Opportunities for Australian manufacturing post COVID-19

The coronavirus pandemic has placed the world in a particularly unique situation – one where entire cities, not just their businesses, were more or less shut down for months. As restrictions begin to ease in Australia and businesses slowly begin to open their doors, there is no doubt the shutdown will have a profound effect on our country’s industries.

The coronavirus crisis has thrown the spotlight on Australia’s manufacturing sector, with the sudden restrictions in overseas markets and the extraordinary global demand for products such as medical supplies drawing attention to Australia’s reliance on supply chains out of China.

In the 1960s, the country’s manufacturing reached a high of nearly 30 percent of gross domestic product (GDP), but has since fallen to 6 percent of this. While this seems like a sombre statistic, it shows there is now the opportunity for Australia to rethink the structure of its manufacturing industry.

So, where does this leave the future of Australian manufacturing and what will it look like post COVID-19?

Supply chain diversification

COVID-19 has demonstrated that Australia’s heavy reliance on supply chains out of China leave the country vulnerable. To avoid disruption on this scale again, companies will likely need to rethink their supply chains and restructure flows and networks to build resilience, in order to avoid over-dependency on a particular country or region. This could lead to a boost to other low-cost manufacturing environments – such as Vietnam, Malaysia and Thailand.

Boost to local manufacturing

The crisis will bring back a focus on boosting local manufacturing, further compounded by consumers’ desire to support local business. This will be especially true for advanced manufacturing, which can supplement local operations with technology such as 3D printing, high-tech automation and robotics.

Manufacturing sector expert and former advisor to the Federal Government Professor Roy Green told the ABC that while transformation of the country’s manufacturing industry won’t occur overnight, progress can be made with a “targeted industry strategy” that focuses on Australia’s niche capabilities.

“It is ridiculous for us to think that we can just flick a switch and start making 90 percent of all our PPE, and forget about China,” he said.

“But what we can do is develop our niche markets and have a strategy that creates clusters of small manufacturing industries we can develop.”

The task ahead

A new Federal Government manufacturing task force has been set up to focus on expanding Australia’s niche manufacturing industry, so far signalling a focus on sectors such as food, defence, mining, medical, engineering and even the space sector.

Another opportunity that has been identified lies in Australia’s abundance of lithium. Typically, Australia has exported the raw form to China to create batteries used in devices such as the iPhone and electric car batteries. However, the current global situation has seen the task force identify lithium as a huge potential growth area for on-shore manufacturing.

Supply chains will become smarter

The disruption to trade caught many companies off-guard and exposed gaps in the digital capabilities of Australia’s manufacturing sector. Many organisations will use the lessons learned from this experience to assess where failures occurred and how to best build resilience within their supply chain networks moving forward. Moves to embed technology across supply chains will accelerate and result in a newfound agility for many industries.

AI, machine learning, predictive analytics, IoT and blockchain will be used to provide precision, enhanced visibility and transparency to supply chains and enable real-time decision-making and responsiveness. Such technologies will allow organisations to be increasingly flexible and better able to adapt to fast-changing customer demands and expectations.

If you are looking for employees in the manufacturing sector, contact Baytech to speak with one of our professional consultants.