VULY is a model for advanced Australian manufacturing and design in two very different ways.
First, it is incredibly innovative, with Vuly’s design and development ingenuity re-defining trampolining in both sport and recreation. Vuly’s trampoline quality is unsurpassed, anywhere in the world – and the company has the testimonials and awards to back it up.
Second, however, is the much sadder tale of how Vuly wants to wholly manufacture in Australia – creating the leading trampoline and outdoor play equipment manufacturing line in the world – but the company but cannot garner anywhere near enough support in Australia to do so.
Reasons are many that Vuly founder and CEO Joe Andon wants to relocate his product manufacturing to Brisbane – where as a teenager he founded the experimental company in his mother’s garage – and where today his research and development laboratory and packaging plant is still located.
Mr Andon’s reasons run the entire gamut from national pride to service quality to R&D speed-to-market to patent and brand protection. Simply, he knows from hard experience that his company would be more successful as an Australian-based advanced manufacturer. Vuly employs about 70 people right now and that would grow dramatically should manufacturing come onshore.
However, the Australian business and government support ecosystem has, so far, worked against Joe Andon and Vuly.
What is stopping Mr Andon achieving that simple – and admirable – dream is a combination of factors that have long dogged Australian manufacturers and would appear, on the surface, easily solved. However, as Mr Andon is finding, and despite the rhetoric of governments for many decades, manufacturing in this country must develop in spite of belligerent funding regimes and macro-economic disadvantages.
The Vuly Trampolines experience is yet another bitter lesson for Australian manufacturing in lost opportunity – although in spite of its many challenges Vuly is progressing well as a profitable and steadily growing company.
“It’s just that I know we could be doing much better and be able to develop much faster if we could move our manufacturing completely to Australia,” Mr Andon said. “We are doing really well. Every month we inch up a bit and every year then we go up a lot, and every few years … well, it’s amazing.”
The way Vuly is structured at the moment, most of its trampoline and swing-set components are manufactured in China, even though products are wholly designed, developed and tested in Australia. A few small items are produced in Australia and certain materials are sourced from the US and Europe. The components are shipped from China to Australia in bulk, quality tested and packed in Australia for distribution worldwide.
The company developed in this way because, in its early growth stages, sufficient financial support was not forthcoming in Australia. A Chinese manufacturer saw Vuly’s potential and took an equity stake to both support the company’s development and secure the manufacturing stream.
While a lifeline at the time, this partnership has now become a limiting factor in Vuly’s development. Manufacturing costs in China have risen steadily and the development flexibility that a fast-moving company like Vuly must exhibit is tempered by conflicting business interests in China and the ongoing problem of other companies misappropriating Vuly’s styling, design, branding and even manufacturing methods.
In many ways, the time has never been more ripe for Joe Andon to achieve his dream of manufacturing his innovative product range in Australia. The Aussie dollar has stabilised well below parity with the US dollar, costs in China are rising, equipment is available to make local manufacturing more efficient than ever – and Australian-made robotics may accelerate that advantage – while shipping has never been more affordable out of Australia.
The irony is that the very government programs that proclaim to promote Australia-based advanced manufacturing do not fit Vuly’s mould. Joe Andon’s company does not qualify for any of the government grants or assistance available right now.
“What is happening is that costs are dramatically going up in China,” Mr Andon said. “At the same time technology is increasing the cost efficiency for manufacturing here. I think it is only a matter of time … but not just yet.”
Mr Andon said it was likely that, if he could bring his manufacturing back to Australia, even the new production line equipment would be custom-designed and manufactured here.
“I don’t know if we would buy from Germany, we would more likely get something custom made, specifically for us. Our engineers would make it or we would work with a firm,” he said.
“I think you wouldn’t just shift 100 percent of your manufacturing overnight, you would maybe do five percent in the first year and work your way up over time.
“I don’t think distance makes a difference. Shipping costs aren’t that much of a big component of the product costs. What does make a difference is being able to control your supply chain. Quality, timing, prices, certainty … a bit of everything really.
“We have got quality control, we have got engineering, we have also got a warranty department, we also have analysis of the products and we work with external labs.”
The key to success for Vuly so far has been its astute design – and Mr Andon believes that same capability could be applied in new ways to the manufacturing process itself.
“I think there is a better way to go about it,” he said. “It’s about designing a product in a way that it’s hard to make mistakes. Make it easy to manufacture. Sometimes there are things that we really would love our product to be – a certain way – but we just don’t do it because we know there might be a higher defection rate on that part. So we just keep it simple.”
Vuly’s knowledge base has been built from many years of practical experience.
“We’ve got a fantastic R&D facility here in Brisbane. We build the first sample here and take it over there and basically let them copy it. Funnily enough it is all Australian-mined steel … wouldn’t it be great if it was mined here and manufactured here?
“It’s funny, we mine it here and ship it all the way over there then ship it back …”
A BETTER WAY
What Joe Andon and many other Australian product designers and manufacturers are up against are aggressive enticements from foreign companies to manufacture offshore, often in environments that are heavily supported by foreign governments.
“What the Australian Government isn’t doing – which I really think they should be doing – is to develop a fund to fight losing control of Australian companies to foreign entities,” Mr Andon said. “A lot of companies in Australia are so closely intermingled with their Chinese counterparts. Not just with China, but with other countries as well. That just gets them into all sorts of situations where they lose control or there are ownership changes.
“They (the international companies) get a hell of a lot of support from their governments. Intense support. Grants like you would not imagine anyone in Australia would ever get. It becomes unfair, because we see that these Chinese companies get all the support.”
The Australian and State Governments prefer to point to a plethora of grants and loan subsidy programs, but these seem to morph with every election cycle and do not have the long-term vision and stability that countries such as China maintain.
“There are a lot of grants out there at the moment – and they are all very, very narrow,” Mr Andon said. “We don’t qualify for any of them. And when you think of how innovative we are … we are in 14 different countries and we are doing tremendously well. There are several issues we have that prevent us from becoming vertically integrated, controlling our supply chain and going to the next level of growth which would employ a lot of people – and that could easily be dealt with through a grant.
“You’d think a company like Vuly would qualify for a grant, but there are no grants we qualify for.
“The only things we have had are things like the R&D tax back initiative. The problem with that is that we need to spend the money up front and then get a refund. Sometimes it takes a very long time, like a year and a half later, if not longer. Cash flow is king.”
Even the much-acclaimed current Advance Queensland grants are dollar-for-dollar. Vuly wanted to invest in itself to utilise one of these grants but were disallowed as the grants were structured to match ‘investor’ funds one-for-one, not owner reinvestment funds.
“It seemed like they wanted to do something, but just the specifications of all of these grants is very narrow. We simply do not qualify.”
Every other Australian advanced manufacturer has stories to tell of the same frustrations. There are questions over whether foreign-owned Australian companies actually have an easier pathway to Federal and State Government grants, because they have the time and the financial backing to fit into the spend-reimburse schedules.
“It defeats the purpose of spending the money in the first place,” Mr Andon said.
VALUE OF GOOD IDEAS
Vuly is a recognised world leader in trampolining technology. Its designs superseded the dangerous spring systems of old trampolines, transforming the sport and enabling new markets to emerge such as trampolining fun parks. Now Vuly is anticipating even more success with its play equipment and swing-set ranges that bring Vuly’s characteristic ‘more fun yet safer’ approach to playgrounds worldwide.
“I think about the kids that would have gone to hospital if we did not ship the products that we did,” Mr Andon reflected. The sporting and recreational sides of trampolining have both benefitted from Vuly.
“We developed the technology for the trampoline parks,” Mr Andon said. For example, Australia’s Skyzone indoor ‘bounce’ parks have Vuly technology developed specifically for that market. Vuly Trampolines technology has also accelerated the sport.
”That has had a huge effect because all the guys doing trampolining at the parks are involved in the sport,” Mr Andon said. “We sponsor a lot of Olympians. Jail Wallace, silver medallist, was at Toys-R-Us with us just a few days ago. We have also got a great things going with Blake Gaudry who represented Australia at the last two Olympics.
“We are not just a trampoline company any more. That is what we have been working on for quite some time. We have a whole range of outdoor products. Some of these have been released, some have not yet.
“We started doing our 360 swing set. Super successful. A fantastic product. It allows kids to basically swing and skate and do stunts, safely, at the same time.”
One of the options on the swing sets is a ‘yoga swing’ made of cloth that can be used for yoga practice right through to a relaxation hammock or even ‘trick’ swinging. A world first on those swing sets – which are customisable single, double or triple swings – is the adoption of shade cloth to protect its users from the sun, clearly an innovation inspired by the Queensland lifestyle. Now accessories such as basketball backboards and rings are integrated.
The success of these play innovations has cemented what Vuly is good at – and now Mr Andon and his designers are seeing how those precepts can extend into future markets.
“Our designer, he’s a pretty smart guy and he says we have to stick with stuff we are good at,” Mr Andon said. “It has to be an outdoor product. It has to be made from steel, it has to sit perfectly in our product range … so we just kind of say, well is that all the things we are good at? If so, then we add it.
“The swing sets are a different technology. There is a few design differences in what we are doing. First is sun protection. The other is the way the frame clicks together. It’s the sturdiest frame in the country. It is in the structure.
“The strength of the stuff is triple what you buy (imported) from Bunnings and places like that. It has the skateboard feature. And then we’ve got is the yoga swing, so you can stretch your back. It’s very good. It’s very hard to beat.”
So is Joe Andon’s determination to make Vuly a world-beating Australian advanced manufacturer in its niche.
A MANUFACTURER’S INVESTMENT LEARNINGS
THE EXPERIENCE Joe Andon and Vuly teams have gained from both manufacturing offshore and attracting foreign investment are salient.
They make the case stronger than ever for Australia to support onshore advanced manufacturing, especially by majority Australian-owned companies.
“I’ve learned not to do investment,” Joe Andon said. “When someone invests in your company they want a seat on your board. The people on your board control the direction of the company. You cannot just auction up tickets to your board seats. It’s like playing the lottery on the direction your company is going to head. You shouldn’t do that. No amount of money is going to justify going in the wrong direction.
“I’ve had a lot of investors and I’ve had a lot of dealings over the years. (The China investment deal was) just one of many transactions. I’ve been around.
“Every time one of those things happen we have a horrible time in terms of our trading. There is a direct correlation.”
Reading between the lines, when trading declines, the board agitates and wants to know why – yet those very board members may be a major part of the problem.
That is why Vuly now prefers to use virtually all of its profit to drive growth, rather than toy with investment money.
Mr Andon has not ruled out using crowd funding to develop future projects, but for now, he is sticking to Vuly’s proven methods.
“Right now we are not looking at it for our projects,” Mr Andon said. “We want to get stuff off the ground, without giving our competitors a head start. That is probably one of my biggest issues with that market.
“You kind of go from prototype phase to letting everyone know what you are working on. There might be a time when that’s appropriate. But not for the things we are working on.”
The reason is, Vuly’s technology is being copied incredibly quickly now.
“Yes, personally that hurts me a lot. Not even just our technology – it’s like everything. Absolutely anything we do,” Mr Andon said.
“If we design a pop-up store and we make a certain sign for it, the competitors will even copy the shape of the sign. It’s as if the design of the sign that we came up with is seen as the reason we are selling well. So they just copy that. The sign could be any shape … doesn’t matter.
“And the text on our website. They copy the text on our website directly and just put it on their website. Stuff that I used to say years ago becomes their tagline. Or even the colours. Their store becomes orange. It just drives me crazy,” Mr Andon shook his head..
“And they think it helps them or something. It doesn’t help them at all. (Thankfully) customers are smart. It’s a worldwide problem. I have even seen another trampoline company that I am friends with copying things. Is it mostly happening in China? I’d say yes. There is a massive concentration in China. China has a massive disregard.
“If you go in to the Chinese with a design for a product – it can be any product, just say, you create a an innovative boxing bag – and you send that design to 10 factories to get it priced up, probably six or seven of those will take your drawing to the Chinese patents office and get a utility model listed, with your drawing. They will be hoping that either you don’t find out or, if you ever leave them, they can prevent you or just copy your design or use it as leverage should there be a payment dispute.
“There is no protection in place. To invalidate one of those costs 40 grand, so if a factory does that to you the only way you can get out of that is to spend 40 grand. Best of luck.
“Those problems would be pretty much alleviated if we were able to manufacture here. Many, many other problems would be alleviated as well. There would be a lot of mutual benefits.
“For example, we have got a very large research and development facility (in Brisbane). A lot of tools and a lot of space. I don’t think we’d need that kind of space or tools if our manufacturing was in Australia. We could actually reduce our own R&D costs and use the manufacturing facility to build prototypes. There are a lot of benefits.”
Mr Andon said innovation happens best on the production line, anyway.
“I know a manufacturer that got a grant successfully, 13 or 14 years ago, to invest in millions of dollars worth of machinery. They have been manufacturing here in Australia all that time, and competing against Chinese prices.”
Mr Andon knows the model can be successful as he’s seen it. Lower rents and lower electricity costs in Australia “would definitely help”.
“Anything would help, but what we really need is support that could buy machinery – which is very, very expensive – and the other thing that happens is, normally, you pay your supplier and they have terms with their suppliers,” Mr Andon said.
“So there is a cashflow gap as well, that comes with taking over your own manufacturing. Governments could be covering that gap and helping with the upfront costs. Obviously the other person would have to put something in to show … this would allow so many companies to at least move five or 10 percent of their manufacturing over. And get success with that.”
In essence, what Mr Andon and other manufacturers could do with is access to funds to bring production onshore, with no ‘decision-making’ strings attached. He thinks business loans from government, similar to the way EFIC is structured, could be the answer.
“The government should do business loans – where the banks don’t lend – like to start-ups and scale-ups like us,” he said. “They could keep it as a fund and when they get paid back then it’s back out to the next person.”
Mr Andon saw it as akin to microfinance start-up programs in developing countries, but on a manufacturing scale.
“I think a lot of entrepreneurs would be happy to pay the interest and the government can make money from that.”
A common problem with business investors is their motivation, Mr Andon said.
“They never realise that they themselves are the problem, so they always try to drive the entrepreneur out,” Mr Andon said, citing Apple and Pixar’s Steve Jobs as an example. “And there are many others. Even Elon Musk got fired.”
For now, Mr Andon is focused on what is required to bring Vuly’s manufacturing to Brisbane – and his first hurdle will be buying out his investors from China.
“I am happy to buy them out, but I just can’t do it by myself,” Mr Andon said. “I’m just a 28-year-old kid, basically. I’ve got to buy them out … who is going to support me?
“Why doesn’t the government support that, taking back (Australian) ownership? And it does not have to be cash, it just has to support me in any way that assists.
“That must be good for Australia, preventing foreign ownership. I don’t want to sound like I am complaining, but it is the best scenario. For everybody.”