Australian Manufacturing Workforce Study fails to address the sector’s shortfall in Intellectual Property management

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Last month, the Australian Workforce and Productivity Agency released its Manufacturing Workforce Study, a major examination of skills in the current Australian manufacturing sector. Its ambitious stated aim is to assist in ‘supporting and developing the skilled workforce required to secure the future of Australian manufacturing’. This article summarises the findings of the study and compares the findings with recently reported data on Australian intellectual property.

Though the study highlights the central future role of R&D and innovation, and the new technical skills that will be required to pursue it, the Agency did not address the lack of knowledge among manufacturing sector managers of the importance of intellectual property, and the need for its identification, protection and exploitation. These IP assets are vital to creating profitability from R&D, but are still relatively underused by the Australian sector.

The study is the result of a process of research, literature review and extensive consultation lasting more than 6 months. The report notes that manufacturing is Australia’s fourth largest employer, and represents more than a third of the country’s merchandise exports. However, it also points out how small the sector is in global terms, representing only 1% of global manufacturing value added. ‘As a small global player, the sector is affected by trends influencing the nature of manufacturing across the world’. The report identifies these factors as globalised value chains, the increasing significance of East Asia, changing consumer demands and expectations, technology and innovation, the bundling of services, the exchange rate and flexible manufacturing.

In summary, the manufacturing sector is becoming increasingly complex, fragmented and competitive. Globalisation is resulting in stages of goods being completed in different countries, and lower technology processes being placed in low cost developing economies. In response, some manufacturing companies are seeking new competitive advantages such as bundling services like R&D, marketing and customer support into their offering. Further, increasing consumer interest in production methods and sustainability, as well as the competitive advantages that can be gained from more efficient production processes, are driving greater use of innovative technologies.

The study suggests that although Australia has built a strong niche in a small number of high-value subsectors such as aerospace, precision engineering and medical devices, the large majority of its manufacturing workforce is employed in low to medium technology sectors. The largest contributions to gross value added come from Food and Beverages, Machinery and Equipment, Petroleum, Coal and Chemical Products, and Metal Products.

Central to the study’s conclusions is the fact that increasing competitive pressures will require a move to more advanced manufacturing, and that this will increase the demand for higher skill jobs, but result in the loss of lower skilled occupations. This will place pressure on the present lower skilled workforce, and without effort to upskill these workers, displacement is likely. Even today, the report highlights how while 87% of currently available jobs in manufacturing require post-school qualifications, only 45% of the present sector workforce have such a qualification.

The study’s recommendations include:

  • new initiatives to promote collaboration on workforce development,
  • the formation of a taskforce to review and revise management training to reflect contemporary management pressures,
  • that government at all levels in Australia provide a multi-layered response to help vulnerable low skilled workers to transition to alternative employment,
  • that industry groups collaborate to promote the range of higher skilled jobs available in manufacturing and improve perceptions of manufacturing as a career choice, and to work with all stakeholders to improve completion of apprenticeships.
  • that universities and industry groups collaborate to deepen connections between manufacturing and university research, and to ensure that manufacturing has access to workers with sufficient science and technology capabilities.

Though the study highlights the importance of new scientific, mathematical and technical skills in the workforce required for Australia to transition into high value-added products and services, it leaves vital skills in IP identification and management unmentioned.

The study itself states that there are more than 88,000 manufacturing businesses in Australia. Yet, the number of standard patents granted to all Australians to protect new innovations in Australia in total remains at around 1,300 a year. Likewise the number of Australian-granted innovation patents, which were designed with small businesses and incremental innovations in mind, is in the low hundreds.

Identifying new intellectual property, and the need to apply for a patent or other IP protection is a critical stage in ensuring the profitability of new high value-add products and services. Those countries which have already begun to move toward this kind of higher value-add economy apply for many more patents worldwide than those which have not. In 2012, while US firms applied for 11,378 patents in Australia, Chinese companies applied for only 510, despite China’s comparable GDP, proximity and increasingly strong economic links with Australia.

The Australian Government, through IP Australia, provides a range of online resources in an effort to expand understanding of Intellectual Property and how businesses can manage it. Australia’s larger firms of Patent & Trade Mark Attorneys, including Fisher Adams Kelly, seek to spread this knowledge among manufacturing managers through seminars and online publications.

To gain a competitive advantage in the high value-add manufacturing sector, even those manufacturers who do not directly develop their own products will need to innovate. New production methods, business processes, tools and techniques will need to be constantly developed to provide the best value manufacturing option for product owners. These competitive advantages will be vulnerable to imitation without robust intellectual property protection. Unless managers can identify innovations that can be protected and monopolised, conferring a real profitable advantage, there can be little incentive for Australian companies to invest in research and development.

Successive governments have introduced positive policies to support research and development. The current proposed Australian Manufacturing Incentive, or ‘patent box’ policy, would be another very effective means of encouraging innovative manufacturing, and we strongly support these policies. However, to maximise the benefits to the Australian manufacturing sector, and the wider Australian economy, more will need to be done to educate executives and owners regarding the knowledge and skills required to identify and manage a company’s intellectual property.

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