Manufacturing workforce
issues paper
October 2013
ISBN 978-1-921916-98-4 (online)
© Commonwealth of Australia 2013
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Disclaimer: The material contained in this paper has been developed by the Australian Workforce and Productivity Agency.
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Contents
List of figures
List of tables
Abbreviations and acronyms
1The study
Introduction
AWPA’s approach to workforce development
Issues paper
Consultation
2Manufacturing—what lies ahead?
Introduction
Context
Manufacturing—more than just making things
Globalisation
Asian century
Technology
Strengths and opportunities
Known opportunities
3Manufacturing workforce—present and future
Introduction
Where are the jobs now?
Who works in these jobs?
What skills do we have now?
What challenges do we need to address—now and in the future?
4Leadership and management
Introduction
Definition
Manufacturing management in Australia
Future manufacturing leadership and management
5Preparing for the future—support programs, policies and initiatives
Introduction
Initiatives to address existing skills challenges
Future-focused initiatives to support Australian manufacturing inthe21st century
Initiatives to drive leadership and management
Attachment A—How to respond to this issues paper
Submission on Manufacturing workforce issues paper
List of figures
Figure 1Employment in manufacturing by subsector, 2002–03 and 2012–13
Figure 2Average annual projected employment growth to November 2017, bymanufacturing subsector (%)
Figure 3Employment in manufacturing by occupational classification, May 2013
Figure 4Highest qualification achieved by workers in the manufacturing industry (%)
Figure 5LLN skills of adults at level 3 and above, by skill and age group (%)
Figure 6Average management performance in manufacturing, selected OECD countries
List of tables
Table 1DAE scenarios, projected average annual employment growth by manufacturing subsector, 2011–2025 (% p.a.)
Table 2DAE scenarios, projected average annual growth rate for top 10 manufacturing occupations, 2011–25 (% p.a.)
Table 3VET qualifications completed by AQF level in manufacturing, 2007–11, numbersof graduates
Table 4Contract completion rates (%), technicians and trade workers, for contracts commencing in 2008
Table 5Proportion of students enrolled in Manufacturing Skills Australia and all Industry Skills Councils courses, by type of provider (%), 2007–12
Table 6Proportion of qualification completions in Manufacturing Skills Australia and all Industry Skills Councils courses, by type of provider (%), 2007–11
Abbreviations and acronyms
ABSAustralian Bureau of Statistics
Ai GroupAustralian Industry Group
ANZSCOAustralian and New Zealand Standard Classification of Occupations
ANZSICAustralian and New Zealand Standard Industrial Classification
AWPAAustralian Workforce and Productivity Agency
CSIROCommonwealth Scientific and Industrial Research Organisation
DAEDeloitte Access Economics
DEEWRDepartment of Education, Employment and Workplace Relations
GDPgross domestic product
LLNlanguage, literacy and numeracy
MSAManufacturing Skills Australia
NCVERNational Centre for Vocational Education Research
NWDFNational Workforce Development Fund
OECDOrganisation for Economic Co-operation and Development
SMEsmall and medium enterprise
RTOregistered training organisation
VETvocational education and training
WELLWorkplace English Language and Literacy
1The study
Introduction
The Australian Workforce and Productivity Agency (AWPA) is an independent statutory body which provides advice to the Australian Government on current, emerging and future skills and workforce development needs. In conjunction with industry, AWPA also analyses sectoral skill needs to support workforce planning and productivity. As part of this work AWPA is preparing aworkforce development strategy for the manufacturing sector.
Manufacturing is the fourth largest employing sector in Australia, employing 921,400 individuals, or 8.0per cent of total employment.[1]The sector also accounts for 7.1 per cent of Australia’s gross domestic product (GDP), 35.0 per cent of exports and 24.4 per cent of business expenditure on research and development. While the sector is dominated by small businesses (80 per cent of employing manufacturing business have 1–19 staff), large manufacturing businesses (over 200 employees) produce over half of the industry value added of the entire sector.[2]
The manufacturing sector has been under pressure from factors such as the high Australian dollar, competition from overseas competitors in low-cost economies and slow productivity growth across the economy. The sector’s output has not kept pace with the broader Australian economy, with average annual growth in industry gross value-added of 0.2 per cent since 2002–03, compared to 3.0percent growth in GDP over the same period. Employment in the industry has also declined at an average annual rate of 1.2 per cent over this time. This trend is projected to continue in the medium and longterm.
While these figures potentially cast a shadow over the sector, they are not necessarily a predictor of the future of manufacturing in Australia. The nature of manufacturing has been moving away from the concept of simply ‘making things’ to integrate value adding services such as design, prototyping and marketing. This has, and is expected to continue to, contribute to the sector’s demand for skilled workers. In many subsectors, lower-skilled and labour-intensive jobs such as packing and product assembly are being replaced by automated processes or moved to low-cost economies, while the demand for higher skilled jobs such astechnicians and production managers has increased. Public perceptions of manufacturing asa declining industry also affect recruitment of today’s graduates.
The demand for higher skilled jobs, coupled with projected declines in employment for mostsubsectors of manufacturing, will place pressure on the sector’s existing workforce. Arelatively high proportion of the current manufacturing workforce have low language, literacy and numeracy skills and 45 per cent have no post-school qualifications, therefore pathways for workers to up-skill or retrain will be important. An ageing workforce will mean businesses will need to consider how to retain older workers to utilise their experience and knowledge withinthe business. Improved leadership and management skills are also necessary for businesses to increase productivity, innovate, adapt to changing business models and integrate into global supply chains.
AWPA’s final report to the Australian Government will outline possible strategies for industry, the education and training sector, and government to promote attraction and retention of skilled workers, increase the availability and supply of specialist skills, improve ongoing skills development and promote the effective utilisation of skills in the workplace.
AWPA’s approach to workforce development
AWPA believes that workforce development is concerned with:
- providing knowledge and skills through tertiary education
- matching tertiary provision to the needs of industry, individuals and society
- using knowledge and skills effectively at work
- further developing knowledge and skills in the workplace.
An effective workforce development strategy requires a collaborative approach between industry, unions, employer groups, the tertiary education sector and government as well asashared agenda between stakeholders responsible for workforce development.
Workforce development refers to more than just training. It also involves integrating business strategy, work organisation and job design to facilitate continuous improvement in skills development and utilisation.
Issues paper
This paper seeks to highlight key issues that will impact the workforce requirements of the manufacturing sector over the next five to 10 years. It has been developed to generate discussion and input from stakeholders on the workforce needs of the sector. Feedback from stakeholder submissions and consultations will be incorporated into AWPA’s final report. Thispaper draws on the considerable body of research on the sector, initial consultations andother data sources to:
- examine current and future developments in the industry and consider the impacts on workforce and skills requirements
- identify the key challenges related to skills demand and supply for the sector
- consider current initiatives to address these challenges and identify methods to replicate best practice in workforce development across the industry.
Consultation
AWPA is inviting submissions on the issues paper by 22 November 2013. Information on making asubmission is at Attachment A of this paper.
As a part of the consultation process, AWPA is also seeking case studies, or candidates for case studies, to provide real-world examples of successful approaches to workforce and skills development in the manufacturing sector for the final report. Examples of relevant case studies could include:
- manufacturers that have navigated their way through significant restructure (what they didand what strategies they employed to bring the workforce along with them)
- examples of best practice workplace development strategies at the enterprise level (thiscould include strategies used to attract and retain staff, apply skills and training andjob design)
- successful programs or initiatives offered by government, industry, or education and training providers which address skills gaps and encourage or enable workforce development.
2Manufacturing—what lies ahead?
Introduction
Globalisation of supply chains, technological advances, and changing consumer demands have presented difficulties, opportunities, challenges and potential rewards across the manufacturing subsectors. The structural changes that are occurring now are likely to continue, or accelerate, into the future and are expected to impact on the required skill profile of the manufacturing workforce. This section deals with the drivers of change for the sector over the next 10 years and what skills the manufacturing workforce may need.
Context
The contribution of manufacturing to the Australian economy has decreased over time. The sector’s contribution to GDP dropped from 9.7 per cent in 2002–03 to 7.1 per cent in 2012–13.[3]The range of products being made in Australia has changed, reflecting changing markets, the impact of global supply chains and some shifting of production to countries with low-priced labour costs, particularly in Asia. The manufacturing subsectors with average annual growth for industry gross value added over the 10 years to 2012–13 were non-metallic mineral products (1.2 per cent); metal products (1.7 per cent) and machinery and equipment (1.0 per cent). Industry gross value added for all other manufacturing subsectors declined, with the greatest contraction in textile, clothing and other manufacturing (6.4percent per annum).
Employment in manufacturing has also been in decline over the last 10 years. There were around 1.04 million manufacturing employees in August 2003. By August 2013, employment levels inthe sector had reduced to 921,400, a decline of 11.3 per cent. In the same period, the total average employee numbers (including manufacturing) increased by over 22.3percent.[4]
The downward trend in total employment across the manufacturing industry and in more than half its occupational classifications is indicative of the structural pressures. Manufacturing Skills Australia (MSA) highlight that many lower-skilled and labour-intensive jobs in manufacturing are being replaced by automated processes with workers taking greater responsibility in quality control and operational efficiencies.[5]
Manufacturing—more than just making things
Transforming raw materials into finished products is an essential component to any definition of manufacturing, but it seems now that manufacturing encompasses the need to add greater value to the finished product at each stage of production.
This paper is underpinned by the assumption that the current and emerging skills requirements of the manufacturing sector will need to be reinforced by skills that enable manufacturers to increasingly do more than just transform materials into products in a competitive manner. They also require the capacity to identify, design, develop, make, sell and service products and services that are in demand in a quickly changing global environment.[6]
Manufacturing is no longer a synonym for production; it represents ‘the full cycle of activities from research and development, through production, logistics and services, to end of life management’. Manufacturers must operate in globally competitive markets, inventing, and innovating and managing, global supply chains and providing aligned services.[7]
These definitions, which reflect themes common to much of the recent literature on the future of Australian manufacturing, are an important foundation for workforce planning. It is likely that the forces that shape manufacturing in a highly competitive and complex global environment will include a greater shift to customisation and personalisation, the growing importance of the low-carbon economy, technology that transforms business models, and collaboration andconnectivity.
The occupations measured as part of the sector relate, for the most part, to traditional perceptions of workers involved in manufacturing processes, as measured by the ABS using ANZSIC[8] and ANZSCO[9] definitions. However, while these occupations continue to have relevance in parts of the sector, many are in decline, while new occupations requiring different skills are emerging. The Future Manufacturing Council notes that:
Business models these days are often bundles of services which package a manufactured product or range of products and these may not be counted as manufacturing in the ABS data. In other words the size of manufacturing and related skills is significantly understated.[10]
Globalisation
Globalisation is expected to continue to impact Australian manufacturing. Global companies in emerging economies are reshaping manufacturing competition through a ‘high-value, low-cost model’,[11] which will impact the future of company models and structures in Australia.
Another effect is that manufacturers are not always sourcing products and services locally. TheSmarter manufacturing for a smarter Australia report noted that global supply chains are increasing their share of world trade and that industry value chains arean important source of technology, collaboration, and knowledge.[12]
Australian manufacturers will have the opportunity to identify which products and servicesare best managed and sold domestically and internationally. There are advantages to be gained from new and larger markets by customisation of products and services for international markets. Additionally, integration of some aspects of the manufacturing activities into external locations to take advantage of local knowledge and operational efficiencies can underpin these expanded marketing opportunities. AWPA’s initial consultations suggest that theskills and experience of dealing in global supply chains are, and will continue to be, important for manufacturers.
An example of the opportunities in global supply chains in operation can be seen in formal initiatives such as the Defence Materiel Organisation’s Global Supply Chain program. The program provides opportunities for Australian industry to access global supply chains of large multinational firms such as BAE Systems and Boeing. These programs are intended to identify and position Australian firms by highlighting advantages such as capability, product, delivery schedule or price.
Australia’s location means that manufacturers are well positioned to take advantage of global supply and distribution chains with Asian linkages. This will be vital to the future of Australian manufacturing because emerging Asian markets are contributing more to global growth than established economies. Asia will be a growing market, particularly for food products. The range of opportunities will enable Australian manufacturers to consider where they can and want to be located in the various supply chain opportunities they identify. Australian businesses are already focusing on those elements of supply chains—from conception to production to consumer—where they have a comparative advantage.
Question for discussion
What are the priority skills required in the manufacturing workforce to work in global supply chains?
Asian century
The Australia in the Asian century white paper, 2012, examines the implications and opportunities involved in taking advantage of the largest structural shift in two centuries whichis now taking place in the world economy.
Conservative estimates suggest that increasing non-resource exports to Asia through improvedAsian capabilities could provide the Australian economy with an additional $60 billion to $115 billion over 10 years.[13] As manufactured products currently represent around 76 per cent of Australian merchandise exports excluding mining,[14] a substantial part of this potential export opportunity should be available to Australian manufacturers.
The ability of the Australian economy to flourish in the coming decade will depend on our ability to raise productivity, develop a deeper understanding of the changes taking place in the Asian region and build successful long-term relationships. This will require ‘new capabilities, new business models, open mindsets, greater investment in skills and education and a higher degree of specialisation in areas where Australia has a distinct comparative advantage’.[15] Put another way, manufacturers will need to foster innovation in their business models and workforce to maximise potential Asian opportunities.
The Asialink strategy for developing an Asia-capable workforce states that ‘one of the biggest impediments to realising the Asian opportunity is the absence or underdevelopment of critical individual and organisational capabilities’.[16] The strategy suggests that building a workforce capable of performing in the Asian century requires broad change on a national scale. It recommends that business, in conjunction with governments and the training and education sectors, take the lead in developing Asia capability[17] in the Australian workforce, particularly inthe pre- and post-transformation roles of future manufacturing.
Question for discussion