Swimming against the tide

Swimming against the tide

Globalisation has forced many Australian manufacturers offshore in order to remain competitive. Not all have succumbed, however. Mark Daffey reports.

It’s no secret that the notion of something being ‘Made in Australia’ is becoming increasingly rare. Globalisation has seen developed nations outsource manufacturing and services to poorer countries that can do the same job cheaper so long as quality assessment standards are implemented. Lower wages, poor regulatory compliance, non-unionisation and the high Australian dollar are all factors contributing to the wave of manufacturing moving offshore.

But that tidal flow isn’t all one way. According to the data recently released by the Department of Foreign Affairs and Trade, our balance of payments was in positive territory to the tune of nearly $21 billion for the September quarter. No doubt a large chunk of that can be credited to the booming nature of our mining industry, with shiploads of coal and iron ore in particular leaving our shores each day. Nevertheless, the result was an improvement over the same period 12 months earlier, when imports exceeded exports by over $4.5 billion.

If those figures were to be broken down further, however, it would probably paint a grim picture for our manufacturers. ‘Not only do we have to comply with our stringent compliance and industrial regulations, we are competing against product that consists of materials that do not meet the same standards. It is manufactured in countries that do not have any level of compliance such as ours and these factories can employ their labour force on a ratio of approximately 33 to one in relation to costs,’ wrote David Kemp, managing director and chief executive of shelving systems maker BDS Group, in a recent letter to politicians.

Kemp continued to air his obvious frustration by saying that we are, “living in ‘Disneyland’ to think any purchaser will pay 35-40% more for any commodity, product or service that is available for less from a number of other suppliers, because it is ‘Made in Australia’”. The influx of cheap imports has forced Australian manufacturers to trim costs, reduce margins and focus on quality and innovation in a bid to compete in their own backyard. Many have given up. However, the state of Australian manufacturing isn’t a lost cause, and some hardware manufacturers are still prepared to take the main protagonists – such as China or India – on their own turf. AG Pulie, Haymes Paint, Ajax Fasteners, Ramset, Reln, CSR Edmonds, Enware, Apex Tool Group, Timbermate, ASSA ABLOY, Sutton Tools and PPI Corporation are some of the company names and brands that export their products to destinations around the world. The reasons for doing so are many.

Expanding sales and profits are obvious reasons, or it may be a simple response to increased competition locally. Establishing a broader customer base abroad is particularly helpful for companies whose sales are subject to seasonal fluctuations, for selling their products abroad can aid cash flow during lean periods, and exporting allows some companies to utilise excess capacity at their manufacturing facilities – by ramping up production for foreign markets, costs can be lowered and return on investment ratios improved. Exporting may also allow companies to access ‘inside knowledge’ of markets and technologies through having a presence on the ground.

Austrade was set up to assist Australian companies wanting to sell their goods or services in foreign markets. It issues grants, offers advice, makes introductions and arranges seminars and meetings that can also be networking opportunities. The Department of Foreign Affairs and Trade also runs courses designed to assist exporters, and state government make grants available to successful applicants, as well as trying to smooth the whole export process. Austrade’s Guide to developing an Export Strategy publication, which is available online (www.austrade.gov.au), says that many companies enter export as a result of a random buyer enquiry – and often succeed through responding to market demand.

‘Successful exporters always have a clear idea of why they are exporting and the results and benefits they expect to achieve,’ it reads, before encouraging potential exporters to identify the key factors that have influenced their decision to export in order to develop a sound strategy. ‘Draw up a ‘long list’ of all the issues that have prompted you to export,’ it continues. ‘This list will serve as the basis of discussion with a range of staff to rank these factors and understand why they are important to the success of your business. Reduce your list to about five of these factors and build your strategy around them – and from that, your Export Plan can be developed.

‘A sound strategy marks the professionalism of your company and provides valuable benefits when dealing with banks, customers and support agencies. It provides direction to your staff and their involvement in its creation is a critical factor in embedding an export culture in your company.’

“Developing export markets immediately provides organic growth in a business. It can assist businesses increase their volume, even out the low times in sales, and expose your brand globally,” says Paul Hasenkam, general manager of AG Pulie, which sells concrete finishing tools, trowel machines, floor grinders and other accessories through its Master Finish brand in New Zealand, South Africa, Southeast Asia and Europe.

Hasenkam cites having the right product to suit the targeted overseas market as a key reason for the success of any company’s export program. He also lists determining pricing structures and knowing how you plan to service the customer as important, not to mention negotiating the terms of sale before goods are shipped.

“The first step is being export ready – having your product ready and infrastructure in place to support new markets/customers,” he says. “Have strong local partnerships and research prospective clients thoroughly,” says Matt Haymes, from Haymes Paint. “When enquiries come in, have a prepared template of questions for them to answer. This sorts out the tyre kickers quickly.” Haymes believes a partner should be able to engage in open, honest and transparent dealings. Nevertheless, he advises exporters to, “always get the money in the bank before sending the goods”.

It’s a common theme. Of all those surveyed for this story, receiving payment up front was highly recommended. Just as important, however, is having the right people to act on your company’s behalf. These are people who know the local market and understand cultural factors.

“In some countries, it is better to have an agent who protects you from losses,” says Ajax Fasteners’ Donna Payne, who lists North America as their primary export market. Ramset – part of the ITW Proline group of companies in Australia – is celebrating 60 years of Australian manufacturing this year. Ramset national marketing manager, Marc Gomes-Luis, says the key to their success in exporting mechanical and chemical anchors, powder actuated tools and consumables, gas tools and consumables, and fire protection products is making innovative quality products that have a true competitive edge.

Allan Ramsey from CSR Edmonds, which sells residential turbine vents to 61 countries around the world, agrees that making quality products with unique features, “preferably with patent protection,” is the most important consideration determining whether a product is suitable for export. Ramsey lists five issues for potential exporters to consider before they look at selling their products abroad. “First, is any intellectual property protected? Second, how is payment going to be secured? Third, look at the support service that can be provided, i.e. what level of travel and meeting is going to be undertaken and maintained? Fourth, what’s the company’s speed of manufacture and capacity to supply quickly? And lastly, you need time dedication from a key individual with knowledge and understanding of various cultures.

“The best person is an experienced exporter who has run the gamut of issues – not a theory person or bureaucrat,” he adds. “You need to gain good understanding of UCP 600 and Incoterms 2010, as well as the shipping process, and they can fast track you on that sort of thing.” Julian Plante, marketing manager at water management products maker Reln, recommends investigating anything that might be a barrier to entry, such as local legislation or requirements, and import duties on such things as recycled products.

“Research the marketplace you wish to enter with organisations that are familiar with that region, and be aware of your internal capabilities,” he says. After that, all that’s left is to give it a try.