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  • Alex Van Ravenswaaij

Optimising the benefits from the Australian Government Manufacturing industry incentives

Operational diagnostics tool for Industry 4.0

As the Australian government is ramping up incentive programs to stimulate the manufacturing sector, manufacturing companies can use this operational diagnostics tool to determine what actions on their part could maximise the advantages available from the offered incentives.

The global economic impact of COVID-19 has highlighted the importance of substantially increasing local manufacturing. In response the Australian government is providing a $100+ billion incentive package to stimulate the local manufacturing industry. The incentive package offers Australian manufacturers the opportunity to upgrade their operations with the latest smart technology. It is however essential to avoid the trap of doing this in an ad-hoc fashion.

Previously countries with lower labour costs and less stringent quality and safety standards, had a distinctive price advantage over Australian manufacturers. However, advances in technology are bringing the advantage back to local producers. Australian industry has recognised that increasing local supply sources reduces supply chain and product availability risks and, coupled with technological developments result in a rapid levelling of production cost differentials.

Specifically, in industries which traditionally relied on relative high levels direct labour, technological developments are playing a substantial role in reducing manufacturing costs per unit without compromising quality and product consistency.

A shorter supply chain means substantially shorter lead times and, together with a lack of sea freight and other importation expenses results in significant upfront cost savings.

While it is clear that there may never have been a better time to boost Australian manufacturing capabilities, it is essential that manufacturers first take a contextual view and decide where they should start. Businesses with the most effective strategies and plans are likely to gain the most substantial competitive advantage.

Termed Industry 4.0 or ‘The Fourth Industrial Revolution’, established manufacturing and industrial practises are combined with the latest smart technologies to improve competitive advantage and profitability. Developments in computer hardware and software, coupled with rapid advances in process automation are enabling manufacturers to become more effective in managing their businesses in an efficient manner, as well as producing high quality products at globally competitive costs.

There are currently many generic and tailored software and hardware technologies available to upgrade manufacturing operations that fall within the scope of Industry 4.0, ranging from planning, execution and reporting software, to fully automated and roboticised production and supply chain solutions. Whilst such technologies have the potential to yield substantial gains in competitive advantage and profitability, it is essential that all opportunities are identified, ranked and prioritised to ensure the best solutions are selected, and benefits realised in the shortest possible time, at the lowest cost, with the least disruption. However, no single software, hardware or equipment vendor can provide all the expertise required to upgrade all the aspects of your operations that require improvement, much less evaluate the order of priority.

Completing a diagnostic exercise upfront to understand the full context, may help to secure the best value-for-money improvement, or simply prevent costly mistakes.

Performance Drivers have developed a structured business evaluation tool which can help to identify and rank all the available improvement initiatives related to advancing Australian manufacturing

What does the tool assess and how?

Operational excellence (achieving the best and most sustainable results) is the goal in manufacturing. Operational improvements need to be done in a particular order to achieve operational excellence.

An often-ignored aspect in the quest for operational excellence is the fact that a business first needs to be effective before you can successfully improve efficiency.

In this context:

Effectiveness = achieving the correct outputs

Efficiency = obtaining outputs with minimal inputs and resources.

The diagram below shows a summary of how to first build the foundations and then work towards operational excellence to optimise competitive advantage in a manufacturing business:

  • Steps 1 and 2 in the diagram are aimed at achieving effectiveness, including standardisation, effective control and continuous improvement built into day-to-day operations.

  • Once the business is effective, i.e. preventing and eliminating process errors, steps 3 and 4 are aimed at achieving efficiency including reducing waste, improving automation and flow to reduce cost-per-unit while preserving quality and customer service.

The reason why some ‘step 3’ type efficiency improvements can disappoint, including sub-optimal results or lack of sustainability, is not because these methods are flawed but because steps 1 and 2 have been poorly executed or poorly maintained.

Here’s a quick test:

  1. Have all your operational procedures been documented? Are all staff following these procedures consistently? And are these procedures frequently reviewed and updated?

  2. Have efficiency improvement methods implemented in recent years yielded the expected results and have result been sustained or extended?

If you can say yes to these questions, then it is likely that most or all the fundamentals are already in place in your business and implementing any Industry 4.0 upgrades should yield further improvements.

If you answered no to any question, it is likely that revisiting any preliminary steps may yield faster and better results than any subsequent upgrades.

Performance Drivers structured two staged business evaluation tool can help score your business on the above aspects allowing you to identify and rank all the available improvement initiatives related to advancing Australian manufacturing and providing you with a clear path and vision to greater competitive advantage and profitability.

Stage1: Access the 20 question Industry 4.0 readiness self-assessment CLICK HERE

Stage2: Performance Drivers perform an onsite 10 step Operational Excellence diagnostic CLICK HERE


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