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Aust manufacturers must master complexity or perish

02 November, 2005

Deloitte's Global Managing Director of Manufacturing Industries, Gary Coleman has said that driving sustainable, profitable revenue growth is the top priority for manufacturing industry CEOs around the world today. He indicates that the days of cutting costs to create prosperity has reached diminishing returns and is now lower on the agenda.

"Our Global Benchmark Study of more than 800 companies identified four strategies that are critical to sustainable profitable growth - building efficient global value chains, seizing opportunities in emerging markets, capitalising on innovation and winning the war for talent.

"The real key to success is mastering the complexity that is inherent in each of these strategies.

Manufacturers need to rethink their business and figure out how to lead and manage in an increasingly complex and changing global environment".

He said that managing global value chains is becoming more complex as businesses outsource operations; collaborate with suppliers and customers; and shift some business functions such as research, development and product engineering to be closer to the customer.

"As a result, manufacturers must contend with managing financial, physical and information flows around the world to get products to market at the right time and at the right price. This is by no means easy."

Coleman said the Deloitte survey found that only 7% of companies have excelled at being what the Firm refers to as "Complexity Masters". Through a superior ability to synchronize within and across the value chains, these companies are generating up to 73% higher profits and greater shareholder returns than their competitors.

Deloitte's Global Benchmark Study included 23 companies from Australia. Key trends among Australian manufacturers:

Australian companies believe the launch of new products and services is the most important driver for revenue growth (consistent with findings among other global manufacturers). However, Australian companies do not seem as confident in their product innovation capabilities.

Australian companies placed higher importance on new geographic markets and mergers and acquisitions to drive revenue growth.

While Australian companies are planning to enter China at a rate close to the rest of the world, they trail significantly in their plans to expand in China. This may indicate that Australian manufacturers are not as advanced as North American and European manufacturers in investing in China.

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