EXTRA >> By Mike Sullivan

FROSTY BOY, one of Australia’s most successful food manufacturers and exporters, is not just riding the crest of a wave, it is creating a wave of interest in icecream and yoghurt products in markets across Asia previously thought as too hard.

In fact, Frosty Boy last year custom built a new 6000sqm factory at Yatala, in the Gold Coast City region, from the ground up to incorporate its state-of-the-art manufacturing systems designed to meet both domestic and international demand. 

Frosty Boy CEO Dirk Pretorius said the facility, which produces the equivalent of two million serves of soft serve ice cream daily, is boosting Frosty Boy’s international expansion and helping its clients succeed in 48 countries – ranging from small restaurants to food outlets including KFC Asia, Burger King Asia, Wendy’s from the US and the 1000-store Jollibee chain in the Philippines. 

Frosty Boy, which started with icecream products  in 1976 in Brisbane, is now manufacturing deserts and beverages, producing versatile powder bases ranging from its ever-popular classic vanilla soft serve icecream to frozen yogurt, frappes, slushies and, more recently, hot drinks. 

“Export now represents 75 percent of our sales and this part of our business continues to grow as more companies realise the quality of our product,” Mr Pretorious said. “Further export opportunities are constantly on the horizon, particularly with the rapid expansion of the frozen yogurt industry, and the ever growing demand for top quality, Australian dairy products in Asia.”

Mr Pretorious has spent many years developing business relationships throughout Asia and these are now paying off – especially with the new flavours developed to suit Asian markets, and a growing awareness of probiotics and so-called ‘superfoods’.

“We see it as following the lead of the US where it has been a big thing for a long time – but we see that taking off in Asia now,” Mr Pretorious said. “I really think we will see strong growth in frozen yoghurt continuing in Asia.”

He said developing flavours for Asia was one of Frosty Boy’s advantages.

“I don’t think that’s a pressure for us, it’s really actually our point of difference. We manufacture more than 130 different types of icecream here. So we really work with the customer in a market to determine what the consumer really needs specific to that market – what flavours do they want, what price point do they want? What specific product do they want to launch in the market?

“Then we work with their R&D team to come up with a product that suits their profile. I think that’s a large part of the success that we have had over the years, to really zone in to that niche market and focus on that niche market,” Mr Pretorious said.

“We (the Frosty Boy leadership) do a lot of travelling and our food teams do spend time in the market as well. The technique is to really work in very closely with the customer to work out exactly what they are after.

“It is about subtle changes in flavour. A vanilla that you would sell in Australia is not a vanilla that you sell in China, for instance. So we work with the suppliers, the food houses and the customer in fine tuning the product accordingly.”

There have been surprises along the way. For Mr Pretorious, one of these has been the popularity of green tea flavours.

“Green tea flavour is one that I thought would be really niche, but we see that starting to take off now as a flavour that is more mainstream,” he said. “We see some icecream shops in Asia that have all their products based around the green tea product. Although green tea has always been a big flavour in Asia, I never really thought it could work on its own as an icecream base.”

Frosty Boy supplies the base product and the flavour is usually added by the client as part of their unique product process.

“So they might add a durian flavour or you might even see some teas – different tea flavoured icecreams,” Mr Pretorious said. “Every time I go back (to Asia) I am amazed at the growth – the number of stores and you have got a growing middle class in all those markets with disposable income.”

RISE OF HEALTHY FOODS

Once thought of as the staple of fast food chains, the fast-serve icecream products that Frosty Boy creates are now underpinning products meeting the needs of a global trend towards healthy foods.

“Healthy foods? That’s a trend all over the world I reckon, people are more aware of eating healthily,” Mr Pretorious said. “So we are aware and have developed products that are sugar-free, low in sugar and low calorie, reduce calories, low fat. Low fat has been a big thing but that is on the sideline now, but the big things now seem to be lower in sugar and lower in calories – that is what we are working on now in coming up with concepts and ideas. 

“We have got such a wide range of yoghurts available – they’ve got anything from high protein to low sugar – there is a huge range available – and they all contain pro-biotics and pre-biotics as well.

“Pro-biotics became well known from yoghurt that you buy in the supermarket. Obviously we add that in and the health benefits of that has been well documented over time. We add the pre-biotics to it which is basically the fibre – or, the food for the pro-biotics – to make sure that you get the best benefit from that.

“We’ve known the benefits for a while and we have looked at all options and as food technologists – we have got very good food techs on our team as well – we are constantly looking at what is going to be the next big thing.  So while it has been in the market in normal yoghurt, we looked at the options of adding it to frozen yoghurt, for the benefit of consumers of frozen yoghurt as well.”

Frosty Boy’s growth in Asia has been accelerated by its products reliability and safety – especially in meeting logistical challenges. 

“The product that we do has got a 12-month shelf life on it, as long as you store it at about 25 degrees, so it is a very easy product to handle, particularly for Asia,” Mr Pretorious said. “For that reason as well, it helps us to be successful because the cold chain and supply chain is not as sophisticated in a lot of these countries.

“So our product makes it really easy for them from a logistical point of view. We do design products that are very robust for that reason. It is still a big problem in a lot of those countries, that supply chain. Our product fits really nicely into that format.”

Frosty Boy works in two main areas of the supply chain: supply groups for the major food chains and with independent importers.

“We are exporting now to 48 countries,” Mr Pretorious said. “It is a process of finding the right distributor, getting them on board and getting them trained up, and then developing that market outside of the chain business.

“I am always amazed when you are travelling and you see how many chains there are that you have never heard of. That you don’t know about, but they may have 200 or 300 stores somewhere in Asia. And you’ve never heard of them. Those are the ones that you need a distributor in market to find them.”

FACTORY FOUNDATIONS

The new Frosty Boy factory at Yatala now provides a firm foundation for meeting growth demands globally, Mr Pretorious believes.

“I think the main thing the new plant does is it gives us some sanity again. At the old plant (at nearby Loganholme) we were running flat out with shift 24 hours a day, seven days a week. And that’s as well as developing markets.

“We have doubled capacity moving into this plant and we are sitting now at around 60 percent capacity. So it gives us the capacity to really develop new markets again and we are looking for new opportunities.”

Fundamentally, the new facility has allowed Frosty Boy to streamline its processes through re-design.

“When you can design something from scratch you can always get it to run more efficiently,” Mr Pretorious said. “So the flow of raw materials through to finished goods is excellent. We also designed it for quality assurance purposes. It is one of the key things now if you are an Australian food manufacturer – to make the absolute most of the great name Australia has got for quality products. Design it to reduce costs.

“If you want to manufacture in Australia you have really got to get your costs under control.

“So we have put in a lot of robotics, in terms of the packing side. So even with the quality assurance focus we are cost effective. So we have computerised many areas of the plant, for instance in terms of the recipes, so they are always strictly following the recipe. Systems are giving them a lot more efficiency.

“We have also developed a good R&D facility here. We bring a lot of customers in to Frosty Boy to work with us here, either working on their own recipes or to develop something specific for them in their market. We prefer to do it here – we make the most progress if we can get them in, or we would send a food tech in to market, to work with the customer in market. Sometimes you have got to do both as well to get it across the line.”

That capability is helping to drive new sales and increase volumes to existing customers, as Frosty Boy products are designed to help their customers grow.

“Because we are so focused on a very niche market and we see so many different markets, we really can give a lot of insights to our customers on what’s the next trend that’s coming – and what do we see that works in other markets. From that point of view I think we can give a lot of input to them.

“We also do a lot of menu innovation work here. We would not just manufacture the product, we would take it all the way through to the menu. And then we would work with the customer on the next launch for them and how is their next menu going to look. We’d work on costings and show them operationally how it should be done to present that product.

“At the end of the day we do not sell a carton of soft serve mix, we sell something that is on a menu somewhere that the consumer has to buy. We really focus on that end of the business in terms of innovation.”

An area Frosty Boy has been a little surprised by is the growth of the beverage market in Australia and Asia– coffee in particular..

“The whole coffee market and the beverage market is a massive trend at the moment,” Mr Pretorious said. “We have developed a range of products called the The Art of Blend, which is a range of products that has been specifically designed like that.

“With seven products you can develop, literally, 100 menu options, by combining them, by adding fruit to them, by adding flavours in there. The idea is that you give a coffee shop or a chain the ability to use these seven products.  You have constant menu changes, limited time offerings, you know, the things that consumers want.

“What we see now is that consumers don’t want to be told what to buy – they don’t want to see two or three items on a menu and that’s it. They want lots of options, and they want those options to change constantly.

“That puts a lot of pressure on the outlets ... and the range is designed to give them that ability to make changes without changing the base product.”

The range has hit markets in Asia at just the right time.

“I am always amazed when I am travelling in China the amount of coffee shops and the quality of the coffee you get there now,” Mr Pretorious said. “Ten years ago you would not get a coffee shop there and now they are on every street corner.

“Obviously that has given us another angle. We can serve those beverage companies.”

Mr Pretorious said Frosty Boy was keeping an eye on food trends such as so-called ‘superfoods’ – but probably not develop such products until they become more mainstream.

“Superfoods … we are keeping an eye on it but you’ve got to remember it has got to be available to mainstream,” he said. “It’s a niche at the moment … and it is obviously a volume thing as well for us – but we are keeping an eye on it and seeing what’s happening in that area.

“We really focus on our niche. We don’t want to try to be everything to everyone. We’ve got big competitors out there – big multi-national companies – and we are still a small player and we have got to always remember that, know our place in the market and focus on what we are good at.”

FOOD’S BRIGHT FUTURE

Mr Pretorious sees a very bright future ahead for Australian food production and manufacturing, based on what Frosty Boy is experiencing as a result of its constant innovation.

“I think Australian manufacturing – and food manufacturing in particular – has got a great future,” he said.

“There are a few things you have got to get right: one is that you have got to spend money on innovation, on things that will reduce costs and give you that ability to compete in those markets. If you get that bit right and then really focus on innovating your product to really give you a point of difference in the market.

“You focus on quality assurance and drive that quality assurance message through to the customer. Those things, I think, are crucial to Australian manufacturers. And then sell Brand Australia.

“We always say we sell Brand Australia long before we talk about Frosty Boy. It has such a good name for the quality of its products. And we use that.

“If you can get that combination right, and obviously customers want good service – it is all about really servicing those customers and taking care of their needs. Then I think we have got a great future for manufacturing in Australia.”

Frosty Boy has not been linked to any major export programs or development organisations so far, but it does recommend working with Australian government bodies to foster new markets.

“Of course, we have worked over the years with Trade and Investment Queensland (TIQ) and their offices overseas as well, to help us with leads and open new markets,” Mr Pretorious said.

“We find if you are going to a meeting with a customer for the first time and you take a government representative with you, like Austrade or TIQ, it just adds to that feeling of confidence in the customer. It says, these guys are seen by the government as worthy of support and to represent – and that really helps us as well with that process, to speed it up a bit.

“But it is a long process, we always say it takes us two to three years from starting before you get the first order out of a market. It is a long process of constantly visiting that market and building relationships.

“I really think that’s where a lot of exporters fall flat, because they start that process and then after a year they say, this is too hard, you know? They say this is taking more time than I thought it would and is costing me money … But it is a process that you have got to stick with to get the end result.

“A lot of times you have got to have that long term vision along with your customer as well. You may start small, but they (grow and) become a substantial customer over time. That has happened many times with us in Asia, where what seems like a fairly small customer to start with grows into a substantial customer.”

But the real key to success for Frosty Boy has been the commitment and innovative nature of its staff.

“The important thing for Frosty Boy is our team and our people,” Mr Pretorious said. “At the end of the day, Frosty Boy is not about the shareholders of the business, to me it is the team of people that has gotten us here and we’ve got a really amazing team. The way they are and the way they work makes it a fun place to work.”

Frosty Boy constant strives to improve its flavour, in both product and production, Mr Pretorious said.

“Keep it a fun place to work. You can’t be in a happiness factory and not be happy.”

ends

By Mike Sullivan

TECHNOLOGY diffusion organisation QMI Solutions is adamant manufacturing has an extremely bright future in Australia – but not as we have known it.

QMI Solutions chief executive Gary Christian believes the demise of the major automotive manufacturers in Australia has blindsided the community and most politicians to the real opportunities and competitive advantages Australian manufacturers retain – and need to develop hard and fast. 

“Is it advanced manufacturing or is it ‘advancing’ manufacturing?” Mr Christian asked. “I think we are advancing it to the next level.” 

Mr Christian made the point in relation to world leaders in manufacturing, based in Australia, that are doing it very differently – companies like defence contractors Micreo and Ferra Engineering, marine manufacturers Riviera and Maritimo, composite materials manufacturer Wagners, global medical device designers and producers Cook Medical and Cochlear, and architectural doors innovator Centor.

All are leaders in their manufacturing fields and going from strength-to-strength, Mr Christian said. Other up-and-coming companies can learn from them. He believes the decline in major car production and the falling away of the mining sector infrastructure boom may actually play into the hands of other Australian manufacturing sectors, long term.

“When a big resource boom pops up, there is a big drain on skills automatically – they all head out west to capitalise themselves, I suppose, on the growth they experience there,” Mr Christian said. “And you see a skills drain in the cities.

“I think the Australian auto industry has done some great things in the last few years. We have some pretty smart stuff in our cars now … they talk about cars starting to park themselves, well, Audi have done it and Holden are doing it. We got there. I think it’s sad that we got there when the market started to shrink around us. 

“You are taking about the in-car componentry – well, that’s electronics so that’s transferable.

“Over the next few years I think we will see a transfer of those skills to other industries. It may be the medical area, for instance, and we have a very good medical device manufacturing industry here.”

AUSTRALIAN CONDITIONS

The impetus to make motor cars in Australia in the first place came from the need to make vehicles for ‘Australian conditions’ – in fact, that was the catchphrase that General Motors-Holdens Sir Laurence Hartnett and Jack Horn used when convincing the GM board to establish Australian-design and manufacturing in 1944. The pair also made their proposal with the full knowledge that at that stage the Holden operation was the most efficient manufacturing plant in the entire General Motors network.

But ‘Australian conditions’ involved more than just the vast distances to be travelled, the wide temperature variations and the rugged state of most roads at the time. They also referred to Australia being a small but relatively sophisticated market, a long way from the world’s major industrial centres, and with a need for innovative engineering for reliability and to overcome the tyranny of distance.

While the increased cost of labour and fluctuations in the Australian dollar may have cruelled the great auto manufacturers, the design-led innovation that has been a characteristic of Australia’s auto industry for more than a century – witness Ford Australia’s famous creation of the ‘ute’ and Australia’s expertise in braking and cooling systems – will keep the industry here. Both Ford and GM are holding and expanding their design and prototyping assets in Melbourne.

Holden has just completed the final designs for the new Buick range – a car that will not even be sold here, as has been the case with its famed latest generation Camaro development program. Aftermarket accessories manufacturers like EGR are expanding their markets in utility canopies and off-road accessories.

“If you are a component manufacturer and you are good enough to compete in a global market – and that’s getting a whole lot of things right in your business so you are competitive—I think that you can collaborate with others and be an end-user supplier to the auto market. I can definitely see that,” Mr Christian said. “A little bit of auto capability is going into marine industries.

“We have come across a lot of great companies operating in the aviation space over the years. I suppose defence takes up a lot of that,” he said.

“If you look at where we see the growth, you look at aviation, medical devices, and to some point even in marine. Even though you may get the (marine vessel) shells made elsewhere, we still have to do the fit-outs, and the electronics (made and fitted) here.

“So I think the electronics (design-manufacture) area will be a huge flow through for us as we go forward.”

HOME GROWN INNOVATORS

Mr Christian said one sector in which Australia has a distinct lead already, agribusiness, is also perhaps its greatest manufacturing opportunity – both in food manufacturing systems and in farm management technologies.

He mentioned the world-leading research being conducted by Central Queensland’s Swarm Farm group on agricultural robotics, in tandem with the Queensland University of Technology (QUT).

Swarm Farm founding director Andrew Bate believes specific robotics can be applied to farming to make it more efficient and eliminate the need for pesticide use by using robots to tend to plants on an individual basis, while also tending the soil – and it can all be done 24 hours a day, seven days a week in any weather conditions. He set out several years ago on a global quest from his Central Queensland family farm to seek out such state-of-the-art systems – only to find that QUT was actually leading the world in this area, so Swam Farms is now a collaborator in developing a series of agricultural robots, now dubbed AgBots.

“He was very focused on not losing his skills and trying to grow the skills to actually pick up the new technologies and putting them into his business,” Mr Christian said. “They are doing well. It’s a processing manufacturing business with the farming. They are one of those stand-out companies that are really embracing the technology.”

Another stand-out design-led company QMI has worked with is Centor. The company is a world leader in sliding and folding door systems and is now one of the world’s leading designers and manufacturers in this area.

“They are one that has made a major transformation over the past four or five years,” Mr Christian said. “We worked alongside the State Government up here to launch a program – the Ulysses program – to help design their transformation.

“To talk to the managing director Nigel Storm about their transformation, it’s a great story about how one day he just went forward on changing his customer base. The business had grown to a point where it was being eroded, so he changed his whole customer base over to more of a direct relationship with the end user – the consumer.

“If you talk about the bi-fold sliding door systems, probably some of the best products I have ever seen would be coming out of Centor ... to the point that he has entered the North American market and his business is growing at a phenomenal rate.

“That is a great example of how a business was able to transform from what they had been doing for many, many years; taking their product range back to what the end user really wanted. I suppose cutting out the middle man in the large end of town and dealing more with the smaller customer (builders and end-users).

“When we first approached them on behalf of the State Government to see if they would do a pilot program, I think there were a lot of vacant looks around the room, trying to understand this design-led concept and what it really meant. But having said that, by the time we got to the next round of discussions with them, they were very interested.

“They knew they had to do something different, because they could see their own balance sheet and they could see their profits. Things were shrinking because of who they were dealing with (at that time),” Mr Christian said.

“Now it has completely turned around to the point where profits are growing based on who they deal with, which is that end customer,” he said.

“Talking about Centor, that whole design led concept is starting to emerge. All companies are asking, what is this transformation of my business model to be better at what I do? Who is the end user? Where am I on my designer journey?”

HELPING MANUFACTURING

Mr Christian believes governments need to get behind rejuvenating manufacturing, but in a way that is consistent with a 21^st century industry. He said manufacturing is and should remain a vital pillar of economic growth in Australia.

“I think government needs to understand the importance of manufacturing – the number of jobs it creates and the overall effect it has on GDP in our country,” Mr Christian said. He uses the recent manufacturing recovery in the US as an example.

“It is interesting when you look at what happened in America over the last couple of years. They had outsourced so much and then they started taking it back in again. They were probably taking the high value products that were more highly automated back in, but they have concentrated on creating more manufacturing and bringing more jobs back internally and it has assisted in turning the economy back around.

“For every manufacturing job there are another five created in the supply chain. Every time manufacturing is not looked at and starts to wind down those volumes, there is a huge flow-on effect. Most people in manufacturing know that.

“I watch the federal scene and it is interesting that we are now going to pump more money back into the auto industry again. Something has happened that people have realised we can’t step back, we have to take things more aggressively and be on the front foot and support our manufacturing – it needs to be a transitional thing.

“It is not something that happens overnight, it could take 10 or 20 years to do that efficiently.”

The outlook right now is hardly bright, Mr Christian admitted and he said as far as QMI could observe there was no appreciable increase in manufacturing start-ups at this stage.

“I think overall it is static – I am seeing some movement there, but not enough to be confident in saying people are starting to want to start up in manufacturing,” he said.

“We have been through X number of years in which manufacturing has largely been attracting negative comments, in a phase that is largely driven by the big end of town.

“Australia is made up of about 96 percent SMES, so most of our manufacturing is done by smaller businesses, between 20 and 200 employees and in that $40-60 million bracket. Those are the ones that actually do transform and become bigger companies down the track. Small business is important because it becomes medium sized business and medium sized business becomes bit business.

“So government does need to support small business but there always comes a point where they need to stand on their own two feet – the issue is what is the point where you stop supporting?”

There has been a prevailing view that Australian banks and their business loan programs are not conducive to manufacturing growth – but Mr Christian did not see it that way.

“We talk to banks because we like to represent manufacturing, and there is interest,” he said.

“Some of  the smaller guys  (banks) are certainly focused on trying to engage with that SME market. The comments that we get are that they are very focused on manufacturing help. I have not been getting that negative feel that banks are not wanting to finance manufacturing.

“It’s like anything, the business has to be able to stack up to the bank because if you are a start-up company and you are really only doing this because it is a passion and you do not understand business, you become a high risk to the bank.

“We have  a lot of processes in QMI where we have benchmarked organisations to give banks that confidence. Those sorts of business tools and benchmarking give companies the confidence and banks the confidence – and provide the documents that assist greatly in front of a banker.

“We tend to go through and benchmark them on the core things in their business. We have done over 1400 benchmarks alone in Queensland in the last 10 years. We can talk openly and honestly about what our findings have been.”

A recent innovation at QMI will play an increasing role in improving business development and helping to make positive cases for finance, Mr Christian said.

“Recently we brought a new product out to the market, Core Value software out of the US, and it is a lot better benchmarking tool again,” he said. “What that is doing is helping companies to make the decision on whether they need to stay in the game or hop out. It goes a lot more into the financial measures of a business.”

He has seen Core Value successfully applied to make a compelling manufacturing finance case to a bank.

“Of companies I have seen over the years, some successful and some not, it always comes back to the skill set in the business,” Mr Christian said. “They are companies formed out of their tech background, I suppose. So they had a passion for what they did.

“Some of them are lucky along the road and had gotten to learn about business and survived – and some didn’t. Those could never get past that ‘I bought myself a job’. It’s unfortunate. But most business people have had to learn along the hard road. A lot of them didn’t go to university – but even those that did often were not prepared for business and it was only by getting into the business and running it that you actually learn.”

BUSINESS HELP

While the challenges to successful manufacturing in Australia are there, Mr Christian said help was available from an increasing range of sources as well.

“There are a lot of places you can go,” he said. “The Federal Government runs the Infrastructure Entrepreneurial program, and they come in and do business reviews around the country. These can be very useful.

“State-wise there is QMI Solutions. We have been here for over 22 years now and we have been supporting new businesses for all of that time, whether it be the uptake of new technologies or the implementation of new soft technologies to actually help them get better at what they do.

“Along that path we have benchmarked those companies to help them realise where they are at and what they need to do.”

QMI’s roots are in leading the way with new manufacturing technologies – it was originally known as the Queensland Manufacturing Institute – and then diffusing those technologies to commercial industry. A good example is its early diffusing of 3D printing technologies, which are now coming to the fore.

“Back in 1993 we were funded by the State Government to take up the stereolithography which was a form of 3D printing,” Mr Christian said. “That technology, which you see everywhere now in 3D printing, was a sizeable machine in those days and it as good for prototyping your products or testing existing products.

“It was a great spin-off technology and there was another company formed out of that called Anatomics and they operate largely in the cranial facial reconstruction area, with medical parts. So there were some really good stories that came out of the forming of QMI and the relationship with Anatomics – and now we see that technology talked about almost every day.”

In fact the two lading medical manufacturers in Australia, Cook Medical and Cochlear, are now adapting 3D printing technologies for their products, to maintain a world lead.

“Cochlear and Cook Medical are both heading that way (3D printing),” Mr Christian said. “At the end of the day, to be able to prototype some small part to get a better feel for it, and it is quite inexpensive to do that, as opposed to the huge outlay. The original 3D printing that we had 20-odd years ago was not $1200 that you pay today, let’s put it that way. It was a significant investment made by QMI and the State Government to be able to bring that technology to this country.

“When you talk about 3D printing (in the future) we can look at the whole concept of growing organs – instead we can be 3D printing them. That’s real. That’s going to happen.

“Same with 3D laser sintering, printing in 3D with powders, they are technologies that will grow more; 3D printing within a few years will be something we talk about as past … it will have migrated and transformed into the new age of printing – even body parts.

“They have printed a car already overseas. So 3D printing is transforming  and while it is industry picking it up now, who is to say that in a few years time you won’t have a printer that you pick up from Harvey Norman for $1000 that you could print your own knob that just broke on your air conditioner? Downloadable.

“Where is it going to go? This is something we are watching carefully to see where this technology is really going to end up. We have already seen the police getting alarmed about people making their own firearms using 3D printers.”

Mr Christian said Australia’s peak science organisation, CSIRO, is heavily involved in 3D printing innovation and its learnings are likely to be taken up by industry. An unusual example was a specific horseshoe CSIRO designed and printed, which ended up saving a horse’s life.

“They were aware of a horse that was likely to be put down, but CSIRO but ended up keeping it alive by making a specific horseshoe, because they discovered one of the horse’s legs was just slightly shorter than the other. That’s technology for you.”

Mr Chrisitian highlighted the value of pure research, even if it was not clear in the early stages how this would play out commercially.

“Some of the things we diffused to this country never really took hold until some years later,” Mr Christian said. “It was on a curve in which we researched and were able to diffuse that technology and, ready for when it really got its full commercial take-up.

“For example, we have an incremental sheet forming machine housed out at the University of Queensland, and they have been doing a lot of work with Boeing over the years – Boeing are a big recipient or interested party on the research side of incremental sheet forming.

“I wonder sometimes, if in 10 years time suddenly everyone is going to be talking about incremental sheet forming, yet we have had the only one in this country for the last nine years.

“I’ve talked to manufacturers over here who may have an applications for it … they don’t understand it, yet. But they can see how it can help their business.”

Mr Christian said Australian industry often struggled with new technology adoption.

“It’s difficult,” he said, “you have really got to try to get them to embrace.

“This is a new technology, you need to stop working in your business and start to work on it – there is an application here that can save you a lot of money and make you more competitive.

“I find that in Australia: some companies struggle with that take-up of technology.”

In some ways, QMI sees resurgence in Australian manufacturing as a ‘back to the future’ process.

Australia has a fine record of invention: the lawn mower, the black box flight recorder, the Cochlear ear implant, Gardasil vaccine, over-the-horizon radar and, perhaps most commercially impactful of all, CSIRO’s creation of wi-fi. An exciting new development in Australia is wireless power connection technology, Mr Christian said.

“We have been starting to get some interest in this kind of area – the whole idea that your mobile phone can just sit there on the desk and charge while you are having a cup of coffee …” he said. “I think this whole wireless transmission of electricity is going to be a huge growth area. I think there is still room to move in other areas like solar panels – for example, why doesn’t Australia have solar roofing, say the whole roof of your house?

“I am lucky enough to run across a lot of great companies doing great things. I ran across a gentleman recently who had a way of charging (electric) buses. As a bus pulled up at a bus stop, it was charging. On to the next stop, charge. They had worked out how many minutes the bus stopped.

“I was also talking to a gentleman the other day who can scan underneath the bitumen at 100kmh for holes. So think about the floods we have over here, we can scan along at 100kmh, scanning 8ft (2.5m) down. It’s a great invention, but once again it is hard to get the right kind of investment in these companies.

“They have a great concept but trying to get funding to take it to the next level and commercialise it is very difficult for them. Trying to get somebody to fund this sort of thing in Australia is very difficult, because of the population.

“There are only 23 million of us here, living in a place bigger than America. That’s the problem. These things will happen, but they are more likely to happen (commercially) in other countries before they happen here.”

Mr Christian said this was the ongoing Australian dilemma, where new inventions and innovative companies go offshore because they can only find funding offshore. For manufacturers, the reality is that they usually must locate to where they are funded – and that is where the jobs are created.

There are many challenges to Australian manufacturing, but Mr Christian remains optimistic about the future.

“I think it is a period of time that we are going back to again – but in different ways,” Mr Christian said. “We will see that large scale mass manufacturing, which we have had here for the past 200 years, will scale down while new niche manufacturing will emerge. Through robotics, 3D printing etc.

“Is it advanced manufacturing or is it ‘advancing’ manufacturing?” Mr Christian asked. “I think we are advancing it to the next level.”

www.qmisolutions.com.au

Ends

EXTRA >> By Mike Sullivan

MICREO Limited, the Australian designer and manufacturer of sophisticated military microwave and photonic defence systems, is a relatively small company supplying a big and increasingly demanding world.

Tim Shaw, Micreo’s managing director, presented a fascinating address to the Innovation Series luncheon in Brisbane in late 2014, outlining how – even though his company operates in a rare environment – its challenges and keys to success are still those of most small businesses and manufacturers in Australia. 

Micreo has had to find ways to manufacture ever-more efficiently and effectively; it has had to employ strategies to manage currency fluctuations, especially as many of its major clients are in the US; and most important it has had to develop a culture of innovation and excellence.

“In a world in which there are big fish and little fish, how can you as a little fish find your lunch and not become lunch?” Mr Shaw opened his address to business, government and research leaders at the Innovation Series.

“I looked at particular challenges that we, as a small company, have faced as a result of being where we are in the world and in trying to do what we wanted to do.

“First and foremost, when we started the business … the A$ was at 53 US cents. You all know where it got to …. Essentially we compete in a world market, even in Australia, because our prices are linked to the world market … and the trade barriers just aren’t there, the way they would have been 30 or 40 years ago,” he said.

“Secondly, our salaries increased at a steady rate over that period – and even throughout the GFC (global financial crisis). If you look at what happened in the US, salaries from that point on went down even … or, at least, remained flat. I am talking particularly about manufacturing labour.

“The result is that we went from having a significant cost advantage in our labour to having a significant disadvantage. Typically these days, the cost of our labour in manufacturing is about 50 percent more than the hourly rate in the US. Never mind looking at other countries where labour is at a lower rate still.”

Mr Shaw said local challenges that small business leaders are familiar with are part of Micreo’s everyday as well.

“We have a small domestic market and the distances to world markets, although that is perhaps becoming less of a factor now than in the past,” he said. “And then you can’t always find what you need in order to make your product, in the local supply chain.”

MICREO’S PATHWAY

Micreo was developed by three microwave engineers – Tim Shaw was one of them – in 2002, with a vision to develop the world’s best products in their field, Today the firm employs more than 70 people at its Brisbane Technology Park headquarters, supplying a variety of electronics and photonics units that protect aircraft, ships and road vehicles from missile and bomb attacks.

Micreo’s main customers are the world’s major defence companies – and they happen to be based in the US and Europe. This was by design, Mr Shaw said, and Micreo had to continually innovate to stay in those markets.

“First, we set out to find an export market niche that suited our ability and our environment,” he said.

“Second, we had to reduce costs as what we produced steadily became more and more expensive, if we did nothing. Therefore we had to do something to reduce our costs.

“Third, we decided to be the best. That takes some confidence. But that’s what you have got to do.

“You have got to go out there and be the best, because how else are you going to get some competitive advantage from where we are in Australia?”

As its technology and products developed to meet emerging threats, Micreo’s successes sharpened the definition of its purpose.

“That’s our mission: we stop missiles and bombs,” Mr Shaw said. “Our products go on to aircraft and they decoy or jam missiles. They also go on to ships and also on to foot soldiers. Our products can help prevent them from being blown up by roadside bombs and the like. We have been pretty successful there as well.”

Right now, Micreo exports more than 90 percent of its products. Mr Shaw said the company has grown at “about 15 percent compound per annum” since it started. It has embarked on a building program to keep up with demand, for example recently doubling the area of its electronics clean room.

Because its contracts are often large, the export balance of income can change dramatically. It can also change when Micreo develops a new product that goes on to enjoy global success.

For example, the company has recently developed an airborne optical link system that is unique – and this may become a blockbuster.

“We think we are the first company in the world to come up with that sort of technology,” Mr Shaw said. “That has recently gone into production and is, we hope, a game changer. We have at least convinced one customer of that.”

GETTING THERE

Micreo has reached this point of prominence by doing many of the things that manufacturers in Australia must do just to stay in the game.

Mr Shaw said Micreo completed programs such as 5S with QMI Solutions, Six Sigma and Lean Manufacturing. He said the cost of completing these kinds of programs is “relatively low” compared with the potential outcomes.

“The other thing we did ourselves – we went to a paperless manufacturing environment very early on in the piece and it has paid for itself in spades ever since,” Mr Shaw said.

Micreo’s Electronic Document Access (EDA) system has in fact become an inspiration to many other manufacturers. The Queensland Government produced a report on how Micreo managed this process and circulated it to other manufacturers.

“To distribute documents in a paperless environment we introduced touch screens to all our operators, very shortly after they first became available on the market,” Mr Shaw said. “They feed straight into our ERP (enterprise resource planning) system automatically. It even prints out their time sheets. It’s a no-brainer. It saves you at least 5 percent of your product costs.”

One of Micreo’s US customers introduced it to the Six Sigma process.

“They sent out a team of eight people for a couple of weeks, because they really liked our product but they wanted us to build it faster and more efficiently,” Mr Shaw said. “Not often you find customers like that. We have gone on with that and taken it on to Lean and, in fact, our chief of operations is now a black belt in Six Sigma.

“Lean goes a bit further in some ways and not as far in other ways as Six Sigma, but they are very complimentary.”

Mr Shaw highlighted the challenges of growth largely being mitigated by effective communication within and beyond his company.

“Staff communication,” he named as Micreo’s key focus for growth. “When you start a business – although I started with three close friends, and two of the guys I have worked with for more than 25 years, having recruited one of them when he was an intern at university – but after a relatively short while the culture begins to dilutes as you get more people in.

“Metrics and KPIs are very important—if you can’t measure how good you are or what is happening, then you cannot really improve it.”

MANUFACTURING EDGE

Micreo has gained an edge through mastering what Mr Shaw identified as ‘lean design’. The company is also focused on protecting itself through technology patents and continually automates by using leading edge equipment.

“Lean design – that’s all about designing the product for manufacture,” Mr Shaw said. “It is much better if you can design the product right in the first place, rather than jumping through hoops to manufacture something which is difficult to manufacture.

“Technology patents – we started the company able to do difficult technology and that was attractive to customers. But along the way we’ve created a few things unique to our company and they have paid for themselves. 

“Automation and the world’s best equipment – you can offset the high labour costs of our environment by introducing those aspects. But not so easy to do because of the money you have to invest, especially as a start-up company.”

But Micreo is always on the lookout for the next innovation or system it can adapt to gain an edge. That may soon include manufacturing in the US.

“We have been keeping an eye on additive manufacturing and that is getting to the point where it can meet the tolerances that we require in our industry,” Mr Shaw said.

“I have also just come back from the US and we are thinking of opening up some manufacturing overseas – we think this will open up the market for us there. It will make it easier for some of our customers to deal with us and increase the size of our business.”

Another edge Mr Shaw sees in Micreo’s arsenal is its climb to the AS9100 standard.

“Now that we are AS9100 – and it is an order of magnitude harder to meet than the ISO9001 standard –  all those complicated records (are easier to access),” Mr Shaw said. “Such as, should a transistor fail (in a particular unit) and you want to trace it, that can be immediately figured out by access to the system.”

Another shrewd company-wide system was to educate everyone, hands-on, in its manufacturing methods and systems.

The entire company was involved in an exercise, modelled using Lego, on manufacturing systems. Teams were asked to complete various manufacturing tasks then shown how to adapt Micreo’s own systems to problem solving.

“At the start of the Lego process you were lucky to get two assembled in the allotted time, but by the end in the same time you were able to do over 100,” Mr Shaw said. “And a similar thing with the design. We produced some software in which we can input our electronic design and it comes up with the number of parts and whether you can find a more efficient way of designing the thing.”

This has had a strong ongoing effect on innovation, with staff using the communication system for problem solving.

“We typically get 50-100 improvement requests, as we call them, every month in our system – a computer-based idea – and we select the best and give them a prize,” Mr Shaw said.

“In terms of engagement, we involve them (staff) in the planning. We want to hear the good and the bad.”

Micreo also sponsors scholarships at local universities, often having students complete work experience periods on site.

“It is hard to measure how much of a cost saving that gives us but it is a very significant thing,” Mr Shaw said.

CONTINUOUS PLANNING

Mr Shaw said an integral part of progress for Micreo was business planning, however this has morphed in the way it is conducted.

“Before we started the business I wrote a business plan and it was 150 pages. It was very valuable to me but I think I as the only person who read it,” Mr Shaw said.

“Each year we have updated it and it has gotten smaller and smaller. Lately we have this chart that goes up on the wall that is not written by one person but it is written by the entire company.

“We looked at the why, the what and the how … the deep motivation needed because we wanted our products to be the best in the world. Then we looked at the core values. The first of those was high quality, on time and on specification.

“We achieved four years of 100 percent quality and 100 percent delivery on our major customer, with at least $500,000 worth of deliveries to them every month,” he said.

Another constant in Micreo’s philosophy is to work on “the very hard things”. As Mr Shaw put it, “If it was easy, they’d be doing it.

“Me-too is not a recipe for success in the Australian environment. We have to be doing something which is difficult, because otherwise somebody else will do it cheaper.”

Structurally, what Micreo did was embark on a range of surveys to set new directions and initiatives based on the research. They did what they called ‘voice of customer’ research and included risk surveys to come up with predictive success factors.

“ … so we know if we do these things it will make our business more successful,” Mr Shaw said. Micreo picked the top five of those predictive success elements and divided staff up into teams with 10 initiatives for each of those top five factors.

Those teams of five then came up with the actions needed to achieve those top five predictive success elements.

“We are about two thirds of the way through all of those actions and it has been without a doubt our most successful plan and has got the buy-in from everybody,” Mr Shaw said.

SHAPE OF THINGS TO COME

Visual reinforcement is a feature of Micreo’s headquarters, as it should be for all developing manufacturers.

Mr Shaw said these visuals included charts of metrics and benchmarking, which are changed weekly in most cases. There is also monitoring of  absenteeism and process, although Mr Shaw said it was hard to capture exactly how much money that saves, “but it is significant”.

There is also a healthy emphasis on the natural competition that emerges among operators in the manufacturing process. Mr Shaw said this was encouraged by Micreo and as a way of helping operators to “lift their game and to find out just what is the best way to do a particular thing”.

Much of that success can also be linked to Micreo’s emphasis on having the world’s best manufacturing equipment.

“Each of our technicians sit in front of about $250,000 worth of equipment,” Mr Shaw said. “That’s one reason why we run shifts and manage a hot seat system.

“With laser welding, we have the only two machines of this type in Australia, that can weld aluminium and various other metals, like titanium, in an inert atmosphere, argon helium environment.

“More recently we have this very precise dye placer,  which picks up items that are half a millimetre square, orients them the right way and does not damage these very delicate gold circuitry that’s on the surface of those chips.”

Micreo has benchmarked itself against more than 200 similar companies worldwide, looking at about 40 different parameters – and it has done so on three occasions from 2006. This was a pleasing exercise to measure progress, rising from what is known as the ‘world class quadrant’ in 2006, higher up that quadrant in 2010 and by 2012’s benchmarking Micreo was clearly towards the very top.

All this effort is paying off as Micreo’s R&D breakthroughs are able to be developed into products rapidly and cost-effectively.

A good example is its latest patent, filed in February 2012, which enabled the company to gain a very large contract from a US defence company.

“There were eight invited bidders of which we were the only non-US bidder – and we got the guernsey,” Mr Shaw said. “Part of that was cost – we were less expensive – but we had a great record with the customer and we also had a great technical proposal.

“This particular invention is the thing that enabled us to get our costs down. By building this item into each article that we ship, we are able to cut our technician time by about 50 percent.”

The most recognisable program Micreo has influenced in Australia is probably the RAAF’s Wedgetail airborne early warning and control aircraft, aboard highly modified Boeing 737-700 aircraft. Much of that technology is now also sold to the US.

Micreo was introduced to the program to provide its very first product that it designed and manufactured – and there are eight of these now per Wedgetail aircraft.

“Australia was the first to get those aircraft – basically a Boeing 737 with what looks like a giant surfboard on top,” Mr Shaw said. “We are still exporting that to our customer overseas.

“Initially it was 70 hours per unit, of touch time, and we have had a couple of goes at re-design and that time has come down to 39 hours. So a major saving in time there … and there has also been some saving in materials through selection of different components and so forth.”

It was Micreo’s success in complex projects like the Wedgetail program that recently won it the Supplier Continuous Improvement Program Gold Award, Australia’s version of the international 21^st Century Supply Chain program – one of only three companies in the world to have achieved that status. The award was presented at the Australian Defence + Industry Conference last year.

Mr Shaw said the award recognised the value of the system Micreo had built and how it worked to make the organisations it supplied more efficient as well. There are 800 companies in the UK and Australia assessed by this system, which delves into every aspect of a business.

“That is like a vessel into which you can put all these improvement initiatives,” Mr Shaw said. “It allows you to manage multiple initiatives at the one time. It is a program that was started by our customers, effectively.

“What they wanted was suppliers who could deliver the right product at the right time. When you have an aeroplane sitting at the end of a production line, you don’t want to be held up by one component.

“Just about every aircraft that has ever been manufactured has been late and overweight, so they put a lot of effort into trying to minimise that effect,” Mr Shaw said.

“The most important thing, as far as I am concerned, is the recognition that it gives to the team that I lead – because it takes everyone to contribute

www.micreo.com

ends

By Mike Sullivan

MANUFACTURING as we know it doomed in Australia? Only a matter of time before ‘manufacturing’ moves offshore? You would think it, if your sources of information are mainstream media.

The noise over the demise of the car manufacturing sector in Australia – with Ford, General Motors Holden and Toyota announcing in quick succession that their Australian vehicle assembly plants would all close around 2017 – may have abated, but there remain whispers that his may actually become Australian manufacturing’s greatest opportunity. 

Many of those whispers are about how the government support that propped up the auto manufacturing industry in its ailing years should be redirected to catalyse growth in new sectors where Australian companies have an edge.

The auto companies themselves have become part of that process, with Ford Australia the first to contribute millions of dollars to programs that assist new and growing manufacturers across a range of industries including food, construction, aerospace and sports design-manufacture, in Victoria.

Ford, after all, may be moving away from making cars here, but it is also spending a lot of money on its design and prototyping facility that will remain at Broadmeadows and focus on projects for Ford globally. Ford Australia is, in fact, moving up the global automotive food chain.

So is General Motors Holden, pumping up its own design facility at Fisherman’s Bend to also take on vital design work for its global parent. 

Technology diffusion organisation QMI Solutions chief executive, Gary Christian, said the situation was still very fluid but he believes this is a time of opportunity for Australian manufacturing to re-set and then thrive. He refers to “advancing manufacturing” rather than advanced manufacturing and he sees design-led manufacturing as a key to its future here.

“Is it advanced manufacturing or is it ‘advancing’ manufacturing?” Mr Christian asked. “I think we are advancing it to the next level.”

CSIRO business development and commercial director, Peter Kambouris is on the same wavelength.

“The demise of the automotive industry has had quite a profound effect,” Mr Kambouris said. “But I am actually enthusiastic around the response of the other sectors.

“Look at the minerals and resources sectors – they are driving a lot of our manufacturing anyway, but are below the noise level. Look at the medical devices sector. Look at the specialty equipment guys. 

“Take, for example, Rode microphone, down in Melbourne. They are the leading microphone manufacturer – I personally think – globally. We have a company here called Sutton Tools. They make drill bits. They have been making them since 1917. They are doing something right.

“Look at a local company here (in Brisbane) named Ferra Engineering. Again, they diversified out of automotive a long time ago and they are making the most of their knowledge around manufacturing, managing global supply chains, they have got an export focus, keeping up the technology.” Among other things, Ferra also makes components for the Lockheed F-35 Joint Strike Fighter and has set up a US manufacturing arm.

Stephen Goh, an Engineers Australia national councillor and senior lecturer in mechanical engineering at the University of Southern Queensland, has plenty of first-hand experience with local manufacturers thriving because of they have “innovation in their DNA”.

“One of the companies we are working with at the moment is designing tractors and building tractors in a little town called Toowoomba, of all places,” Dr Goh said. “I can see that the company has high aspirations and they want to be moving towards exporting.

“Some of these tractors have very high tech equipment, some of them remote sensing equipment, control equipment, GPS enabled. They also have machine vision equipment on there as well, to know when the tractor is doing the harvesting, they are actually sensing what is happening with the soil, with the weeds and sensing that and actually destroying he weeds as they go by very precisely killing those weeds. So, amazing advances.

“You can always import tractors from America,  or from China, but they don’t have this ability.  This is 21^st century thinking.”

Dr Goh said Australian manufacturing had to focus on areas in which it had a discernible lead – and then extend that lead. He has been working with several companies in the construction industry, helping them to design and build hi-tech, economical and environmentally sound  fast-build homes – where research shows there is massive worldwide demand. Australia has a lead in this area from working in modeular homes and fast-build mining communities.

“In the modular and fabricated housing sector,” Dr Goh said Australia had an existing edge. “This is a fairly cottage based industry currently and we are looking to progress. 

“Construction is still using fairly traditional methods and it is like building inside a ship – it is just a big ship – and I think (the current industry) is not quite there as it is not using some of the sophisticated  tools available in modern manufacturing. I think it is about moving from construction to manufacturing.

“There is technology involved, like using robotics and other things to improve efficiency and lower the cost base,” Dr Goh said. “But also, with regards to streamlining the processes as well.

“I think the whole supply chain needs to be investigated further. There is plenty of opportunity to lift that cottage industry out from where it is at the moment into the 21^st century in terms of hi-tech manufacturing.

“My personal thinking is that you’ve got flat pack Ikea furniture – and you can have a flat pack house ready to assemble on site, or literally transported to the site, ready to move in.”

Both Mr Kambouris and Dr Goh mentioned the need for Australian industry to embrace advances in robotics and new materials technologies – with breakthroughs in both these areas being made in Australia at present.

“Another area is agriculture,” Dr Goh said, mentioning the move to agricultural robotics being driven out of Queensland. “The potential there is enormous for the manufacturing industry.”

He said Australia had to stay out of the large volume production mindset and focus on high-quality high-return niches.

“Our cost base does not warrant us to be a global supplier for a fairly commoditised product,” Dr Goh said. “ However, in saying that, Wagners (a multi-industry Darling Downs-based company, known for recently building its own airport at Wellcamp and for materials development, producing composite power poles and bridges)  do specialise in niche product. The products no-one wants to design for. Often they are one-off or two-off.

“They might make significant volumes of one or two pieces, but the design aspects are on a one-off basis. Just say a Chinese manufacturer might be able to manufacture a fibre-composite bridge that’s 10m long – and that’s all they can do from that factory. The Wagners say, we can do 10m yes, but we can also do 20m or we can do 50m … we can do 2m wide we can do 5m wide … and so on.

“I think it is about the design ability and the manufacturing capability. I know a lot of manufacturers around the world are catching up, but we are still winning in that space.”

Mr Kambouris said, “I think nanotech and biotech will be enablers to those key companies.

“The ability to be flexible and agile and adjust to the marketplace is where some of the information systems are that we do quite well in: so communication, sensor and sensor network, plus automation and robotics will allow those companies to utilise the technical material innovations with that informational overlap to help them avoid the costs that others keep on absorbing.

“Allow them to have an extended supply chain that they can manage. And when they make that bridge, they make it once, right the first time, so they do not have to make it two or three times,” Mr Kambouris said.

“When you look at the cost of doing business in Australia and compare labour costs, our labour is not that different to what is in Germany or Japan. So there is something else happening.

“I think a way of addressing that is with the right technical solutions and with the right information layer with it, we can make that bridge once and in the right time and have it made and certified and out the door two or three times faster than we would currently do.

“So in a current costing we might say cost it out to a 10-week process,” Mr Kambouris said. “What if we could get it down to five weeks? What if we could get it to two weeks?

“We are not going to change the nanotech or biotech in there, we are just going to change the way we use the information, to make certain we do it once and do it right the first time.”

Mr Kambouris said there were some very prominent rays of sunshine in Australian manufacturing right now, some of which have come about because of official concern over the demise of the auto factories. He said the industry-led manufacturing innovation precincts – such as those for the food industry and advanced manufacturing (META) were good examples, with more to come.

“I like the way that the precincts have been set up, it’s very useful having industry led outcomes,” Mr Kambouris said. “Not commenting on the precincts themselves, I like the way they have been set up with the industry-led partnership that identifies a need for them and then simply outsources or contracts out the R&D action. In the past it has very much been led by, ‘Have I got an idea for you’.

“We still have the ideas but we can frame them to address that key market requirement. It’s either addressing a cost issue or a hidden cost, or providing a new line of business. It just makes sense.”

Dr Goh said while Australian manufacturing had a long way to go, it should also go a very long way.

“The community in general does not know that we have a manufacturing industry outside the automotive sector,” he said. “It’s about selling the good story around what’s out there.

“We have Cook Medical. We have Wagners in Toowooomba, Russell in Toowoomba. We have a number of global companies based in Australia. Many factories are well equipped to produce products that are exported and utilised not just in this country but around the world.

“We are punching above our weight in many respects,” Dr Goh said. “ I think it is about translating many of these types of successes into everyday language and everyone talking about them.

“It’s not just about having an awards night …. It needs to go into the mainstream.”

www.csiro.au

www.qmisolutions.com.au

www.engineersaustralia.org

ends