CEO Jeff Phillips talks about transforming Hunter-based manufacturer Varley to follow new markets at Future of Manufacturing and Engineering Summit in Newcastle Australia on 29 July 2014

1. Future of Manufacturing in
Australia:
Die. Survive. Thrive.

2. Managing Director since 1995
Chairman since 2000
Qualified Electrical Engineer
Varley established 1886
Employs 650 people across multiple sites in Australia and overseas
Jeff Phillips – Varley Group

3. “Making goods or wares by manual labour or machinery.” Macquarie Dictionary
“Transformation of material into new products.” ABS Industry Classification
“The full cycle of activities from research and development, through design, production,
logistics and services, to end of life management.” University of Cambridge's Institute for Manufacturing
Manufacturing is a broad term that covers many technologies, all materials and can
be applied to one-off builds or mass reproduction.
Too broad to be easily communicated
What is Manufacturing?

4. DIE
Who cares if we have a manufacturing sector in Australia?

5. The Image of Manufacturing

6. Do we need Manufacturing in Australia?
Australia has always been a primary
sector economy
Globalization has commoditised
consumer products and created
regions of technical expertise
Manufacturing continues to shrink.
1984 – 17% 2014 – 8%
Australia’s high cost base – both labour
& materials, regulatory costs, tax,
transport
Low R&D and risk adverse seed capital
Buying local is considered
uneconomical

7. Exporting is more difficult to achieve – marketing, transport, travel time
No land connected neighbours & low internal population
Not on any major trade route
Australia is in the wrong location

8. China has capacity to manufacture for the whole world
China has abundant cheap labour & material
China is investing heavily in education & machinery
The Rise of China

9. ABS 2013 has Manufacturing
- 4th
largest component of the Australian economy
- 4th
largest employer in Australia
- 3rd largest export from Australia at $41b
- the largest R&D spend at $4.5b
The highest multiplier effect of all sectors at 1.43
(US Research Report, “Manufacturing: An Economic Driver for Jobs and Florida’s Future.” August 2011.)
Promotes high levels of workforce education
China cannot control the world’s distribution channels
But Manufacturing remains Important to Australia

10. SURVIVE
How do we stay alive as a manufacturer in Australia?

11. Manufacturing must have a positive perception
Negative talk does not endear supporters

12. Passion for the business & determination to exist
Adaptability & perseverance to the changing regulatory, economic &
technological landscape
Operate with cash reserves & never become reliant upon government assistance
Unlikely to compete with a global product but easier to survive in niche markets
Business will need to be blended – offer a broad spread of products or
complementary services
Leadership must have the Will to Exist

13. Be Close to your Customer
Customization - Identify, design,
develop, make and sell products
and services that your customer
needs!
Have effective after sale warranty,
spares & service
Make the customer feel important

14. Exploit your Strengths
Extremely high labour efficiency
Well educated free thinking workforce
Capitalize on unconventional
opportunities
Remain agile for quick change
Globally high acceptance of Australian
made goods

15. THRIVE
How to outgrow Australia?

16. Control or own desired technology (IP) - local or global
Be a quantum step cheaper in production costs – constantly strive for zero
production costs
Ensure that these advantages cannot be easily replicated
Utilize multiple smarter partners to create a new offering
Super Smart or Super Cheap

17. Foresee the Future
Closely observe your market trends &
pick most likely future requirements
Be disciplined with strategic business
planning
Exploit market downturns to position
for explosive growth in the boom
market
Continuously adopt new technologies
and materials
Keep business structures that can
react quick to disruptive change
Invest in innovation

18. Borderless Manufacturing
Will Additive Manufacturing transform the world?

19. How will 3D Printing transform Manufacturing?
Product development can occur in
Australia while the manufacture will be
done in the country of the customer
Focus will switch to design development
& ownership of this IP
Manufacturing costs will have greater
consistency around the world
- Energy cost become more significant
- Labour & transport less significant
- Material costs should equalise
Manuf. Cost = raw mat. + machine time +
comms
Greatly increase speed to market with
limitless customization

20. Is this really Manufacturing?
Removes country of destination
import duties/tariffs & meets local
content requirements
Negates the need for FTA’s on
manufactured goods
By the ABS Definition of
Manufacturing this will not be
classified as manufacturing
Expedites the shift from physical
labour to brain power
So has Australian Manufacturing
thrived or died?

21. THANK YOU