Insights for business: The Australian Modern Manufacturing Strategy
Background
In October 2020, the federal government released the Modern Manufacturing Strategy (MMS), which outlined six National Manufacturing Priorities (NMP): resources tech and critical minerals processing, food and beverage, medical products, recycling and clean energy, defence, and space.
The MMS outlines the process by which a roadmap for each of the NMPs will be produced that guides action in the priority area. Round 11 of the Department of Industry, Science, Energy and Resources (DISER) administered Cooperative Research Centres Program (CRC-P) program, is now open, with up to 70% of the funding set aside for projects that address the NMPs.
I was invited to join a webinar panel discussion to address the MMS, NMPs, manufacturing in Australia more broadly, and the CRC-P scheme. This discussion was focused on Australian start-ups, SMEs and companies developing and commercialising medical products, consultants, researchers and university professional staff.
Below are the questions I was asked, along with my responses. These are shared to provide what I recognise as insights and opportunities for businesses.
Panel interview and discussion
Q: You’re our manufacturing expert. Prominent in the MMS is the “smile curve” – can you explain what this is, and how it’s relevant to the production of medical products?
My response:
This is a big question so let’s start with a bit of background on the Smiley Curve to give context.
The concept was first proposed almost 30 years ago by Stan Shih who was the founder of Acer, who at the time was a manufacturing-focused business. According to Shih, in the personal computer industry, the two ends of the value chain – product conception (design and development) and marketing/sales, command a higher value-add to the product than the middle part of the value chain – manufacturing.
Based on this concept, Acer adopted a business strategy to reorient itself from manufacturing into global marketing of brand-name, PC-related, products and services and they invested heavily in R&D to develop innovative technology.
The concept later became widely cited to describe the distribution of value-adding potentials in other types of industry to justify business strategies aimed at higher value-adding activities.
The reason this is so important here for us in Australia is that focusing on value-add is one of the key elements for success in our tech companies. This is even more important with regards to the production of medical products.
The overheads for med-tech manufacturers are significantly higher than that of other manufacturing industries due to the cost of compliance from Quality Systems and regulatory perspectives. This is incredibly important to understand if you are a manufacturing company pivoting into the med-tech space, or starting on your journey to commercialise a product with a med-tech application.
Designing your product and your process, to compete on value, not on price, is critical.
Ensuring that you are solving a problem that your customer is willing to pay for, the solution. Understanding who your customer is, which seems simple, but sometimes in the med-tech space can be different, to the patient in which you are solving the problem for. It really can become quite complex in this space and is something I recommend spending a decent amount of time analysing.
What we can learn from the Smiley Curve, is that nearly half the jobs in Australia Manufacturing are outside production roles and that there is a significant amount of value-added to our manufacturing value chain through R&D and customer-centred design.
This is why projects like CRC-Ps are so important.
Developing a Quality Product is not enough to deliver commercial success. Before we even start on the design and development journey -we must have articulated a clear value proposition combined with a differentiated market position. Ultimately, this boils down to, does someone care enough about the problem you are trying to solve to pay for a solution?
Q: Unavoidably, “manufacturing” involves making things - are there any other key messages that can be taken from the MMS about where Australian manufacturers should focus their efforts in order to compete on a global stage?
My response:
I am passionate about seeing Australia play to our strengths, we can't be everything to everyone. But we can be world-class if we choose to prioritise and focus our areas of expertise.
The Modern Manufacturing Strategy (MMS), has outlined six National Manufacturing Priorities (NMP): resources tech and critical minerals processing, food and beverage, medical products, recycling and clean energy, defence, and space. I strongly support this selection and encourage all manufactures to focus their efforts and capability in these critical areas.
I see our manufacturing strength is in the High Value, High-Quality products which place a strong emphasis on delivering innovative solutions to global problems. It is not about competing with each other here in Australia. We will succeed when we work together and collaborate to solve some of the world’s biggest challenges.
We do well when we leverage our Australian-made brand a focus on innovating not only the product but the value chain and our business models.
In the med-tech sector, we have such a strong history of delivering innovation. From the invention of bionic ears to CPAP masks. We delivered the worlds first baby to be born from a frozen embryo to the invention of Fenestrated endovascular stent grafts. Australians have been innovating in this space for decades. We still manufacture Cochlear implants, ResMed Masks, IVF incubators and needles and Cook Endovascular grafts here in Australia and we continue to support these inventions through ongoing R&D.
I am optimistic to see the federal governments support for our manufacturing industry and look forward to seeing each of the roadmaps that will come from the priority industries.
Q: MTPConnect recently released a report on the interim findings of our REDI sector-wide skills gap analysis. One area where CRC-P applicants often have trouble is in articulating the workforce training opportunities that their project provides. Can you tell us about some of the skills gaps that you see Australia has to address in medical products manufacturing?
My response:
When looking at what workforce training opportunities your project will create there are a few rules of thumb, these will differ for every project, but generally, for every 10 jobs you create in manufacturing, another 3 will be created in the supply chain.
For every one production worker you have, you will at least create one additional role within your company as a support role. Obviously, the ratios change depending on the level of automation. Typically these are made up of quality control and assurance engineers, regulatory professionals, logistics staff, sales staff, customer service. Depending on your type of product and production you might also have maintenance staff, calibration technicians, service engineers, operations and manufacturing management, supplier control staff, post-market product support. Just to name a few.
As for the skills gaps, supporting our STEM skills pipeline is an area that I spend a lot of my time in. Unfortunately, we have some gaping holes in both our current and future STEM workforce.
In manufacturing, we are struggling to get both early-stage apprentices, and experienced staff, both vocationally and tertiary qualified. From a med-tech perspective, COVID has created a number of compounding challenges.
The inability to source skills from overseas, in addition to the increased demand for skills in the medical device development and manufacturing areas due to the volume of companies pivoting to support our COVID needs has created some challenges in the skills space.
As outlined in the REDI report, people with an understanding of Quality Management systems and experience with how to apply it to commercialise a medical device are incredibly hard to come by.
Even though these skills are challenging to find at the moment, there are ways to get around this. Requirements for medical devices are well outlined in the standards. Find a person who has the right mindset for compliance and a willingness to learn, get them to read the standards (13485, 11135, 14971 etc). This is a skill that can be learnt.
If you are able to find an expert to partner with they can provide overview and feedback, rather than developing the system for you. This is probably a more realistic model at this time where access to skills is a challenge.
