT perspective. Upgrading their outdated technology should be the priority, including updating old versions of ERP software, to the latest versions.
They should also consider accelerating their digital strategies to enable them to supply direct to the consumer where possible, as many consumers will be staying home for the foreseeable future, and leaving out the middleman will keep prices competitive.
By considering these five simple steps, Australian manufacturers will be better positioned to take advantage of this opportunity to revive the local manufacturing sector. And right now, our economic sovereignty will be achieved by making our manufacturing sector more competitive, resilient, and able to succeed in the challenging post-pandemic market.