7 June 2006Blakemore Consulting International Dr John Blakemore National President ManSA Chairman...

7 June 2006 Blakemore Consulting Internationalwww.blakemore.com.au

Dr John BlakemoreNational President ManSAChairman Blakemore Consulting InternationalMartin Place [email protected] +61 2 9238 7670Mob 0414 970758

Australia’s Manufacturing Future in a Global

Marketplace


Questions

• Which Industries? Only those where we have a Strategic Advantage (SAW)?

• How much protection? None? Have we moved too fast?

• CAD and Foreign Liabilities too High?• 40% world’s Uranium but not Nuclear? • Why is Business R&D lowest in OECD?


The New Rules 1 • Battle Present Vision and Global Drivers• Blending of Civilisations & Cultures?• New world order based on Culture. • Companies larger than countries• Massive Debts of poorer countries• Western world trading deficits huge• Continuous global conflicts• Global Warming and Peak Oil.• Wealth Spread very uneven, ageing.• Decline of USA, growth of China & India


New Rules 2

• Move from Mass Production To Agile Made to Order • Don’t size demand to fit Capacity Fit Capacity to fit Demand• Low cost and high quality


New Rules 3

•Low Working Capital and Low Inventory and rapid response• Satisfy all members of the value chain•Superiority of Knowledge Capital•Digital data available instantaneously•Compression of Lead time and elimination of Non Value Added steps


Leading Edge Trends

• Why does it cost the consumer $150 for gym boots that cost $2 to make?

• Why does a digital download music Album cost the consumer $16 when the cost including royalties is $2?

• The supply chains will compress and prices fall, the answer is speed and elimination of steps in the physical supply chain as variety increases.


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Inventory in Supply Chain Autos


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1992 1994 1997 1999

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Dealer Stock

Dealer Transfers

Distrib Centres

Built to Order

Sales Sourcing Autos


New Generation Manufacturing 1

• Use Digital data to maximum advantage• Choose those industries where we have a

natural Comparative Advantage eg Uranium, Energy, Aluminium, Food etc

• Build integrated digital supply chains• Plus high value goods like scientific

instruments, sensors, medical devices, • Focus R&D efforts where we have a SAW• Modular fusion of new technology.



•Recognise the value chain• Rapid use of digital data from the source to any position in the value chain•Mass to build to order



•Establish knowledge networksTo supplement in house Limitations•Increased emphasis on speed and R&D and innovation of process and product



Human Resources

• Control core competencies• Collaborate and Synergise• Reward Innovative knowledge developers• Continuous learning • Imagination +Knowledge= Discovery


Agile General Principle

Process Innovation to Continuously Improve capability of B and then all processes so that the Pull (MTO) process can pull from further back in the Supply Chain. Manufacturing Capability to match Demand not Supply to match Manufacturing Capability.

1 2 B 4 Customer Point of Sale

Supplier


R&D IP Design

Manufacture Anywhere

Assemble @ Market

Sell BTO

NGM IP Model Oz1


Industry Group

NGCROCSIRO, Unis

Overseas Exp

Output to Intermediate Stage

Each Company Develops Own SAW

Government Support

Data Mining

NGM R&D Model Oz2


Product

Use & Monitor

Re Use

Waste Minimisation

NGM Green Model Oz3


Process Innovation Product Development

NGM All Co Model Oz4


Plant Capacity + Sales Forecast

Parameters

Mon Tues Wed Thurs Fri Sat Sun

Manufacturing Sequence

Booking System

Order Entry

Inv C

1

Suppliers 2

NG Pull IT Model Oz5


Hardware Old ………………………Hardware New

Pharmacies Old……………………………….Pharmacies New

Zara Fashion New

NG Retail Models Oz6


Where do we Start ? Macro

• Convince and Lobby Politicians and Business Leaders so that they understand the need to take a long term view.

• Convince Business Leaders that it is their best interests to have R&D representation on the Board.

• Educate the Industry Bodies.• Focus our Research efforts not spread

them thinly like the CSIRO• Make Universities Commercially

accountable through Cooperative R&D using Japanese model


Where Do You Start?Micro

1. Integrate processes and systems, pull by customer, then spread out both ways.2. Substitute pull for MRP3. Use internal digital data on shorter periods4. Hook up digitally with customers & suppliers5. Eliminate forecasting as much as possible6. Educate Industry Bodies.


Manufacturers Need Agile Systems

We must embrace change, globalise, and Innovate continuously. If this means supply from low wage countries then accept this butcontrol the IP from here and manufacture for the world in a modular design for higher volume or customise where we have a comparative advantage, but the overriding rule is that we must be agile and flexible like Australia 2 in 1983 and replace labour with capital and use blue sky strategies, and use digital data more cleverly.


The End


Supplier Mergers and Acquisitions

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North America

Europe

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Manufacturing or Service?

•There is no such thing as a pure Manufacturing Company

• All companies are Service Driven

•What is your Position in the Supply Chain?


Innovation, R&D and Australia’s Manufacturing

Future

We need to be Creative, Innovative, Fast & Flexible

(Like Australia 2 1983)


Australia Has a Problem


R&D $ & Productivity

Source: OECD Main Science and Technology Indicators, 2005-1 Source: OECD Productivity Database, 17 December 2004

GERD

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

90-91 92-93 94-95 96-97 98-99 00-01 02-03

Year

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1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Australia Japan Sweden United States

Per cent of GDP Per cent of GDP

MFP Growth

-2

-1

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Australia Japan Sweden United States

Per cent Per cent

GERD is defined as total expenditure by all sectors — business enterprise, government, private non-profit, higher education — on R&D that is performed within the boundaries of the country


My R&D Observations

• 800 E&M Applications (5yrs)• Approx 5% successful• IP mostly exploited Overseas • Small no. people rich• Little benefit National Benefit


Reasons for Failure of R&D

Poor Understanding of:1. The Scientific Method 2. The use of the correct resources3. The needs of the market4. Difference between Process & Product

Innovation 5. The need to articulate the concept and plan6. The way to raise funds to support the application7. Financial accounts 8. Cashflow9. Poor measurement of risk


Agile Rule 3

• Drive Process Innovation with Product Innovation (25 creative Flow Rules)


Australia Exports & EmploymentExcellent Correlation


Australia’s Comparative Advantage


Cash Flow and ProfitMass Smart 1 Smart 2 Smart 3 Smart 4

Sales S Revenue 130,000,000$ 130,000,000$ 140,000,000$ 150,000,000$ 160,000,000$

Purchases P RM Purchases 60,000,000$ 40,000,000$ 60,000,000$ 70,000,000$ 70,000,000$

Inventory Start InvSt RM+WIP+FG 40,000,000$ 40,000,000$ 30,000,000$ 30,000,000$ 30,000,000$

Inventory Finish InvFin RM+WIP+FG 40,000,000$ 20,000,000$ 20,000,000$ 20,000,000$ 20,000,000$

Gross Margin GM GM=S-P-InvSt+InvFin 70,000,000$ 70,000,000$ 70,000,000$ 70,000,000$ 80,000,000$

Direct Labour DirL 28,000,000$ 28,000,000$ 28,000,000$ 28,000,000$ 28,000,000$

Ind Man Exp IndManExp 35,000,000$ 35,000,000$ 35,000,000$ 35,000,000$ 35,000,000$

Expenses Exp 63,000,000$ 63,000,000$ 63,000,000$ 63,000,000$ 63,000,000$

Net Profit NP 7,000,000$ 7,000,000$ 7,000,000$ 7,000,000$ 17,000,000$

Cash Flow CF CF= NP+ Inv Change 7,000,000$ 27,000,000$ 27,000,000$ 27,000,000$ 37,000,000$

Flow InvSt + P - InvFin 600,000,000$ 60,000,000$ 70,000,000$ 80,000,000$ 80,000,000$

Ratio Sales SalesL/SalesM 1.0 1.1 1.1 1.2

Agile Results P&L


EBITA for 6 Months Periods

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July Dec2001 Jan-June2002 Jul-Dec2002 Jan-June2002 Jul-Dec2003 Fcast

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What Has Been Done (Carpet)

$300M T/O


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Output

Smart Production ..Output & Defectives (Loss to Profit)

Defectives


CSIRO Exp vs Comparative Adv


Agile Rule 1

Demand = Production• Make to Order•Pull by Customer•Apply Continuous flow rules


Agile Rule 2

•Match Manufacturing Capability with Demand• Product Range complexity often creates poor servicing and excess waste and working capital•Tirelessly improve agility by reducing the EPR by removing non value added activities


Agile Rule 4

• Recognise that Digital Data can be obtained at the POS and sent to any point in the supply chain


Agile Rule 5

• Reduce Complexity and Modularise


Supplier Mergers and Acquisitions

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7 June 2006Blakemore Consulting International Dr John Blakemore National President ManSA Chairman...

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