Quality manufacturing in the era of cheap imports
Australia has some of the world’s highest standards when it comes to manufacturing and product quality – so why are so many products imported? Power Equipment Australasia reporter, Lauren Butler, spoke with some of the industry’s top Australian manufacturers to discuss the history, benefits and challenges of making and buying within Australia.
Surveys conducted by the Australian Made, Australian Grown organisation (AMAG) indicate that 94 per cent of Australians consider Australian products to be an indicator of quality. However, it is no secret that Australian consumers and companies , in addition to valuing high quality, locally made products, also value low cost equipment, which is usually purchased and imported in bulk.
In early May this year, Trading Economics reported that machinery makes up a huge 40 per cent of Australia’s imports, with manufactured goods adding a further 12 per cent to that total – but despite the threat of cheap imports, Australian power equipment manufacturing remains strong, with a number of manufacturers still operating across the country and expansion of the manufacturing sector on the rise. Confirming this, the Australian Industry Group reported that the machinery and equipment manufacturing sector expanded strongly again in March, making it the fourth consecutive month of expansion for the Australian Performance of Manufacturing Index (PMI).
PUMPS AND PRESSURE CLEANERS
In a market deluged with cheap imports, Australian Pumps refuse to join what Managing Director, Warwick Lorenz, refers to as the “price race to the bottom”. The company, established in 1993, operate from a 2.1 acre factory complex in Sydney’s boutique Norwest business district that houses production and assembly.
“When we set up Australian Pump Industries, we did it on the basis that we could only justify starting a new company if we could set a standard for quality and performance. We knew we could never compete with multi-nationals making huge quantities of products for the consumer markets.” Mr Lorenz said.
“We wanted products that worked, and to deal with people who would not let us down. At that point we coined our slogan ‘reliable products, reliable people’.”
Knowing that the company could deliver better value if not a lower cost, Aussie Pumps has been extremely successful, out-performing large public companies and multi-nationals through innovation and operation of a ‘no frills’ business model. In order to guarantee quality and value, Aussie Pumps obtained ISO9001 Quality Certification as early as possible and relies on passionate and experienced industry professionals to get the job done.
“The company is less than 50 people, but they are the cream of the industry and are dedicated to providing nothing but the best in product and aftermarket support to customers not only in
Australia, but throughout international markets. We found that quality pays,” he said.
With its broad consumer base, the company heavily relies on its network of dealerships and the philosophy that people will pay fair prices for quality products.
“With pressure cleaners, there are 400,000 units imported into Australia every year, with an average price of about $138. You can imagine where most of those machines go – the big box stores, and of course, the vast majority are coming out of China. We believe our customer’s time is valuable, and if we can produce equipment that makes them faster, smarter and of course, safer, then we are doing a good thing and we deserve to not only survive in this tough environment, but to prosper as well,” he said.
With little incentive from the government, manufacturing can come at a high cost to Australian companies. According to Mr Lorenz, the research and development parameters for tax incentives are so tight that companies rarely get assistance.
“If your products succeed and they are based on existing technology but applied in a more innovative way, you get no support at all. The government expects us to duplicate Newton’s discovery of gravity in order to justify any kind of support. Successful companies like us simply don’t qualify,” he shared.
At the end of the day, Mr Lorenz said that he is passionate about Australian manufacturing, not only because of the quality products Aussie Pumps produces, but because of the jobs it creates for people who want to do something they can be proud of. For him, and the company as a whole, this continues to pay off. While cheap imports continue to threaten the industry, Mr Lorenz believes that there will always be a place for quality Australian manufacturing, particularly for professional equipment users.
“For consumer products, I think we are stuck with the fact that we are China’s quarry, they are our manufacturing plant. When it comes to products that have to work in professional applications, there is no doubt that we can do it better, competitively and even reach out into the world market if we choose to,” he said.
Established in 1934 by Frank W Davey in Victoria, Davey Water Products has contributed to Australian manufacturing for over 80 years. What started as an auto-electrical business expanded into generators and electric motors, and after World War II, into water pumps. According to Davey’s Head of Education and Training, Ashely White, it has maintained its commitment to research and development, resulting in innovative new products. Many of these products have received awards for innovation and excellence, which have led to Davey’s induction into the Manufacturing Hall of Fame in Victoria.
“Davey has a long held reputation for dependable products. It is important to us in order to provide the superior value for money that our customers expect. If we didn’t make better products, what is to differentiate us from any number of lower quality importers?” he said.
One of the key challenges involved in Australian manufacturing is the cost of production. Davey has focused on maximising its output by targeting 100 per cent success in processes.
“This means we have a target to remove all waste at all levels of our operation,” Mr White said.
Passionate about Australian made products, Mr White said that it is widely beneficial for fellow Australians to support the industry.
“Quite simply, if we don’t have Australian made goods designed for our conditions, we can end up having less than dependable internationally designed products which are not suited to our harsh environment. On a purely patriotic side, it’s also important that we have employment for Australians at all levels,” he said.
In order to continue manufacturing in Australia, Mr White believes that innovation is key.
“Failure to innovate and create new, better solutions for end users is a guaranteed path to cheap imports taking over. It’s up to each business to manage their own futures by focusing on a path of constant innovation to stay ahead of low cost imitators.”
Since its first invention in 1962, Atom Industries has been a household name not only in Australia, but worldwide. Founded by Australian brothers, Angelo and John Notaras, the company is well known for its award winning handheld products. From its early start, Atom’s inventions have continued to be designed, developed, manufactured and sold in Australia, as well as a number of export markets, from its warehouse in Lilyfield, Sydney.
According to John Notaras, manufacturing in Australia is expensive, with the payoff being an unmatchable high-quality product.
“Because Australian manufacturers have an extremely high cost, and hence a high price in the market, Australian made products have to be better quality than imported products. They have to have technological advantages with clever innovation, which our brilliant research and development design team have done,” Mr Notaras said.
While manufacturing takes place in the company’s Sydney warehouse, it is rare for Australian manufactured equipment to have 100 per cent Australian made parts. For Atom, parts like bearings and screws are imported from overseas. Mr Notaras is proud of what the company has achieved, especially considering that manufacturing in Australia is no easy task.
“There are no government incentives for Australian manufacturing, and the government certainly does not make it easy – in fact, they make things more difficult. However, they do allow a small taxation concession for research and development. It is incredibly hard, but not impossible to manufacture in Australia, not only because of the high costs, but also because Australian industry has shrunk so much with loss of support industries,” he said.
“More companies don’t do it because they have no passion to make outstanding products like Atom does. Any Australian manufacturer who has survived the onslaught of the cheaper imports have survived because of the quality they produce,” he said.
As for buyers, he recommends that all Australians support Australian made products, both for their superior quality and for the preservation of important skills in Australia.
PUSH AND RIDE-ON LAWN MOWERS
H.F. Deutscher, established in 1904, is a third generation, family owned and operated manufacturing company, operating from a modern factory on Creswick Road, in Ballarat, Victoria. Surviving two world wars, a world-wide depression, a series of droughts and a number of global financial crises, Deutscher embodies the hardy nature of Australian manufacturing. In the late 1950s, the company saw an opportunity to service the growing landholding sector and commenced manufacturing heavy duty, self propelled mowers. Using Briggs & Stratton and Honda engines, the company is passionate about providing Australians with great quality products that are sold directly across Deutscher Mowers’ independently owned and operated dealer network.
Deutscher is no stranger to the industry’s challenges, having existed in Australia for so long. According to Office Manager Peter Clifton, international imports are a major threat to Australian manufacturers.
“One of the prominent risks associated with manufacturing in Australia is the threat of losing market share to sub-contracted Chinese production. Deutscher Mowers continues to invest strongly in research and development activities across its full production range,” he said.
According to Mr Clifton, Australian made products are known for quality – especially when they have a deeply rooted history of manufacturing in the country.
“The reason for this is that companies that don’t place a high value on quality are unlikely to survive long against the vast array of low cost imported products hitting Australian markets over the last 20 to 30 years, particularly in the outdoor power equipment sector. Deutscher insists on using only Australian steel in its manufacturing processes, as most imported steel is of a notably inferior quality,” he said.
The company tries to source materials locally wherever possible, though this is sometimes not an option with so many components no longer made in Australia. Alongside several other Australian manufacturers, Mr Clifton said that the company believes that more could be done by governments to support Australian manufacturers, particularly regarding government department supply tenders.
“There should be some extra weighting given to locally made products that meet all the specification requirements,” he said.
According to Mr Clifton, Australian workers generally enjoy very reasonable pay and working conditions, leading to a high standard of living for most people.
“This is a good thing overall. Labour costs, however, are a significant factor in the pricing of Australian made goods. This can be challenging for manufacturers trying to compete against imported products, especially those from countries where labour costs are extremely low. Maintaining quality standards is the best way to compete,” he said.
While it is clear that cheap imports are here to stay, Mr Clifton says “It is important, therefore, for Australians to buy Australian made goods and products wherever possible. At the same time, it is also essential for Australian manufacturers to maintain high standards, constantly seek production efficiencies, search for improvements to their product range and listen to what their market demands,” Mr Clifton advised.
An iconic Australian brand with a history spanning over 65 years, the ‘Victa’ lawn mower was invented in 1952 in Mervyn Victor Richardson’s Concord backyard in New South Wales. By 1953, demand for the mowers was so strong that Mr Richardson gave up his job and became full-time manager of Victa Mowers Pty Ltd. Today, Victa is owned by the Briggs & Stratton Corporation,
and assembles its mowers and spares at its Moorebank, New South Wales facilities.
According to Briggs & Stratton Managing Director in Australasia, Dean Harriott, there are many factors that play part in the quality of a product.
“Delivering a quality product combines many things, such as materials and components, design, testing of products and the manufacturing process itself. As an iconic Australian brand, Victa has earned a reputation for being experts in outdoor power equipment due to innovation, strong performance and rock-solid reliability. We have a local engineering and design team that ensures all of our products are designed to reliably perform, and a test department that inspects all products to ensure they meets strict requirements and are suitable for Australian conditions,” he explained.
Briggs & Stratton are excited to pair their Australian standards and reliability with a global community and a blended supply chain, which allows it to assemble and deliver products from Australia by using a mix of locally assembled products and internationally sourced components.
While he acknowledges that there are currently no government incentives in place, Mr Harriott said that the company is open to conversations with government.
“We have had a long standing relationship with Australian government officials and look forward to continuing to work with them in the future. If there are opportunities to have a dialogue regarding future incentives, we would welcome those,” he said.
Mr Harriott believes there is a positive future for manufacturing in Australia, and strongly supports local jobs. “Victa assembles most mowers locally, as we believe in supporting local jobs. Victa has enjoyed a long and prosperous history here in Australia, and we look forward to building on those successes into the future,” he said.
Owen Cox started Cox Industries in 1954 from a factory in Wonnangatta, Brisbane, and today has a full production factory in Acacia Ridge, employing over 100 Australians with a national network of over 250 dealers. Starting with both ride-on and self-propelled walk behind mowers, the company has differentiated itself over the years through innovative design and specialised transmission. According to Cox Industries CEO, Peter Jamieson, this differentiation has been the hallmark of the company’s success. He believes that it is incredibly important to produce products made in Australia, by Australians for Australians.
“Australian made products are built for Australian conditions. We make a very rugged and relatively simple mower that can cut brush, scrub and still do manicured lawns which is quite unique,” he said.
As far as support goes, Mr Jamieson said there is little nation wide support for Australian manufacturers, but there are some local incentives.
“There is a Made in Queensland program which we’re applying for at the moment, but nothing nationally,” he said.
Aside from lack of support, one of the major challenges for Australian manufacturers is staffing and wages.
“Finding a skilled labour force is always a challenge, and keeping that skilled labour force in full time employment given the seasonality in our business is hard. One of our primary focuses is cutting the highs and the lows of our season down. With sourcing components from overseas, there is always a lead time. You have to put an order in for engines almost four months ahead, determining what your sales will be. Production forecasting is a huge challenge,” he said.
With other Australian industries such as the automotive industry going entirely offshore, Mr Jamieson said it is more important than ever for Australians to support Australian made.
“Australian made means you’ve employed Australians to make something for Australians. It’s a nice feeling driving home from work each night knowing that we’ve kept 100 people employed,
making something for our fellow Australians,” he said.
“I think as long as long as we can keep ourselves efficient and we’ve got our production plants working as effectively as they can, and consumers are prepared to pay a fraction more because our labour rates are expensive, then we will continue to operate into the foreseeable future,” he predicted.
Graham and Clare Dryden started Graden in 1986 and immediately began manufacturing turf machines in Coburg, Melbourne. The company’s product range was developed upon requests for something better in the field of turf maintenance.
“High quality machines built tough is a mantra that continues today,” Sales and Marketing Manager, Mark Bainbridge said.
The company manufactures walk behind and tractor mounted scarifiers and verticutters, green rollers, renovation clean up machines and industrial strength zero-turn mowers from its Thomastown building, where its design facilities, prefabrication and assembly are all under one roof.
“This ensures consistent quality manufacturing,” Mr Bainbridge said.
According to Mr Bainbridge, for many Australian manufacturers, cheap imports continue to influence pricing expectations for customers. “We struggle to be price competitive with cheaper versions from overseas. The value in Australian quality and dependable Australian manufacturing can only go so far. The current economic situation in the turf industry in Australia means the cheaper alternatives are getting the nod on price consideration alone. The Australian market wants the quality, but cost of manufacture due to higher wages and cost of raw materials raise the cost of our machines. Why don’t more companies do it? To be honest, I think it just gets too hard and the market is accepting and buying the cheaper alternatives,” he said.
“Once Australia loses its manufacturing skills and capabilities, it will never get them back, so the cheap imports will grow. Unless the market changes its cheap, quick-fix, short term view on machine purchases, and regains confidence in durable machines and the resultant long term gain in efficiencies, Australian manufacturing has a short term life span. That is, unless there are Government incentives internally to grow and promote. Unfortunately, that is not the case currently,” Mr Bainbridge said.
It is clear that without support from Australian buyers, dealers and government, cheap international alternatives will threaten yet another Australian industry. On behalf of Australian power equipment manufacturers, we urge Australians to consider quality, environmental suitability and the preservation of important skills when purchasing and stocking equipment.
For more information on Australian made products, visit: www.australianmade.com.au