From computer games to building supermarkets — this business shows the problems in our ‘pivot’ to manufacturing

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From computer games to building supermarkets — this business shows the problems in our ‘pivot’ to manufacturing

Almost 30 years ago, Sydney-based business Almec created parts for the gaming industry.

A decade later it built mobile phone antennas for Telstra — before that work moved to China.

Then the factory turned to lighting and small-scale construction supply, until — you guessed it — most of that went offshore too.

Today Almec, a “bespoke” sheet metal fabrication business, is focused on “filling the gaps in the market” in medical and building supplies — shorthand for whatever work it can find.

This is small-scale manufacturing in 2020 Australia, and according to the company chief executive Lil Taylor, it is hard work.

An Almec worker in the middle of the steel fabrication processAn Almec worker in the middle of the steel fabrication processAn Almec worker in the middle of the steel fabrication process.(ABC News: Brendan Esposito)

“The only way to survive is to keep diversifying,” said Ms Taylor, who took over the family business from her father.

“Recently we had a point where it was a bit slow, and my dad walked down the road to the Costco supermarket that was getting built and said, ‘we’re a sheet metal company around the corner, can we supply to you?’

“And we got business out of it.

“We’re not shrinking, and right now sales are as good as this time last year, but cash flow is tough. [It’s] tough to keep the doors open.”

Almec has had to pivot many times during its life.Almec has had to pivot many times during its life.Almec has had to pivot many times during its life.(ABC News: Brendan Esposito)

The coronavirus crisis has thrown the spotlight on Australia’s manufacturing sector.

The sudden restrictions in overseas markets and the extraordinary global demand for products such as medical supplies have laid bare Australia’s over-reliance on supply chains out of China.

Much has been made of a consortium of Australian manufacturing companies “pivoting” into critical ventilator production, while a Victorian company, one of the few Australian companies mass-producing PPE, has brought the army in to ramp-up production.

But this is a tiny bright spark in a manufacturing sector that has been shrinking for decades.

After reaching a high of nearly 30 per cent of gross domestic product (GDP) in the 1960s, manufacturing has since fallen to 6 per cent of GDP.

The manufacturing sector's share of GDP.The manufacturing sector's share of GDP.The manufacturing sector’s share of GDP has dropped significantly over the past 60 years.

And the pandemic is triggering a rethink of how this graph should look.

Though playing down any moves towards more protectionist policies, Prime Minister Scott Morrison has talked up promoting Australia’s “economic sovereignty” in a post COVID-19 world.

While Federal Treasurer Josh Frydenberg has promised a re-evaluation of supply chains and a focus on niche manufacturing where Australia does well.

Professor Roy Green has heard this before.

A man working on a steel fabrication sheet in a factoryA man working on a steel fabrication sheet in a factoryRestarting Australia’s manufacturing sector has been talked about for many years.(ABC News: Brendan Esposito)

The manufacturing sector expert and former advisor to the Federal Government said the manufacturing industry had been “withering on the vine, for a long time”, with paper after paper on how to kick-start the sector either partially implemented or put in the too hard basket.

But, he said, there had been an obvious “transformation of attitudes” since the pandemic hit.

“It won’t happen overnight,” he said. “But other countries have done it, and Australia can do it.”

Professor Green said it would come from a “targeted industry strategy” — what Mr Frydenberg calls a re-focus on Australia’s “comparative advantage”.

“For example, it is ridiculous for us to think that we can just flick a switch and start making 90 per cent of all our PPE, and forget about China,” he said.

“But what we can do is develop our niche markets and have a strategy that creates clusters of small manufacturing industries we can develop.”

What the experts are saying about coronavirus:

The task ahead

A new Federal Government manufacturing task force has been set up to focus on this very issue.

It is part of the commission headed by former Fortescue Metals chief executive Nev Power to identify ways to help the economy respond in a post-COVID-19 world.

The manufacturing element of the task force is led by former Dow Chemicals boss and Donald Trump-advisor Andrew Liveris, who recently said Australia had “drank the free-trade juice” for too long, and signalled an end to the era of “off-shoring”.

The taskforce, which is only an advisory panel, has so far signalled a focus on sectors such as food, defence, mining, medical and engineering — and even the space sector.

Catch up on the main COVID-19 news from October 18 in our coronavirus blog

One practical example promoted by many in government is the lithium sector.

A handful of lithium from the Greenbushes mineA handful of lithium from the Greenbushes mineThe lithium industry is held up as a case study for Australia’s manufacturing future.(ABC South West: Ruslan Kulski)

Australia has an abundance of lithium, but exports the raw product to China to create batteries used in devices such as the iPhone and electric car batteries.

“How incredibly stupid it is for us as a nation to dig the lithium out of the ground, send it overseas and buy the batteries back at 50-times the price,” Professor Green said.

A new $135 million lithium battery research centre announced last year is designed to change that process, and in-turn develop an Australian lithium manufacturing sector.

Coronavirus questions answered

An illustration of a cell on an orange background with the word 'coronacast' overlayed.An illustration of a cell on an orange background with the word 'coronacast' overlayed.

Breaking down the latest news and research to understand how the world is living through an epidemic, this is the ABC’s Coronacast podcast.

Read more

This specific-sector focus is backed by Industry Minister Karen Andrews, who told the ABC the pandemic had shown “some gaps” in our manufacturing ability and supply chains.

“[But] we can’t be all things to all people,” she said. “We need to bring businesses and consumers with us and they need to get behind the push to diversify our supply chains.

“We’re not going to be able to manufacture everything that we want in Australia, but I want us to be in a position that we can manufacture everything we need.”

Australian Manufacturing Workers Union national secretary Paul Bastian said the sector would be critical for Australia to “bounce back” and called for a more collaborative approach between government, industry and workers.

According to workplace expert Alison Pennington, coronavirus is “the nail in the coffin” to Australia’s existing economic relationships.

Ms Pennington, a senior economist at the Australia Institute’s Centre for Future Work, said it was clear Australia — and the world — was entering a new era.

“We’ve all had the thought that manufacturing is dirty, it’s old, we’re too slow and too expensive,” she said. “Things will be different now.”

A man working on a machine in a factoryA man working on a machine in a factoryNext year marks a big year for Almec and Australia’s manufacturing business.(ABC News: Brendan Esposito)

Next year marks a big year for Almec — its 30-year anniversary.

And Lil Taylor has one wish for the business’s birthday party.

“I hope that the COVID-19 crisis sees the Government and other companies across the board reassess their supply chains and look locally to fill, if not all, at least some of their orders,” she said.

“It will help protect the manufacturing industry so that it is there when they need it most.”

What you need to know about coronavirus:

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From computer games to building supermarkets — this business shows the problems in our ‘pivot’ to manufacturing

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