It is plain that manufacturing is being seriously challenged by an onslaught of global, structural and cyclical forces that have resulted in over 100,000 Australian manufacturing jobs lost in the last decade.

Many long-established factories and iconic Australian manufacturing firms are under pressure and some have closed. Business costs are rising and demand is slowing. Many regional communities, both rural areas and cities and suburbs, are bearing the brunt of this downturn.

Australian manufacturing is particularly vulnerable because of its small scale and relatively high cost economy in global terms. But, the game is far from over.

Australian manufacturing has a future, but ‘business as usual’ is not an option.

Fortunately, there are signs of Australian companies adapting to the profound changes that are redefining the character of manufacturing.

Some Australian manufacturers are performing well by capitalising on Australia’s strengths, like upstream processing in extractive, forestry and agricultural industries and as suppliers to the mining and construction sectors. There are growth prospects too in niche areas of knowledge-intensive manufacturing like medical and scientific equipment, advanced materials and products using creative design for unique luxury brands such as cosmetics and high-end fashion.

Some have found new niches in wider and more distributed global value chains, such as components for flame effects at Olympics ceremonies and high frequency radios for the Afghan police compatible with US-made equipment used by the Afghan army.

Others are opening up opportunities in clean energy and other cleantech ventures like construction materials from recovered and converted waste, and carbon auditing.

Understanding and serving customers more imaginatively than competitors is vital to the success of Australian manufacturers. Competing on value not price is key to innovation in manufacturing.

Innovation from research, technology and science is widely recognised. But equally important is innovation from less obvious sources, particularly through the skills, know-how and relationships operating in enterprises and workplaces.

Manufacturers can succeed by being innovative problem-solvers whose highly-skilled employees and capable managers are linked into global supply chains. Manufacturers can build deep in-house expertise to provide internationally competitive products and services that excel and excite paying customers globally because they meet needs better than the offerings of competitors.

Such change is both necessary and urgent if Australian manufacturing is to prosper and to secure its future against the odds.

Manufacturing Futures: a paper by the Australian Business Foundation for the NSW Business Chamber, April 2011