Australian manufacturing is at its lowest point ever at just 5.6% of GDP. It used to be over 30% in its heyday in the 1960s. The government’s plan to resuscitate the ailing manufacturing sector over the recent years has been fundamentally built upon a heavy technology focus.
Based on a recent Ai Group’s Performance of Manufacturing Index, it appears that something is making a difference: we’ve seen nine months of consecutive growth since the COVID-induced global disruptions hit last year.
However, the 2020 Australasian Supply Chain Institute (ASCI) report revealed the overall maturity of Australian supply chains fell by six percentage points (from 52-46) between 2018 and 2019. And that was despite unparalleled investment in and focus on automation.
So, the sector is growing. However, the current approach isn’t working. So, what is the issue and what should we do? The output isn’t the problem – the sector’s output has quadrupled over the past six decades. But productivity has failed to keep pace. The ABS graph below demonstrates that labour productivity is struggling well below the 30-year average. Automation and technology alone haven’t delivered the promised productivity benefits.
So, I have a few questions for you:
- What’s happened in your business over the last decade(s), comparing product volume growth versus productivity growth?
- Which one has grown faster – product or productivity?
- What are you doing to improve the lagging factor?