With huge changes sweeping the sector, the long-term outlook for manufacturing in New South Wales (NSW) is positive. However, while major infrastructure projects in rail, light-rail, road and airports are positioning NSW as the state of the future, it’s having an impact on the state of manufacturing and the SME market at the same time. By John Spender, Director of Business Advisory at William Buck Chartered Accountants & Advisors.

NSW is the state for manufacturing, accounting for around 30% of Australia’s total manufacturing output. Manufacturing employs 7% of the NSW workforce, and Western Sydney is the key driver of the advanced manufacturing sector.

Australian manufacturing is predominantly a SME market, with 24,319 firms having fewer than 19 employees, 1,663 with 20-199 employees, and only 164 with more than 200 employees. While the infrastructure boom currently sweeping NSW is set to enhance the state’s economy, the paradox is that the SME manufacturing sector is suffering a skills gap within both ‘blue collar’ and ‘new collar’ workers as a direct result. A survey conducted by Business Chambers found that 63.3% of participants who owned manufacturing businesses reported a perception of a skills shortage.

Kevin Adler, Managing Director at Ogis Engineering, agrees, saying the loss of employees in engineering and steel, to the new boom is enormous.

“On one hand I am happy for the infrastructure to happen, government haven’t focused on infrastructure for such a long time,” says Adler. “On the other, with so much infrastructure going on, there are many manufacturers like myself, who are losing key employees to bigger companies who can afford to pay extra for those skills. It’s a bit like a mining boom in Sydney. They are offering enormous remuneration for two-year contracts and they take it, and I don’t blame them. The reality is, I’m losing some staff and this makes it difficult for us to produce the high-quality product that we are renowned for. I have to turn work away as we don’t have the capacity as before.”

Adler says he worries about the SME engineering and steel manufacturing market in NSW over the next few years.

While the NSW Government has reported TAFE trade enrolments are being driven up by the infrastructure boom, the skills gap is still apparent, particularly for trade skills. However, this is not just a blue-collar issue; employment of highly skilled workers is crucial for the advancement of advanced manufacturing, and this has been identified for action in the NSW State Government’s strategy for manufacturing, released in June.

New initiatives can’t come soon enough. Adler says he has a number of pieces of high-tech machinery considered to be in the realm of advanced manufacturing. However, he would like to purchase more.

“There are high-tech machines that I would buy tomorrow, but at the moment we can’t find the staff to operate them,” says Adler.

Filling the gap

These sentiments are being echoed across my networks with William Buck, with clients asking how they can address the skills gap? My reply is there’s not one straight answer.

I recently spoke at an event about Western Sydney’s infrastructure boom, discussing how what’s becoming more important is for businesses to focus on collaborative partnerships in order to remain competitive. The plans to transform NSW – in particular, Western Sydney – means that there is a lot of potential for growth and collaboration, yet there are also challenges being faced in getting there.

What’s needed is lawyers, accountants, advisors and banks and other institutions to give manufacturers forums to discuss trends and opportunities as well as acting as links to increased collaboration. As a result of these sentiments being heard across our networks and to help fill this gap, William Buck Chartered Accountants and Advisors, Coleman Greig Lawyers and St George Bank are creating ‘manufacturing lab’ events.

This initiative brings together innovators, business leaders, industry bodies and government to drive collaboration and initiatives that would benefit the manufacturing industry. These events provide a platform for thought leadership and networking to make a positive difference and address ongoing manufacturing in NSW and Australia.

Collaboration, today’s competitive advantage

The NSW government reports that less than 5% of Australian SMEs are pursuing partnerships. However, there are major opportunities for small companies if they focus on targeted collaboration and strategic partnerships with academia, industry and government. To be leaders in advanced manufacturing and create a competitive advantage, R&D needs to be at the core of the business.

Today’s business environment is one of increased complexity. It’s difficult for companies to rely entirely on their own knowledge and skills to maintain or improve their competitive position. While some organisations have the capability to ‘do it all’, many SMEs don’t have the resources to develop and implement a collaborative model.

With new digital technologies and increased connectivity there is also a lot of uncertainty. These challenges can be amplified for SMEs with limited access to the critical knowledge and expertise that they need to drive ‘collaborative innovation’.

Effective partnerships can be the key to unlocking innovation and growth, involving transfer of knowledge, skills and resources. Businesses that recognise the strategic importance of collaborative innovation and actively invest the time and effort to pursue partnerships will benefit across a number of areas, including:

  • Continuous improvement and process efficiencies.
  • Expanding networks and insights.
  • New product development.
  • Accessing new talent pools and skill-sets.
  • Increased productivity and reach.

What stops SMEs from collaborating?

One of the biggest roadblocks preventing collaboration is trust. Working with new partners, whether that is with researchers, companies or across industries, creates a unique set of issues when it comes to knowledge sharing and protecting intellectual property (IP). Another challenge is understanding how changing technology can impact or benefit a business.

Earlier this year, the Advanced Manufacturing Growth Centre (AMGC) submitted a number of recommendations in its report ‘Industry 4.0: Opportunity for every Australian Manufacturer’, designed to break down barriers and facilitate collaboration. One suggestion is the concept of a ‘sharing economy’, which would allow manufacturers to loan and share equipment such as 3D printers and other physical infrastructure that may be seasonally idle.

Ultimately, good collaboration is built on strong relationships, trust and knowing where the opportunities are. The first step for any business considering collaboration is to have a clear awareness of the partners’ core areas of capability and their limitations, as well as which areas a partnership can complement.

How to make collaboration work for your business 

Understanding the current state of your business and comparing that to your two-to-three-year goals can help to identify critical gaps and potential opportunities. The Innovative Manufacturing CRC (IMCRC) has developed a business diagnostic tool to help SME manufacturers on their journey to the Industry 4.0 transition. The futuremap workshops, jointly developed by the AMGC, the IMCRC and the Entrepreneurs Programme (EP), are designed specifically for Australian SME manufacturers to help foster co-operation among research and industry.

Before diving into a collaborative partnership, it’s important for a business to know their core motivations and how this collaboration will shape their competitive advantage. The right partnerships are mutually beneficial – each business can focus on its speciality work while relying on its partner for support outside their own expertise.

Addressing the opportunities and issues of the infrastructure boom in NSW is no easy feat. However, with continued support and linking SMEs with collaborative opportunities, it’s hoped that the boom will enable them to grow into the future.

William Buck Chartered Accountants & Advisors is a Corporate Partner to AMTIL, delivering exclusive benefits to AMTIL members. For more information on how you can be involved in manufacturing events in NSW, contact William Buck.