Breaking into global defence industry supply chains is no easy feat. But while speculation over Australia’s submarine-building program continues to generate negative headlines, some savvy Australian advanced manufacturers are popping the champagne corks as opportunities abound. By Barbara Schulz.

Doom and gloom is the dominant media narrative when it comes to Australian manufacturing. Despite growing numbers of Australian manufacturers transitioning positively in terms of production technologies, corporate structures, specialist expertise and higher-value activities, we hear mostly of the failures. Successful companies are shifting focus to new areas of growth and tapping into multinational supply chains, with many becoming significant players in global markets.

In the area of aerospace and defence, those significant players include BAE Systems, Thales, Raytheon, as well as established manufacturers such as Broens (last year acquired by Forgacs), Levett, Lovitt or Marand. For the latter, for instance, the completion of the final finished phase for the first F-35A Lightning II joint strike fighter (JSF) – known as AF-73 – is an important production milestone, demonstrating the significant industrial benefits the F-35 program brings to Australia’s aerospace industry.

The work on the F-35 vertical tails is contracted to Marand by BAE Systems. This is one of the largest manufacturing projects for the Australian F-35 program, with 722 ship sets planned. Earlier this year, two of Marand’s Australian-made vertical tails were installed on AF-73 at Lockheed Martin’s production facility in Fort Worth, Texas. On 17 July the aircraft made its first flight. Marand Chief Executive Officer Rohan Stocker said the flight marked a monumental achievement for Marand and its dedicated employees.

“It has been an incredible journey from the point where we initially bid for this work with BAE Systems, to witnessing the reality of our vertical tails being an integral part of the F-35,” Stocker said. “This is a great moment, and we look forward to continuing to build our future as a global supplier to the F-35 program as well as to other advanced manufacturing opportunities in Australia.”

Air Vice-Marshal Chris Deeble, Program Manager – JSF Division within the Department of Defence, believes Marand’s success is proof that Australian companies are adding value to the JSF capability and are competitive in the global arena.

“One of the key roles of Defence’s JSF Industry Team is to work with Australian companies to help position them to access and grow opportunities in the global JSF market,” said Deeble. “Close collaboration between Australian industry and Defence will be essential to the delivery of a first-class sustainable and affordable JSF capability for the Australian Defence Force.”

Australian industry has so far won US$482m worth of production and development work from the JSF Program. But Marand’s success story doesn’t stop there. The company recently won a global award at the Chartered Institute of Purchasing and Supply (CIPS)’s Supply Management Awards in London, involving its engine removal and installation trailers for the F135 Pratt & Whitney engine fitted to the JSF. These trailers will be distributed to all JSF operators worldwide.

Marand is a good example of how Australian SMEs with established links in non-aerospace sectors have been able to diversify into the manufacture of aircraft components as a result of the JSF Program. The company knows that precision products demand a culture of manufacturing excellence. Attention to all aspects of quality is therefore critical to success.

Ron Weinzierl, Business Director at Melbourne-based Australian Precision Technologies (APT) agrees.

“As an ISO9001 quality certified company (developing AS9100 certification) our high quality standard has allowed us to achieve preferred supplier status to industries globally,” Says Weinzierl, adding that it all comes back to advanced manufacturing. “You need to have the correct technology and you need quality certification that monitors that technology. When people think of going into defence they have to be aware of the fact that it is all IP-controlled manufacturing and the paperwork is very detailed – you can’t just have a machine and the smarts to run the machine. You have to have a quality-controlled process.”

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A good time for business

APT has 15 years of experience in the defence sector, and while Weinzierl says it has been an up and down over the last five years, it is a good time for business.

“The first-tier suppliers are coming out of the design into the production phase, which means that there is a bright future for second tier suppliers like us and our third tier suppliers,” he says. “There is really a lot of growth in production over the next 3-5 years for defence.”

According to Weinzierl, this growth comes from two different areas. One is the global requirement for defence supplies; the other is Australian companies that have developed world-leading technologies, which they are now supplying to the global market. Weinzierl believes there is a lot of dollar value in the defence industry, worth up to $5bn.

His advice for companies looking to tap into the defence industry? “They should go in confidently. As long as they are there for the right reasons they will succeed. The end-user, the defence customer, has the skills and infrastructure to develop companies if they see value in them, that is not something people should worry about. But it takes time and money. If you don’t have one or the other, it’s not an industry you want to go into.”

With more than 30 years experience in the defence industry, Bob Bale from NSW-based Bale Engineering and Bale Defence Industries confirms that time is critical to establish your company in this industry. Continued growth and expansion over the years sees the company now employing a highly trained and skilled workforce, delivering a range of products and services to defence facilities and associated industries throughout Australia and the South Pacific.

“It takes years and years to get quality systems up in place, and contacts in the industry,” says Bale. “It is fairly difficult and takes a long time to tap into the industry. But it’s a good time for business!”

Bale Engineering doesn’t require a sales team to pitch the company’s manufacturing capabilities, including five-axis machining technology sourced through John Hart among others. The company is known as a reliable supplier, who delivers high quality parts on time.

“We do one-offs, we can adapt,” Bale says. “Whatever comes in next week we can do it.”

Government support

For companies looking to tap into defence and other industries, there is support. The government has 500 different grants available, says Weinzierl.

“We have been successful in securing a $1m grant to develop our advanced manufacturing capabilities into defence and aerospace,” he adds. Before applying, though, companies should talk to government grant consultants, give them a business review business plan, then see which one might be the right one to apply for. You need a consultant.”

Weinzierl believes that the aerospace & defence supply chain is bigger than what the automotive one ever was, though he adds that companies that haven’t already diversified into the sector won’t be successful. “Those that have will take advantage of the new production phase in defence.”

One of those companies that have recently successfully transitioned is Axiom Precision Manufacturing, formerly known as Diemould Tooling Services, based in Adelaide. Established in 1979, Diemould was a specialist in the design and manufacture of high-quality plastic injection moulds and precision-machined components. It used to serve automotive companies around the world, but about five years ago realised that it was time to stop putting all eggs in one basket.

Today the company has some very exciting projects on the go and in the system. Aerospace and Defence Manager Fred Hull says: “We have successfully transitioned into aerospace and defence and have just been recommended for AS 9100C aerospace accreditation.”

But how did the company with a clear focus on automotive manage to establish itself as a renowned supplier to the Australian or global defence industry?

“It’s been a long road,” Hull says. “Firstly we became a member of the local defence industry group the Defence Teaming Centre (DTC), which gave us exposure to the industry and opportunities to meet with companies involved in defence work.”

In 2008, Hull completed the Defence and Industry Study Course {DISC} to better understand defence requirements – for example, understanding what through-life support really means.

“You also have to understand the tender process, which can be very long-winded,” he explains. “Once you have secured and finalised your first project you can keep the ball rolling. With a good portfolio under your belt you are most certain to secure other project.”

According to the Australian Industry & Defence Network (AIDN), many of its members experienced a reduction in defence work last year and there is ongoing speculation resulting from the First Principles Review and the submarines question. Despite the pessimistic outlook, there have been a number of positive events and initiatives, such as the commissioning of the first Landing Helicopter Dock (LHD) in Australia, the arrival of the Landing Craft for the LHDs to Sydney, and a current government commitment to a real 2% defence budget increase. While overall defence revenues have remained static, or depressed, some defence industry sectors, such as service providers, have experienced better-than-average revenue flows.

The submarines question

Australia’s submarine-building program has been heavily discussed in the media lately. The Federal Government has launched a competitive evaluation process for the contract, with Japan, France and Germany in the running ahead of an announcement in early 2016. However, the South Australia (SA) government has demanded an overseas building program be ruled out and wants a 30-year commitment to build submarines in Australia.

SA Premier Jay Weatherill has claimed that a three-decade commitment is needed to ensure a strong manufacturing sector and economy, saying: “A strong manufacturing sector in South Australia and indeed the nation requires this nation to commit itself to a strong, local capacity to defend our nation with our own indigenous sovereign defence capability in the manufacturing sector.”

While South Australian defence minister Martin Hamilton-Smith rejected a program combining local and overseas submarine construction, many say that government has long decided for a contract with Japan, which wants to build all subs overseas; but the pressure on Canberra is on. If the Defence white paper confirms that there is a future to build both surface ships and submarines locally, it will lock in tens of thousands of jobs.

Axiom has been fortunate in winning work serving Australia’s submarine fleet, manufacturing parts for its existing Collins-Class vessels including engine bearings and assemblies. However, without collaboration and networking with industry professionals both locally and overseas, the company wouldn’t have won many of its current projects. According to Hull, Axiom has travelled to the US to get a feeling for the industry over there.

Getting organised

In 2013 the US accounted for 35% of the US$1.7 trillion global defence spend, significantly higher than the next five biggest markets combined. As a result, the Victorian State Government, in conjunction with the Department of Defence, is undertaking Team Defence Australia (TDA) defence and aerospace missions to the US to provide Australian companies access to a great range of target organisations.

In SA, the Defence Teaming Centre has established the Australian Aerospace Alliance (AAA) to provide Australian aerospace companies with the opportunity to partner with other smart, innovative companies to develop the tools for industry that can drive and expand into overseas markets. In NSW, there is the Australian Business Defence Industry (ABDI), whose members – including major companies such as Boeing, Airbus or BAE Systems – benefit from education, networking, products and services necessary to develop business opportunities and grow effectively within the defence markets, both domestically and abroad, the ABDI says.

Advanced manufacturers are also teaming up. Ron Weinzierl is president of the Australian Precision Manufacturing Group, which aims to build a forum of likeminded, knowledgeable and experienced members of the precision manufacturing industry from the ground up. Members including Barrow Engineering, Anca, Okuma, Iscar, Benett, Lovitt, Levitt and many more combine their knowledge in industrial design, technology, engineering and business practice. According to Weinzierl, the 27 advanced manufacturing companies combined generate $2bn in sales, with more than 2,000 employees and 50 apprentices.

“We want to make sure that we are developing advanced manufacturing opportunities,” Weinzierl says. “Collaborating as a group we will be able to identify opportunities and help each other out.”

www.defence.gov.au
www.marand.com.au
www.aptengineering.com
www.baledefence.com
www.axiompm.com.au
www.dtc.org.au
www.aidn.org.au
www.nswbusinesschamber.com.au/abdefence
www.apmgroup.org.au