COMMERCIAL AUSTRALIA - POST PANDEMIC

The Covid pandemic has forced many manufacturers to rethink their corporate strategy and as the pandemic subsides and perhaps business returns, it will return to a new normal, and those organisations which are adept at recognising and capturing subtle or not too subtle shifts and trend changes, will benefit significantly.

In this analysis some of the issues which product designers, marketing specialists, and companies will face, and also some of the benefits and opportunities which could be presented will be highlighted.

INTRODUCTION

The advent of the Corona Virus has created havoc with traditional thinking about supply chains, the sourcing of products and components, as well as our traditional supply routes to the export markets. What will emerge post Covid is not yet known, but there are calls from many quarters that Australia must reorganise and rely a lot less on imports, and transition to self-sufficiency in supply of goods and components

This is a course of action destined for failure unless it is appropriately focused. Australia cannot competitively manufacture the range of products and components which would be required to replace the full range of imported goods, and instead we must be very focused on what we will manufacture and the means which we will adopt to satisfy our need for these goods and components

This article explores those requirements.

PROCESSING OR MANUFACTURING

We cannot manufacture all that which we consume, and probably only manufacture a reasonably small proportion of the total. Just think about your trip to the supermarket, the first step is to climb into your car. Is it manufactured in Australia? No. Reflect on the auto industry in Thailand, with over 20 car makers, 700 first tier suppliers, 1700 second and third tier suppliers, and over 500,000 employees. Of the top 100 auto parts manufacturers in the world 50% have factories in Thailand. Could we emulate that?? No, not likely, as we have discouraged all the auto companies from operating in Australia, and the investment necessary in the plant, equipment and the structural costs would be beyond us. But we may process some components

There are many examples of products which could fall into a similar category, and it does tend to focus the mind on what we can achieve in “self-sufficiency”, and if we are to move towards self-sufficiency a careful selection of the sectors to target is necessary

Consequently, it is imperative that we carefully select our target sector, and it is clear that the range of options is somewhat limited, however, the opportunities in the “new technologies” probably present some opportunities for enlightened and enthusiastic entrepreneurs to create new companies.

WHAT PRODUCTS?

A difficult question. We will still be linked to the global producers and suppliers for the basics, although it is possible, or at least probable, that niche markets can be identified for basic products. Not easy, as it is expected that most of these would be well serviced by existing companies.  It is theorised that the high-tech products should take a stable place in the supply chain, however, it is anticipated many of the “new” products will not survive they as they have presumably been developed because of the novelty value rather than the utility value, and hence will not survive long in the market, if indeed they make it to market.

What is becoming apparent is that the new products which do survive will be part of a supply or distribution channel which is currently being used by another component which is probably not being consumed in its own right. This envisages that these new components/products will be consumed by existing products and will have to replace existing components

For example, what then is the defining characteristic or the perceived value of the new product? If the case of a hydrogen fuelled motor vehicles is considered, there are several approaches. One is the hydrogen gas is added to the petroleum fuel which provides some benefits, but it is necessary to provide a dual feed system and also the resulting pollutants are reduced but not eliminated. The alternative is to have the vehicle totally powered by hydrogen which requires a totally different fuel feed system and there are no pollutants admitted omitted, but what a major exercise to reset all road vehicles. The changeover period could be long and arduous, and some authorities will undoubtedly object to the changeover and will restrict or even ban it. What of the electric vehicle?

It will be absolutely necessary to design replacement products and components with the utility objective and not the novelty function in mind.

SUPPLY CHAIN DISRUPTION

The supply chains are the aspects of a business which are likely to be most affected when things returned to “normal”. We’ve already seen the disruption which has occurred as supply chains have been violated by the vagaries of the pandemic. These are some of the chains: –

From raw material to component manufacturing
From components manufacturing to the incoming warehouse
From the warehouse to the manufacturing facility
From the manufacturing facility to the sales facility; and finally,
through the distribution channel to the cash customer

Each of the supply chains will be significantly changed and it is the companies which are agile and can develop resilience systems which will prevail. The conventional approach of Just in Time, and stock minimisation, and similar policies, will not be competitive and will lose the continuity of supply.

The digital era will control those supply chains, and it will be the companies which are capable of identifying the new requirements, developing new operating systems, and then reorganising the operating systems which will succeed.

DISTRIBUTION

The major issue with creating a new high-tech product is the distribution. We in Australia are not particularly skilled at identifying and making use of distribution channels, nor of identifying potential customers or sales points, and often we ignore them completely, and then wonder why our product does not take a significant place in the marketplace.

An example of this is the situation which occurred during the pandemic when China blocked the importation of some of our products, and we were forced to identify and adopt distribution channels to new customers.

If we are to adopt the high-tech approach, which has significant attraction, the question of customers and distribution channels is of extreme importance as it is highly likely that they do not currently exist, and hence the potential customers must be identified, and the distribution channel must be conceived, designed, and adopted, which can be an extensive and expensive exercise.  If it is not undertaken, the effort and expense expended in developing the gadget is totally lost

Many of the distribution channels will lead overseas and while that may be a new experience for some company executives, it is one which must be considered. There are a number of reasons which indicate Australian companies should be investing in cross-border activities particularly in existing markets.

Foreign companies have taken equity positions in almost every sector, significant companies are foreign-owned or foreign controlled, and some have acquired the distribution companies which sit above the agricultural system in Australia.

Australia may be seen as an investment target with investors take advantage of the resources and skills, but Australian companies are not reciprocating and hence are not acquiring offshore income nor establishing distribution channels.

WHAT EXPORT MARKETS?

Many Australian companies tend to avoid the export market for complex reasons, but within the new post Covid marketplace, the need to engage with the export market is sure to become more important, as the novelty value of components and products becomes further widespread. Further, as the development of new product continues, the wider the marketplace will become. But it will increase in importance to the component and product manufactured in Australia.

Within the Australian geographic area is Asia, in which many of the countries are developing rapidly. From a commercial perspective, generally the developing markets provide a population which is growing in both number and purchasing power, and often there is a wider acceptance of innovative and entrepreneurial products, and a new product may receive a higher level of acceptance. Too often these markets are overlooked by suppliers in favour of the fully developed sophisticated markets in the western world, when the market is oversupplied and overpriced

SUMMARY

In summary, as the effects of the pandemic decline, the nature of the commercial activities can change to become far more engaging with a new marketplace, using newly discovered or even newly developed and adopted supply chains and distribution channels, but most importantly, a newly designed product line targeting high-tech products and high-tech customers.

About the Author

Glen Robinsons experience and expertise lie in the manufacturing, processing, and distribution areas, with specific emphasis on business management and strategic planning. Glen has more than 35 years’ experience in cross border advisory and has worked with a wide range of industries from agriculture through to manufacturing and distribution industries. He gained his Southeast Asian experience as chief executive officer for the Asian subsidiaries and joint ventures of a major international manufacturing and marketing organisation

Glen has been on the boards of many Asian related business organisations and has for many years advised several Foreign Investment Boards in the ASEAN regions. He is on the Board of Directors of the Australia Thailand Business Council and is a Counsellor for the Australian Institute of International Affairs [NSW]