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R&D Innovation and Australia’s Manufacturing Future

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R&D Innovation and Australia s Manufacturing Future Dr John Blakemore Principal Blakemore Consulting International Sydney masc_at_blakemore.com.au – PowerPoint PPT presentation

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Title: R&D Innovation and Australia’s Manufacturing Future


1
RD Innovation and Australias Manufacturing
Future
  • Dr John Blakemore
  • Principal
  • Blakemore Consulting International
  • Sydney
  • masc_at_blakemore.com.au
  • www.blakemore.com.au

2
Australian Manufacturing Has a Problem
3
Problem
  • Manufactured imports greater than manufactured
    exports
  • Net contraction in real terms, of the production
    of value added goods
  • Despite record terms of trade we trade in deficit
    with CAD approx 6GDP
  • Solution is Innovation of process and product and
    increase in Business RD

4
RD 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 RD
that is performed within the boundaries of the
country
5
Australia Exports EmploymentExcellent
Correlation
6
CSIRO Exp vs Comparative Adv
7
(No Transcript)
8
Process Innovation versus Product Development
  • There is no point in adding a new product to a
    bad system
  • Process innovation and product innovation must be
    integrated together to achieve the flexibility
    needed
  • Products need to be modular and design and
    customer friendly

9
Where Do You Start?The World is your Market
  • Processes must be world class
  • Concentrate effort in areas in which we have a
    competitive advantage
  • Join the global supply chains
  • Integrate processes and systems, pull
  • by customer, then spread out both ways.
  • 5. Recognize that it is all about QCD
  • 6. Use internal digital data on shorter periods
  • 7. Hook up digitally with customers suppliers
  • 8. Reduce or Eliminate forecasting as much as
    possible

10
Parameters 1
  • The resources boom and a weak US has led to an
    elevation of the A and squeezed manufactured
    exportsDutch/Spanish Disease in the future?
  • Labour costs often blamed (incorrect?)
  • Serious infrastructure constraints
  • Servicing costs on foreign debt high
  • Interest rates high by global standards and will
    go up higher when Net Financial Debt seen as a
    problem (60 GDP, CAD 6 GDP)
  • Italy highest on record in 1924 at 7.1 of GDP,
    then, in 1925 what happened?

11
Parameters 2
  • RD and Innovation are the key drivers of
    manufacturing growth and sustainability
  • Australias private RD investment is very low by
    world standards
  • Australia concentrates its innovation and RD in
    the middle of the supply chain. This effort is
    more valuable closer to the customer.

12
Innovation and Performance
  • We need to be flexible and fast like Australia 2
    in the Americas Cup in 1983 when we came from
    behind 3 to 1 and had to win the next 3 races in
    a row Even though we lost the next 3 starts we
    won the cup.
  • The secret was the Ben Lexcens innovation.
  • We need a winged keel!!!

13
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?

14
Solutions
  • Two plans needed
  • 1. Short term objectives to immediately build a
    planning system to release working capital by
    reducing the planning cycle and making to order (
    Process and System Innovation)
  • 2. Long term strategies to utilize all national
    resources to link process and product innovation
    systems and RD and maximize performance by
    reducing planning cycles and maximizing value
    added in the whole of the supply chain (Process,
    System Product Dev).

15
Key Business Financial RatiosTo Aid Process
Product Innovation
  • EBITA
  • ROWC Return on Working Capital (DrCr)
  • Days Inventory
  • Value Added Percent of Sales and Product
  • WC as Sales
  • Cash Flow (Current Ratio)
  • (Labour oncosts) as Sales
  • Quality (Waste), Cost (COS), Delivery (OTD)
  • RD as Sales (Process vs Product)
  • Intangible Assets?
  • RONA (How do you value assets?)

16
Key Operational Ratios
  • On Time Deliveries (CROTD, Actual)
  • Changes to plan
  • Planning lead Time
  • Lead Time ( Time to produce from RM)
  • Value Added Time (Run Time/ 168 )
  • Measures (Setup,Run,BD,PMT,Idle,CU),
  • Manned Time ( Available)
  • Major Ops with adequate backup personnel

17
Current Accounting Procedures are Inadequate and
Mislead
  • Spread overheads over all processes. ( but Admin
    Overheads?)
  • Isolate what is in the overheads and allocate
    them correctly to products and processes
  • Use the appropriate line entries in the PL to
    focus on the cost of non value added processes
  • Do not be misled by the fact that inventory is
    seen as an asset on the Balance Sheet it is a
    waste.

18
PL and Improved Flow
19
Some Operational Measures can be Misleading
  • up time may be high because run or batch sizes
    are too large and this creates excess inventory
    of some and out of stock for others
  • Solution is to measure and reduce continuously
    the Economic Production Run (EPR) and reduce
    setups, idle time, cleanups, colour changes,
    breakdowns,
  • Preventative maintenance needs to be optimised

20
Machine Measures Typical
21
My RD and Innovation Grant Observations
  • 800 RD Innovation Applications (6yrs)
  • 50 received grants, 5 successful
  • IP mostly exploited Overseas
  • (e.g. Shi Zhengrong and Suntech)
  • Tasmanian windfarm technology to China
  • Small no. people rich
  • Little National Benefit
  • Favours Product over Process Innovation
  • Commercial Ready needs Improvement!

22
Industry Statement May 2007
  • Recognizes the need to act now
  • 3 Major initiatives
  • 1. Productivity Centres
  • 2. Global Opportunities Program
  • 3. RD concession improvements.
  • Claims Manufacturing has grown by 1.2 pa for the
    last 10 years, (inflation?)
  • Recognises that large overseas owned enterprises
    are not contributing significantly to private RD
  • Initiatives for these to use Overseas
    Intellectual Property in Australian RD. Is this
    surprising?

23
Judging Commercial Ready
  • Management Capability (PL, Fin Ratios, Balance
    Sheet, Organization)
  • Commercial Potential (Market, Export Potential,
    Plan)
  • Technical Strength (Innovation, Proof of Concept,
    Plan, Integration of RD with functions,
    milestones)
  • Need for Funding (Proof can fund 50 )
  • National Benefit (Australian employment
    potential, export potential)
  • All 5 of equal weight, (6 points each),
    must score min 17 to be supported

24
Reasons for Failure of RD
  • Poor Understanding of the
  • connection between Process Product Innovation
  • use of correct resources (inc Partnerships,
    Pana/Leica)
  • ways to release working capital to max Technology
  • needs of the market (needs versus wants)
  • scientific method (observation and measurement)
  • need to articulate the concept and plan
  • way to raise funds to support the application
  • best way to use capital
  • measurement of risk
  • need to tap the wisdom of the worker

25
Innovation Process versus Product
  • There is no point in adding a new product to a
    bad system.
  • Honda, Canon, Kawai, Toyota, Panasonic, all link
    Process and Product Innovation

26
How do we Implement Creative Manufacturing, the
immediate need and the Step Beyond Lean
  • It is all about
  • People, Training,
  • Culture,
  • Leadership and Commitment

27
Kyosei
  • Kyosei Living and Working Together for the
    common good
  • Kaizen Continuous Improvement
  • Genchi genbutsu place of understanding
  • Obeya big room
  • Sensai teacher
  • Poka-yoke mistake-proofing
  • Jidoka stop machines (Toyoda Loom)
  • Miyamoto Musashi The Book of Five Rings the
    Samurai warrior after Shogun liberation

28
Rule 1Make to Order (MTO)
  • Demand Production
  • Pull by Customer
  • Apply Continuous flow rules (26)
  • Continuously reduce batch sizes by reducing the
    Economic Production Run (One piece Flow?)
  • Plan by replacement short Lead t
  • Reduce forecasting as much as possible

29
Rule 2Maximum Flexibility Machine and Labour
  • Match Manufacturing Capability with Demand
  • Tirelessly improve flexibility by reducing
    EPRs
  • Continuously reduce lead time
  • Focus on the financial parameters to prioritise
  • Aim for continuous flow
  • Maximise the use of Appropriate Technology (Six
    Sigma)
  • A process can be treated like a machine (Adam
    Smith)

30
Rule 3Innovate
  • Drive Product Innovation with
  • Process Innovation

31
Rule 4Use Digital Data Effectively
  • Recognise that Digital Data can be obtained at
    the POS and sent to any point in the supply chain

32
Rule 5Design for Flexibility
  • Reduce Complexity
  • Modularize
  • Introduce Complexity late in SC
  • Universal design (Toyota)
  • Backup suppliers (standardise)

33
Rule 6Reduce Waste in All Forms
  • Planning waste
  • Expenses waste
  • Resources waste

34
Some Values of Key Parameters
  • Days Inventory 8 Days (Canon Panasonic) actual
    38 Days but 30 Days on Water
  • Value add Never stop Improving (Samurai
    Warrior, Toyota lt 10)
  • Planning Cycle 7 days to one day
  • RD as Sales gt 5
  • Process Control at 6 Sigma
  • On Time Deliveries (CRLT) 100

35
Australian Example 1 Profit in 300M T/O (Ref
Blakemore Consulting Reports )
36
Australian Example 2(2X Productivity (Ref
Blakemore Consulting Reports)
Defectives
37
Conclusion
  • Build a flexible system that can respond to
    changing markets quickly and optimize the supply
    chain.
  • Remove wasteful inventory by matching lead time
    and cycle time and continuously increasing value
    added time
  • Use the capital released from wasteful inventory
    to innovate flexible systems and processes that
    can respond faster to new products.
  • Continuously innovate new products and processes
  • Use a consistent strategy based on the systems of
    Honda, Toyota and Canon
  • Use all resources and be aware of the tools and
    knowledge available and foster partnerships with
    the best.

38
Innovation, RD and Australias Manufacturing
Future We need to be Creative, Innovative, Fast
Flexible(Like Australia 2 1983)
  • John Blakemore

39
The End
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