1. 7 June 2006Blakemore Consulting International www.blakemore.com.au Dr John Blakemore National President ManSA Chairman Blakemore Consulting International Martin Place masc@blakemore.com.au +61 2 9238 7670 Mob 0414 970758 Australia’s Manufacturing Future in a Global Marketplace

2. 7 June 2006Blakemore Consulting International www.blakemore.com.au Questions Which Industries? Only those where we have a Strategic Advantage (SAW)? How much protection? None? Have we moved too fast? CAD and Foreign Liabilities too High? 40% world’s Uranium but not Nuclear? Why is Business R&D lowest in OECD?

3. 7 June 2006Blakemore Consulting International www.blakemore.com.au The New Rules 1 Battle Present Vision and Global Drivers Blending of Civilisations & Cultures? New world order based on Culture. Companies larger than countries Massive Debts of poorer countries Western world trading deficits huge Continuous global conflicts Global Warming and Peak Oil. Wealth Spread very uneven, ageing. Decline of USA, growth of China & India

4. 7 June 2006Blakemore Consulting International www.blakemore.com.au New Rules 2 Move from Mass Production To Agile Made to Order Don’t size demand to fit Capacity Fit Capacity to fit Demand Low cost and high quality

5. 7 June 2006Blakemore Consulting International www.blakemore.com.au New Rules 3 Low Working Capital and Low Inventory and rapid response Satisfy all members of the value chain Superiority of Knowledge Capital Digital data available instantaneously Compression of Lead time and elimination of Non Value Added steps

6. 7 June 2006Blakemore Consulting International www.blakemore.com.au Leading Edge Trends Why does it cost the consumer $150 for gym boots that cost $2 to make? Why does a digital download music Album cost the consumer $16 when the cost including royalties is $2? The supply chains will compress and prices fall, the answer is speed and elimination of steps in the physical supply chain as variety increases.

7. 7 June 2006Blakemore Consulting International www.blakemore.com.au Inventory in Supply Chain Autos

8. 7 June 2006Blakemore Consulting International www.blakemore.com.au Sales Sourcing Autos

9. 7 June 2006Blakemore Consulting International www.blakemore.com.au New Generation Manufacturing 1 Use Digital data to maximum advantage Choose those industries where we have a natural Comparative Advantage eg Uranium, Energy, Aluminium, Food etc Build integrated digital supply chains Plus high value goods like scientific instruments, sensors, medical devices, Focus R&D efforts where we have a SAW Modular fusion of new technology.

10. 7 June 2006Blakemore Consulting International www.blakemore.com.au New Generation Manufacturing 2 Recognise the value chain Rapid use of digital data from the source to any position in the value chain Mass to build to order

11. 7 June 2006Blakemore Consulting International www.blakemore.com.au New Generation Manufacturing 3 Establish knowledge networks To supplement in house Limitations Increased emphasis on speed and R&D and innovation of process and product

12. 7 June 2006Blakemore Consulting International www.blakemore.com.au New Generation Manufacturing 4 Human Resources Control core competencies Collaborate and Synergise Reward Innovative knowledge developers Continuous learning Imagination +Knowledge= Discovery

13. 7 June 2006Blakemore Consulting International www.blakemore.com.au

14. 7 June 2006Blakemore Consulting International www.blakemore.com.au NGM IP Model Oz1

15. 7 June 2006Blakemore Consulting International www.blakemore.com.au NGM R&D Model Oz2

16. 7 June 2006Blakemore Consulting International www.blakemore.com.au NGM Green Model Oz3

17. 7 June 2006Blakemore Consulting International www.blakemore.com.au NGM All Co Model Oz4

18. 7 June 2006Blakemore Consulting International www.blakemore.com.au NG Pull IT Model Oz5

19. 7 June 2006Blakemore Consulting International www.blakemore.com.au NG Retail Models Oz6

20. 7 June 2006Blakemore Consulting International www.blakemore.com.au Where do we Start ? Macro Convince and Lobby Politicians and Business Leaders so that they understand the need to take a long term view. Convince Business Leaders that it is their best interests to have R&D representation on the Board. Educate the Industry Bodies. Focus our Research efforts not spread them thinly like the CSIRO Make Universities Commercially accountable through Cooperative R&D using Japanese model

21. 7 June 2006Blakemore Consulting International www.blakemore.com.au Where Do You Start? Micro 1.Integrate processes and systems, pull by customer, then spread out both ways. 2. Substitute pull for MRP 3. Use internal digital data on shorter periods 4. Hook up digitally with customers & suppliers 5. Eliminate forecasting as much as possible 6. Educate Industry Bodies.

22. 7 June 2006Blakemore Consulting International www.blakemore.com.au Manufacturers Need Agile Systems We must embrace change, globalise, and Innovate continuously. If this means supply from low wage countries then accept this but control the IP from here and manufacture for the world in a modular design for higher volume or customise where we have a comparative advantage, but the overriding rule is that we must be agile and flexible like Australia 2 in 1983 and replace labour with capital and use blue sky strategies, and use digital data more cleverly.

23. 7 June 2006Blakemore Consulting International www.blakemore.com.au The End

24. 7 June 2006Blakemore Consulting International www.blakemore.com.au

25. 7 June 2006Blakemore Consulting International www.blakemore.com.au Manufacturing or Service? There is no such thing as a pure Manufacturing Company All companies are Service Driven What is your Position in the Supply Chain?

26. 7 June 2006Blakemore Consulting International www.blakemore.com.au Innovation, R&D and Australia’s Manufacturing Future We need to be Creative, Innovative, Fast & Flexible (Like Australia 2 1983)

27. 7 June 2006Blakemore Consulting International www.blakemore.com.au Australia Has a Problem

28. 7 June 2006Blakemore Consulting International www.blakemore.com.au R&D $ & Productivity Source: OECD Main Science and Technology Indicators, 2005-1 Source: OECD Productivity Database, 17 December 2004 GERD is defined as total expenditure by all sectors — business enterprise, government, private non-profit, higher education — on R&D that is performed within the boundaries of the country

29. 7 June 2006Blakemore Consulting International www.blakemore.com.au My R&D Observations 800 E&M Applications (5yrs) Approx 5% successful IP mostly exploited Overseas Small no. people rich Little benefit National Benefit

30. 7 June 2006Blakemore Consulting International www.blakemore.com.au Reasons for Failure of R&D Poor Understanding of: 1.The Scientific Method 2.The use of the correct resources 3.The needs of the market 4.Difference between Process & Product Innovation 5.The need to articulate the concept and plan 6.The way to raise funds to support the application 7.Financial accounts 8.Cashflow 9.Poor measurement of risk

31. 7 June 2006Blakemore Consulting International www.blakemore.com.au Agile Rule 3 Drive Process Innovation with Product Innovation (25 creative Flow Rules)

32. 7 June 2006Blakemore Consulting International www.blakemore.com.au Australia Exports & Employment Excellent Correlation

33. 7 June 2006Blakemore Consulting International www.blakemore.com.au Australia’s Comparative Advantage

34. 7 June 2006Blakemore Consulting International www.blakemore.com.au Agile Results P&L

35. 7 June 2006Blakemore Consulting International www.blakemore.com.au What Has Been Done (Carpet) $300M T/O

36. 7 June 2006Blakemore Consulting International www.blakemore.com.au Smart Production..Output & Defectives (Loss to Profit) Defectives

37. 7 June 2006Blakemore Consulting International www.blakemore.com.au CSIRO Exp vs Comparative Adv

38. 7 June 2006Blakemore Consulting International www.blakemore.com.au Agile Rule 1 Demand = Production Make to Order Pull by Customer Apply Continuous flow rules

39. 7 June 2006Blakemore Consulting International www.blakemore.com.au Agile Rule 2 Match Manufacturing Capability with Demand Product Range complexity often creates poor servicing and excess waste and working capital Tirelessly improve agility by reducing the EPR by removing non value added activities

40. 7 June 2006Blakemore Consulting International www.blakemore.com.au Agile Rule 4 Recognise that Digital Data can be obtained at the POS and sent to any point in the supply chain

41. 7 June 2006Blakemore Consulting International www.blakemore.com.au Agile Rule 5 Reduce Complexity and Modularise

42. 7 June 2006Blakemore Consulting International www.blakemore.com.au