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Advancing manufacturing: do we have the skills?

By: Chris Williams
20 August, 2014

Australia's continued shift from heavy industrial manufacturing to higher value-added, technologically advanced manufacturing may be inevitable in the next ten years, but the skills gap in our workforce could hold us back.

A report released earlier this year by the Australian Workforce and Productivity Agency (AWPA) claimed our local manufacturing sector should have a positive future despite recent downturns and closures in some industry sub-sectors.

It is the sort of motherhood statement we hear a lot, usually from the mouths of politicians, that few would disagree with but without any reliable roadmap for how we are going to make it happen.

The Manufacturing Workforce Study report's authors reminded us that despite the apparent stream of factory closures and job losses, manufacturing remained the country's fourth largest employer, makes a disproportionately large contribution to export revenue and research efforts, and plays a critical role in the uptake and spread of innovation in our economy – however it came with a 'but'.

"Raising skill levels in this workforce will be critical, and the industry will require more people with higher education skills, particularly science, technology, engineering and mathematics (STEM) skills and improved management skills to provide the technical and leadership capacity to drive the sector's transition," AWPA Chair, Philip Bullock, said.

Develop STEM skills

Key recommendations of the Manufacturing Workforce Study included the need for programs to assist businesses in upskilling their workforces; strategies to assist vulnerable workers transition to new roles; encouraging the development of STEM skills; as well as improving apprenticeship completion rates.

The report was the final act for the AWPA as it was promptly rolled into the federal government's Department of Industry last month but while the agency may be no more, its findings remain, and according to some the advanced manufacturing skills shortage is not a problem of the future, but one of the here and now.

Jeff Connelly, CEO of Siemens' Australian operations, said manufacturing was on the brink of major transition, and action was required now.

"Our experience in Australia is that we see a general knowledge gap in engineering already. Siemens invests over $6 billion in R&D each year globally, continually developing new technologies - so it's difficult for universities to be up to date by the time they produce their engineers," Connelly said.

"This new future of advanced manufacturing needs new skills. The common tool of trade for a manufacturing worker is more likely to be a computer tablet than an impact driver…this is something Australia should be looking at right now."

The next 10 years

Professor Veena Sahajwalla is Director of the Centre for Sustainable Materials Research and Technology at the University of New South Wales. Professor Sahajwalla says the next ten years will be critical if our future engineers are to support internationally competitive industries.

"The ability of engineers to build Australia into the future – to foster invention and innovation to support internationally competitive industries – will depend largely on changes that must occur over the next decade or so," Professor Sahajwalla said.

"Future knowledge-based industries won't just spring up because Australia's engineers are generally well regarded or because Australia's engineering degrees and professional associations are of high quality.

"We need to further enhance the engagement of engineering students with industry to produce truly 'work ready' graduates.

"The OECD currently lists Australia last place out of 33 nations for collaboration on innovation between businesses and the higher education sector and public research agencies. This is a critical gap that we must address."

Beyond the car industry

Speaking about the recent decline of Australia's automotive manufacturing sector, Professor Sahajwalla said the fact Australia would no longer manufacture cars was only a disaster if we failed to apply the knowledge of what it took to make those cars to industries of the future.

"Instead of mourning the loss of 'big' industries defined by particular 'end products' we need to be constantly looking for creative, new opportunities along increasingly complex, evolving value chains," she said.

"Those car parts manufacturers could switch to making steel parts for complex equipment or for the beds used in hospitals, as the health-related industries expand with ageing populations.

"What is critical here is expertise in making sophisticated steel parts and the ability to recognise and take advantage of commercially viable opportunities to continue to use those skills as economies evolve."

Stephen Durkin, CEO of Australia's peak engineering body Engineers Australia, concurs.

"Notwithstanding the bleak news of recent closures in the manufacturing sector, Australian manufacturing will maintain its research and design capabilities; this news is extremely promising. These areas play a crucial role in driving technologies which lead to innovative breakthroughs," Durkin said.

"Engineers are major drivers of advanced technologies and innovations. Innovative engineering processes are steadily replacing traditional manufacturing methods in Australia; it is important this movement is maintained to transform Australia to a high-tech, knowledge based economy.

"Addressing the demand for STEM skills in manufacturing is of critical importance."

Industry Skills Fund

The federal government's new $467 million Industry Skills Fund announced earlier this month is one measure designed to address the capability of Australian small and medium-sized businesses to respond quickly to new opportunities.

Busy At Work, a not-for-profit organisation providing apprenticeship and employment programs, welcomed the announcement of the fund, with CEO Paul Miles saying it would help manufacturers relieve some of the pressure they were under to adapt to changing markets and new technologies.

"(It) is great news for our SMEs as it is designed to incentivise business investment in skills training and simplify the processes which can be a significant barrier," Miles said.

"This will support the development of a sustainable, highly skilled and well placed workforce able to respond quickly to opportunities, giving them the crucial competitive edge.

"To generate new jobs for workers transitioning from these traditional sectors, industry must seize new economic opportunities."

Business Council of Australia President Catherine Livingstone goes further. Livingstone said beyond skills development governments needed to develop and maintain a deeper understanding of the dynamics of the economy at the sector level.

"Every policy should be designed to support and extend Australia's economic strengths by building on sectors with a comparative advantage and helping others to transition with minimum disruption," Livingstone said.

Citing research undertaken by McKinsey & Company, Livingstone said Australia had a substantial comparative advantage in highly differentiated manufacturing, but was failing to take advantage of what was, she said, an "enormous opportunity".

"Across a range of measures, most of our industry sectors are not competitive against the United States – a country still viewed as being at the forefront of productivity and innovation," Livingstone said.

"(We see in) these findings enormous opportunity…but only if Australia changes its mindset to acknowledge that the unstoppable forces of globalisation and technology have shaken up forever what it means to be competitive at a world standard."

"By putting in place deliberate strategies to improve our competitiveness, fostering innovation and playing to our strengths, Australia can lift its performance to world standard."