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Australian Science and Technology Council Act - Australian Science and Technology Council - Report - Computer-related technologies in the metal trades industry, dated 11 January 1985 - Report prepared by the Technological Change Committee


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The Parliament o f the Commonwealth o f Australia

A U ST R A LIA N SCIENCE A N D TECHNOLOGY COUNCIL (ASTEC)

Computer-related Technologies in the Metal Trades Industry

January 1985

Presented 19 March 1985 Ordered to be printed 28 March 1985

Parliamentary Paper No. 92/1985

SW 8

A REPORT TO THE ^

PRIME MINISTER BY ASTEC:

PREPARED BY THE

TECHNOLOGICAL CHANGE

COMMITTEE

Computer-related Technologies in the Metal L Trades Industry

COMPUTER-RELATED TECHNOLOGIES IN THE METAL TRADES INDUSTRY

A REPORT TO THE PRIME MINISTER

BY THE

AUSTRALIAN SCIENCE AND TECHNOLOGY COUNCIL

(ASTEC)

PREPARED BY THE

TECHNOLOGICAL CHANGE COMMITTEE

JANUARY 1985

Australian Government Publishing Service Canberra 1985

© Commonwealth of Australia 1985 ISBN 0 644 03858 6

Front cover: computer-aided manufactiring of a variable pitch propeller blade for the Royal Australian Navy's FFG-7 anti submarine frigate; courtesy Vickers Ruwolt, Melbourne.

Printed by Watson Ferguson and Co., Brisbane

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CANBERRA, A C T . 2 6 0 0

EEFER

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1 s t Level, W in g 5

ED M U N D BARTON BUILDING

BARTON, A C T 2 6 0 0

11 January 1985

My dear Prime Minister

We have the honour to present to you a report on computer-related technologies in th e m e ta l tr a d e s in d u stry . This r e p o r t has been p re p are d by the

Technological Change Committee, a standing committee of ASTF.C.

The importance of th e ad o p tio n of new tech n o lo g y for the r e v ita lis a tio n of

A u s tr a lia 's m a n u fa c tu rin g in d u stry has been widely recognised. This report examines those factors which influence the adoption of new te ch n o lo g ies in an important sector of the manufacturing sector, the metal trades industry. It also con sid ers th e in d u s tria l re la tio n s , tra in in g and skills issues arisin g from

technological change.

We have made a number of recommendations for government action. We believe that these constitute a balanced package of in c e n tiv e s th a t will e n c o u rag e a

m ore c o m p e titiv e attitu d e in industry, while still providing an adequate level of support. In our view, it is important t h a t th e r e be p re ssu re for ch a nge, but

also t h a t co m p an ie s be given ev ery o p p o rtu n ity to ta k e a d v a n ta g e of

developments in technology.

Yours sincerely

(R.O. Slatyer) Chairman

4

C *

(J.H. Carver) Deputy Chairman

/

For and on behalf of:

S.G.W. Burston P.S. Kincaid-Smith R.I. Tanner

J.N. Davenport K.H. McLeod P.M. Trainor

D.H. Green J.W. Nevile D.W. Watts

P.D. Jones G.A. Rigby L.S. Zam patti

The Hon R.J.L. Hawke AC MP Prime Minister Parliam en t House

CANBERRA ACT 2600

TERMS OF REFERENCE

OF THE

TECHNOLOGICAL CHANGE COMMITTEE

The ASTEC T echnological C hange C o m m itte e is to maintain a continuing review of the processes and trends in technological change in A u s tra lia and els e w h e re , and evaluate the report on the direct and indirect effects at the

national level including social, economic and technological effects.

The C o m m ittee is to identify and evaluate new and changing technologies of importance to Australia, and factors favouring, or r e s t r a i n t s im peding, th e introduction or diffusion within Australia of new or existing technologies.

The C o m m itte e is to consider community attitudes recognising the need to increase th e n a tio n a l com m unity aw a re n e s s and u n derstanding of issues arising as the result of technological change.

The C o m m itte e is to c a rry out studies of technological change as required

above and also in response to requests from ASTEC, noting that ASTEC may receive requests from the Commonwealth Government.

The C o m m itte e is to re p o r t to ASTEC making re c o m m e n d a tio n s , where

a p p r o p ria te , aim ed a t deriving maximum b e n e fit to A u s tra lia from

technological change.

MEMBERS OF THE TECHNOLOGICAL CHANGE COMMITTEE

Professor G.A. Rigby, FTS Professor of Electrical Engineering The U niv ersity of New South Wales, (C hairm an of Technological Change Committee)

Professor R.O. Slatyer, AO, FAA, FRS Professor of Biology Research School of Biological Sciences The Australian National University, (Chairman of ASTEC)

Dr L.A. Brodribb Managing Director M. Brodribb Pty Ltd

Professor J.H. Carver Director Research School of Physical Sciences The Australian National University, (Deputy Chairman of ASTEC)

Mr T. Johnson Assistant National Secretary Electrical Trades Union

Professor R. Johnston Director Centre for Technology and Social Change The University of Wollongong

Mr P. Laver General Manager Operations, Steel Division, BHP Ltd (on leave from September 1983)

Mr J.P. Maynes National President Federated Clerks Union of Australia

Mr K.H. McLeod Federal Secretary Australian Insurance Employees' Union

Dr S. Richardson Senior Lecturer, Economics Department The University of Adelaide

Professor A.E-S. Tay Challis Professor of Jurisprudence, Faculty of Law The University of Sydney

v

MEMBERS OF ASTEC

Professor R.O. Slatyer, AO, FAA, FRS, (Chairman) Professor of Biology Research School of Biological Sciences Australian National University

Professor J.H. Carver (Deputy Chairrpan) Director Research School of Physical Sciences The Australian National University

Sir Samuel Burston, OBE Grazier

Professor J.D.C. Crisp, AM, FTS (Acting member, July to December 1984) Professor of Engineering Dynamics Monash University

Mr J.N. Davenport, AO, DSO, DFC & Bar, GM Company Director

Professor D.H. Green, FAA Professor of Geology The University of Tasmania

Dr P.D. Jones Managing Director Techway Proprietary Company Limited

Professor P.S. Kincaid-Smith, CBE, FRCP, FRACT, FRCPA Professor of Medicine The Royal Melbourne Hospital

Mr K.H. McLeod Federal Secretary Australian Insurance Employees' Union

Professor J.W. Nevile, PASS A Professor of Economics The University of New South Wales

Professor G.A. Rigby, FTS Professor of Electrical Engineering The University of New South Wales

Professor R.I Tanner, FTS, FAA P.N. Russell Professor of Mechanical Engineering The University of Sydney

vi

Mr P.M. Trainor Chairman Nucleus Ltd

Dr D.W Watts Director Western Australia Institute of Technology

Mr L.S. Zampatti Managing Director Castlemaine Tooheys Limited

vii

CONTENTS

1. SUMMARY AND RECOMMENDATIONS 1.1 Introduction 1

1.2 The Recommendations 2

1.3 Competitiveness 2

1.4 Technology and Competitiveness 8

1.5 The Adoption of New Technologies 13

1.6 Industrial Relations, Skills and Training 17

2. INTRODUCTION

2.1 Background to Study 22

2.2 Outline of Report 22

2.3 Background to Recommendations 25

3. THE METAL TRADES INDUSTRY 3.1 Introduction 27

3.2 Background and Structure 27

3.3 Production Processes 28

3.4 The Metal Trades Industry and the Economy 30

3.5 Structural Adjustment 35

4. COMPUTER-RELATED TECHNOLOGIES 4.1 Introduction 39

4.2 The Manufacturing Process 39

4.3 Evolution of Computer-Related Technologies 39

5. COMPETITIVENESS 5.1 Introduction 55

5.2 Definition of Competitiveness 55

5.3 Production Efficiency 56

5.4 Design 62

5.5 Marketing 65

6. TECHNOLOGY AND COMPETITIVENESS 6.1 Introduction 68

6.2 Benefits of Specific Computer-Related Technologies 68

6.3 Factors affecting the Level of Benefits from

the Introduction of New Technologies 73

6.4 Problems with the Introduction of Computer-Related Technologies 74

6.5 New Technologies and Other Factors Affecting Competitiveness 80

I X

7. THE ADOPTION OF NEW TECHNOLOGIES 7.1 Introduction 83

7.2 The Economic Environment 83

7.3 Industry Structure 84

7.4 The Firm's Decision to Adopt New Technology 88

7.5 The Environment for Innovation 92

8. INDUSTRIAL RELATIONS, SKILLS AND TRAINING 8.1 Introduction 95

8.2 The Cultural Context 95

8.3 Industrial Relations Issues Associated with Technological Change 103

8.4 Education and Training 112

APPENDIX A Activities of the Working Party 121

x

1 . SUMMARY AND RECOMMENDATIONS

1.1 Introduction

1.1.1 D espite its d ec lin e in r e l a t i v e im p o rta n c e over many years, the

manufacturing sector retains a significant position in th e A u stralian economy. ASTEC believ e s t h a t its renew al and gro w th a re very much in our national

interest. Yet the policies of the past no longer seem appropriate for su staining a

prosperous and vigorous manufacturing sector into the future. Among alternative new policy proposals it is widely considered that the adoption of new technology has p a r tic u la r p o te n tia l as a m eans of achieving industry renewal, through its

influence on th e c o m p e titiv e n e s s and p r o f it a b i l i t y of individual firm s and in

facilitating structural adjustment within the manufacturing sector as a whole.

1.1.2 New technology can ta k e the form e i t h e r of new product or new

process technology; it can be incorporated in both new and existing industries. While new industries offer an important opportunity for producing innovative goods and services, traditional industries are also a major source of new and improved

products. The a c h ie v e m e n t of incremental improvements in existing products can convey a substantial competitive advantage to individual firms.

1.1.3 Sim ilarly, whilst new prod u c ts o ff e r obvious o p p o rtu n itie s for the

application of innovative p rocess technology, la rg e p o te n tia l b e n e fits may be

realised from the upgrading of plant, infrastructure and management approaches in existing industry. Studies show t h a t , w ithin an industry s e c to r , the level of

p ro d u c tiv ity varie s s ig n ific a n tly a re b e tw e e n firm s, p a r tly b ecause new

technologies have spread slowly and unevenly. Thus th e more rapid diffusion of existing best practice technologies will increase productivity overall.

1.1.4 This re p o r t is concern e d w ith one of th e s e aspects of technological

change: th e adoption of new c o m p u t e r - r e l a te d p ro c ess tech n o lo g ies within a

tr a d i t i o n a l industry, th e metal trades industry. Three issues are highlighted: the contribution which these new technologies can make to the improved p e rfo rm an c e or c o m p e titiv e n e s s of individual firm s; the range of influences which favour or restrain their adoption; and the industrial relations, skills and training issues which arise.

1.1.5. The process of technology adoption within A ustralian manufacturing

industry is not well docum ented. To supp lem en t th e very lim ited in fo rm atio n

av a ila b le , a sample of firms was selected for study from within the metal trades

industry. Discussions were also held with a number of people having knowledge on p a r tic u la r a s p e c ts of th e inquiry. Much of the information provided is based on

these interviews.

1

1.2 The Recommendations

1.2.1 We make a num ber of re c o m m e n d a tio n s for g overnm ent' a c tio n to

promote the adoption of new tech n o lo g y as a s t r a t e g y for enhancing industry

p ro d u c tiv ity . Although both the analysis and the recommendations focus upon a particular group of technologies and a particular industry, in many r e s p e c ts they apply also to other technologies and to other industries.

1.2.2 An im p o r ta n t them e drawn from our analysis is that new technologies

alone will not transform the manufacturing sector into a p ro d u c tiv e , c o m p e titiv e and vigorous s e c to r of the Australian economy. They are, however, a necessary p a r t of such a t r a n s f o r m a tio n . G e n e ra lly , firm s will not be tec h n o lo g ic a lly

in n o v a tiv e unless th ey live in an e n v iro n m e n t which p ro m o te s fle x ib ility , a

capacity to change and the s e a rc h fo r and im p le m e n ta tio n of all so u rc es of

p ro d u c tiv ity gains. Past policies have not encouraged such an environment. Their em phasis on th e d ev e lo p m e n t of im p o rt re p la c e m e n t and the g e o g rap h ical

d ispersion of manufacturing capability has produced a manufacturing sector which, while perhaps appropriate at the time, is ill-equipped to face the technological and international trade challenges of the 1980s.

1.2.3 Our view is t h a t if th e m anufacturing sector is to retain its valuable

role in the Australian economy, it must be both required and a ss is te d to become

more productive, more flexible and more innovative and actively to seek markets both a t home and abroad. Speedy adaptation to the new e n v iro n m e n t will occur only if firms appreciate that their past strategies will no longer suffice, and have

the r e s o u rc e s and the will to change. A s s ista n c e is re q u ire d to e f f e c t this

tr a n s f o r m a tio n , for w ithout any form of a s s is ta n c e , th e sudden s h ift to a

substantially more competitive environment is likely to result in av oidable social and economic dislocation.

1.2.4. The main task b efo re g o v e rn m e n t is to ensure that the environment

imposes a steady pressure for change to more competitive structures, while at the sam e tim e providing forms of support which enable potentially successful firms to adapt rather than fail.

1.2.5 The d e ta ile d s e t of recommendations proposed follow from this. They

centre on the role which new technology may play in assisting a relatively sm ooth transition for the manufacturing sector to a more competitive position. A number of th e re c o m m e n d a tio n s may stan d on th e ir own. However, those which we

in te n d e d to provide support for a d a p ta tio n to a more competitive environment (recommendations 7, 9, 14, 15 and 16) should not be considered s e p a r a te ly from th e recom m endation (recommendation 11) which seeks to maintain the pressure to adapt. For additional assistance from government, taken alone, runs the r e a l risk of simply reinforcing existing inappropriate structures.

1.3 Competitiveness

1.3.1 We f i r s t desc rib e the f a c t o r s which determine the competitiveness of

firms in the metal trades industry. Em phasis is given to those f a c t o r s which

d ir e c tly influenc e the a b ility of firm s to sell their products and services, over

which the firms themselves have a significant measure of control. Less a tt e n t i o n

2

is given to the impact which the general economic environment and exchange rate variations can have on c o m p e titiv e n e s s . The sources of c o m p e titiv e ad v a n ta g e examined are: p ro d u c tiv e e ffic ie n c y (the im p act of scale, the efficient use of

existing resources, quality assurance and input costs), design and m ark e tin g . The ability of firm s s u c c essfu lly to exploit th e s e sources of competitive advantage

reflects the capacity of management to organise the resources of the firms in the most e f f i c i e n t m anner and to seek ou t m a rk e ts both a t home and abroad, to

maximise profits and to ensure its survival and growth.

Production Efficiency

Impact of scale

1.3.2 Firm s which consider th ey a r e a t a p rice disad v an ta g e believe this

arises chiefly because of th e ir r e la t iv e ly low p ro d u c tiv ity . This is a t t r i b u t e d

largely to th e ir in ab ility to a t t a i n th e b e n e fits of scale. Small s c a le is the

outcome of both natural factors and government actions which arise at both S ta te and F ed e ra l levels. The most im p o rta n t g overnm ent action is Australia's long

standing t a r i f f p r o t e c t io n a r r a n g e m e n ts , but S ta te industry d evelopm ent and

d e c e n tra lis a tio n policies, including s t a t e purchasing p re fe re n c e s , also have a

significant effect on industry patterns. The re su lt is t h a t A u s tra lia 's in dustrial

ce n tre s have not s p e c ia lise d and a wide cross-section of small-scale industry is represented in most centres.

ASTEC recommends:

(i) That the M inister for Industry, T echnology and C om m erc e, in

consultation with the Australian Industry and Technology Council, give e v e r y support to initiatives by State Governments to abolish s t a t e purchasing p r e fe r e n c e s and in particu la r to establish a

timetable for their phasing out.

(ii) That the M inister for Industry, T echnology and C om m erc e, in

consultation with the Australian Industry and Technology Council, propose i n itia tiv e s w ith the o b je c tiv e o f ensuring th a t S ta te

G o v ern m en t policies, and p a r tic u la r ly policies for industrial

d e v e lo p m e n t, do not lead to an undesirable fr a g m e n ta tio n of

industry.

(Rl: 5.3.3)

1.3.3 For many firm s th e d is a d v a n ta g e s of small scale are exaggerated by

short production runs for individual items. E conom ies of sca le o fte n can n o t be a tta in e d b ec au se s p e c if ic a tio n s incorporating mandatory standards for commonly purchased items vary between States. This occurs in spite of the activities of the Standards A ssociation of A u s tra lia which endeavours to re a c h u n ifo rm ity of

practice.

3

ASTEC recommends:

That the Minister for Industry, Technology and Commerce, in consultation with the Australian Industry and T echnology Council, fo r m u la te proposals to ensure the u n i f o r m i ty o f te c h n ic a l standards in co rp o ra ted in the regulations o f regulatory a u th o r itie s w ithin A ustralia. The standards o f the Standards A sso cia tio n o f

Australia should be promoted.

(R2: 5.3.4)

1.3.4 The n a tu ra l factors affecting scale are Australia's small population size

and the wide geographic dispersion of markets. Small m a rk e t size is argued to

have a 'stra n g lin g lim itation' on Australian productivity. However, we believe it is important not to exaggerate the e x te n t to which a sm all m a r k e t n e c e ssa rily

poses in su rm o u n ta b le d i f f i c u l t i e s for firm s wishing to operate in international markets. Other countries with smaller domestic markets have d e m o n s tra te d th e ir a b ility to c o m p e te on in te r n a tio n a l m a rk e ts. The re a l c o n s tr a in t of a small

domestic market is felt by m anufacturers whose focus is confined to th e local

m a rk e t. This em phasises the importance of exporting as a means of overcoming the problems of small scale, thereby prom oting th e econom ic v iab ility of firm s within the industry.

The efficient use of existing resources

1.3.5 Many p la n ts have th e o p p o rtu n ity to make sig n ific a n t in c re a se s in

productivity through the more efficient use of their existing plant and equip m en t, thro u g h im proved m a t e r ia ls handling, p lan t la y o u t, production c o n tro l, the

scheduling of inputs and o th e r p ro d u c tio n eng in ee rin g functions. Many firm s

re c o g n ise these opportunities but few have acted to implement them. Those which have done so have recorded large increases in productivity.

1.3.6. We a re c o n c e rn e d a t the a p p a re n t lack of a t t e n t i o n given to th e

production e n g in ee rin g fu n c tio n in wide se c tio n s of A u stra lia n m a n u fa c tu rin g in d u stry . Few firm s employ trained production engineers and the comparatively low salary scales offered indicate that the function is generally undervalued. The supply of p ro d u c tio n en g in e e rs is also lim ite d . T h ere a r e few train in g

opportunities, and students themselves do not see this area of engineering as the basis for an a t t r a c t i v e c a r e e r . H ow ever, we do not consider t h a t d ir e c t

in c e n tiv e s should be provided to s tu d e n ts to e n c o u rag e them to u n d e r ta k e

p ro d u c tio n eng in ee rin g stu d ies. We hold the view that more students would be

in t e r e s t e d in p ro d u c tio n engin ee rin g as a c a r e e r if th e r e w ere im proved

employment opportunities for them. Instead, incentives are required on the demand side of the market to encourage firm s to give g r e a t e r a t t e n t i o n to prod u c tio n

engineering activities.

1.3.7. An e n v iro n m e n t is needed which encourages firms continually to seek

ways of improving their productivity. One set of incentives which may be given to firm s to en c o u ra g e production engineering activities and which would be more immediate are funds for research and development.

4

ASTEC recommends:

That the Minister for Industry, Technology and Commerce seek amendment o f the Industrial R e se a rc h and D e v e lo p m e n t In c e n tiv e s A c t (1976) to allow research stu d ies o f m a n u fa c tu r in g s y s te m s , the planning o f such s y s te m s and th e ir

development to be eligible fo r g rants under the A c t. In particular, s t a t u t o r y

exclusions under S e c tio n 4, su b se c tio n 3 o f the A c t, re fe rrin g to m e th o d s

engineering and operational research, should be removed.

(R3: 5.3.13)

Quality assurance

1.3.9 Im p ro v e m e n ts in productive efficiency may also be achieved by giving

attention to quality assurance. Em phasis on q u a lity a ssu ra n c e can r e s u lt in a

re d u ctio n in c o s ts and im p ro v e m e n ts in th e e f f ic ie n c y of th e m anu fa ctu rin g

process. Quality is widely seen in Australian manufacturing industry as relating to the in sp e c tio n of the finished product. More recently, some firms have redirected their attention towards to q u a lity planning, followed through all s ta g e s of th e

manufacturing process. Some highly encouraging results have been recorded.

1.3.10 T h ere is a need to s tr e s s th e im p o rta n c e of q u ality a ssu ra n c e in

enhancing the competitiveness of firms. The S ta n d a rd s A ssociation of A u s tra lia , the Australian Organisation for Quality Control and like bodies provide information and support for the implementation of quality assurance.

Input costs

1.3.11 F irm s claim th e y a re a t a price disadvantage compared with imported

goods from some countries because of comparatively high input costs, p a r tic u la r ly material costs, labour on-costs and the costs of maintaining regulatory standards.

1.3.12 In th e m e ta l tr a d e s industry, material costs represent in excess of 50

per cent of total costs for many firms while direct lab o u r c o s ts run b e tw e e n 10

per cent and 30 per cent. Steel is an important input and firms commented on its

high cost. The r e v it a li z a t io n of th e m e ta l tr a d e s in d u stry in the longer term

depends upon the ready availability of competitively priced basic inputs. We stress that unless attention is given to containing these c o sts, m easu res to f o s te r the

r e v ita liz a tio n of dow nstream industries such as the metal trades industry will be limited in their success.

1.3.13 F irm s also claim th ey a re a t a c o m p e titiv e disadvantage because of

high labour on-costs; for every dollar paid in wages, firm s in te rv ie w e d pay an

additional 40 to 50 c e n ts as o n -c o sts. Firms are particularly concerned at the

rate of growth of payments for workers' compensation and payroll tax. We note however, that firms can reduce the level of their workers' compensation payments to some extent by giving increased attention to safety matters.

5

ASTEC recommends:

That the G o v e rn m e n t take a ctio n to a lle v ia te the adverse e ffe c t on industrial

c o m p e t it i v e n e s s o f high labour costs, a sig n ific a n t co m p o n en t o f which is

represented by labour on-costs. In particular, the Government should:

(i) support and encourage curre n t S t a t e Government investigations

into w o rkers' c o m p en sa tio n a rra n g e m e n ts w ith a view to

d ev eloping a uniform s y s te m which provides s a t i s f a c to r y

c o m p en sa tio n a rra n g e m e n ts in the m ost cost e f f e c t i v e way

possible;

(ii) in itia te discussions w ith S t a t e G o v ern m en ts w ith a view to

establishing the means by which payroll tax can be reduced.

(R4: 5.3.24)

1.3.14 S ta t e and C o m m onw ealth G o v e rn m en t ch a rg e s and re g u la tio n s also

contribute to raising manufacturing costs.

ASTEC recommends:

That the Government note that State and Commonwealth Government charges and regu la tio n s impose an additional burden on m anufa ctu rin g co sts and th a t it

investigate means by which these costs can be reduced.

(R5: 5.3.23)

1.3.15 A nother influence on the level of input co sts is the maintenance of

regulatory standards. Buyers, testing authorities and licen so rs check com pliance with standards more regularly and systematically in the case of local products than they do for imports. Local firms should be able to demonstrate com pliance with standards without incurring a cost disadvantage.

ASTEC recommends:

That the M inister for Industry, T echnology and Commerce note the disparities which e x is t in arra n g em e n ts made for the v e r ific a tio n o f com pliance with

m a n d a to ry standards between local and imported goods and, through the Australian Industry and Technology Council, ensure that procedures fo r v e r ific a tio n be the same for imports as for domestically produced goods.

(R6: 5.3.25)

Design

1.3.16 Design can influence competitiveness in two main ways. It offers the

o p p o rtu n ity for th e d evelopm ent of prod u c ts with superior p erfo rm a n c e and

re lia b ility , and im proved ap p e ara n ce. It p e rm its the d evelopm ent of more

efficient manufacturing processes, thereby contributing to im proved effic ie n c y of prod u c tio n and th e maintenance of consistent quality. A recent survey indicates that little attention is paid to m an u fa ctu rin g design in A u stra lia. Much design

comes from overseas.

6

1.3.17 L ice n ces a r e an im p o rta n t source of foreign design and until recently

they were regarded as a significant source of competitive advantage but this is no longer the case. As the international trading environment has become increasingly competitive, licensors have, in some instances, competed directly against their own license e in th e l i c e n s e e 's 't e r r i t o r y '. It is also claimed that licensors from the

United States, in particular, are less willing to tra n s fe r the l a t e s t technology to

th e ir lic e n s e e s . Some firm s which depend m ainly on lic e n c e s now find their

viability significantly undermined.

1.3.18 R educed o p p o rtu n itie s to undertake profitable manufacturing activities based on the use of foreign licences requires that firms must increasingly depend upon their own research and development efforts to secure competitive advantages through th e design process. ASTEC has argued in its re p o r t 'In c en tiv es for

Innovation in A u s tra lia n In d u stry ' t h a t incentives, in addition to AIRDI Scheme grants, a r e re q u ired to s t i m u l a t e in d u s tria l r e s e a r c h and d evelopm ent and a

ta x a tio n premium scheme was recommended. The Government has since indicated its acceptance of the need for a taxation in c e n tiv e for industrial re s e a rc h and

d evelopm ent following the ASTEC recommendation. ASTEC believes it should be in the form previously proposed and repeats its earlier recommendation.

ASTEC recommends:

(i) That a ta x a tio n in c e n tiv e sch e m e be introduced as a matter of

urgency, as an incentive, in addition to the A ustralian Industrial R es e a r c h and D e v e lo p m e n t In c e n tiv e s (AIRDI) Scheme's Project Grants, to s t i m u l a te the level o f industrial research and

development activity in Australian business;

(ii) That the AIRD I P r o ject Grants Scheme be maintained, with the

same maximum level o f individual grant and the same perc en ta g e rate o f grant as at p resent, and w ith the M inister having

discretion to vary both the m a x im u m level o f grant and grant

rate;

(iii) That businesses be fr e e to choose one form of incentive or the

other, according to their own best interests; and

(iv) That w ith r e s p e c t to ta x a tio n in c e n tiv e s fo r IR&D a single

premium rate be set at 50 per cent.

(R7: 5.4.4)

1.3.19 We note t h a t Governments provide some support to the design function

in Australia through the Industrial Design Council of Australia (IDCA) which offers design advice, design referral, technical information and product assessment.

Marketing

1.3.20 Marketing is an effective means by which firms differentiate themselves from their rivals. Effective marketing requires that firms study th e ir c u s to m e rs ' needs in an a t t e m p t to s e g m en t the m a rk e t and develop products and services

tailored to specific user-applications in those markets. The most successful firms interview ed gave considerable attention to the marketing function. In contrast,

7

m easu res to im prove p ro d u c tiv e e ffic ie n c y have a much reduced im p a c t on

profitability if the marketing function is n e g le c te d and th e firm is selling th e

wrong product or is in the wrong market.

1.3.21 By moving into export markets in particular, the size of the market for

Australian products is expanded, offering the o p p o rtu n ity to firm s to sec u re th e b e n e fits of in cre ased scale. Governments can play an important role in assisting firms in marketing th e ir p ro d u c ts o v e rseas through th e provisron of financing

a r ra n g e m e n ts . R e c e n t am en d m e n ts to th e Export F inance and Insurance

C o rp o ra tio n (EPIC) A ct and th e accom panying guidelines, and th e in creased

willingness to in c o rp o r a te the Development Import Finance Facility (DIFF) as an element in an export finance package, have placed g o v e rn m e n t a s s is ta n c e on a

m ore c o m p e titiv e basis th an previously. The G o vernm ent should ensure that

Australian companies are not disadvantaged in international markets by th e c r e d it terms they are able to offer.

1.4. Technology and Competitiveness

1.4.1. C o m p u te r - r e la te d te ch n o lo g ies can c o n tr ib u te to improved

competitiveness in the metal trades industry. However, a s ig n ific a n t num ber of firm s have not in troduced th e s e technologies successfully. Their experiences and possible causes of their difficulties are considered. An assessment of the re la tiv e im p o rta n c e of new p rocess tec h n o lo g ie s and o th e r in flu en c es on the

competitiveness of Australian firms in the metal trades industry is also made.

Benefits of specific computer-related technologies

1.4.2. There is a w idespread view t h a t th e d om inant m o tiv a tio n for the

introduction of new process technologies is to reduce labour co sts. While this is im p o r ta n t, we found t h a t new tec h n o lo g ie s have the p o te n tia l to provide

significant improvements in competitiveness in a num ber of o th e r ways. These o th e r b e n e fits vary according to the specific machine or system, but they include improved lead times, reductions in rework and r e j e c t r a t e s , savings in m a te r ia l co s ts , th e econom ic realisation of sophisticated design, greater quality assurance,

savings in space and a reduction in inventories.

1.4.3. The e x t e n t to which these p o te n tia l b e n e fits a r e a c tu a lly achieved

varies according to the conditions under which firm s a r e o p e ra tin g . In re c e n t

y ea rs, b e n e fits have not been as g r e a t as e x p e c te d b ec au se of the impact of

recession; with the downturn in a c ti v i t y most s y s te m s and m achines have been u n d eru tilised . B en efits a re gre ater where users approach the introduction of new technologies from the viewpoint of their ability to solve m ajor problem s r a th e r

th an simply from a te c h n o lo g ica l p e r s p e c tiv e . Benefits are greater where the

management enlists the skills and enthusiasm of the firm's work fo rce. They a re g r e a t e r where the new technologies are integrated with other systems or machines in the manufacturing process. Finally, b e n e fits can be enhanced when product design is adju sted to th e new production en v iro n m e n t, for many products are

designed to be built by people and may not be easily ad a p te d to

computer-controlled machines.

8

Problems encountered in the introduction of new technologies

1.4.4. We found there are at least five conditions necessary for the successful

introduction of computer-related systems into firms and plants. First, m anagem ent must know th e ir business; they must know their customers, their rivals , and the

basis of competitive advantage for the products they produce. They need to have a systematic view of what they are doing in the production process and they must know their products. Secondly, management must have a a good a p p r e c ia tio n of exactly what benefits there are to be gained from these new technologies. Thirdly, management must choose the system most a p p r o p ria te for th e ir own p a r tic u la r

needs. F o u rth ly , they must give priority to facilitating the introduction of the

system. Business operations are not only production systems, they are also social system s and th e q u ality of human relations can have an important influence on

economic outcomes. Finally, managers m ust ensure t h a t w orkers a re a d e q u ately train e d to have th e c a p a c ity to o p e r a t e the systems and feel comfortable with

them.

1.4.5 A num ber of firms have experienced considerable difficulties with their

new c o m p u te r-b a s e d sy stem s - o th e r than n u m eric ally co n tro lle d (NC) and

computer numerically controlled (CNC) machine tools - to the extent that some of them have either already withdrawn their systems or are considering doing so. No a c c u r a te e s t i m a t e can be made of th e e x t e n t of firm s ' d is s a tis fa c tio n but

extensive enquiry confirms that it is widespread.

1.4.6 G en erally d is s a t i s f a c t i o n was found to be greater the more recent the

development of the system, the more the system r e p r e s e n ts a ra d ic a l d e p a rtu re

from previous o p e ra tin g practices and the more the user is required to conceive of the system and its application in an abstract fashion. P roblem s aris e in the

following situations:

- when th e wrong pro d u c t is being produced for the market; even

the most technically efficient s y stem s will not be p ro f ita b le in

these circumstances;

- when firm s do not m a tc h th e ir needs with the diverse range of

opportunities provided by the machine or system;

- when firm s are faced with the choice between systems; there is a

widespread lack of of knowledge within firm s about co m p u ter

system s, a lack of knowledge on the part of vendors about the

design and p roduction p rocess in firm s, and t h e r e a re few

independent sources of advice available to purchasers;

- when top m an ag e m en t do not give p rio rity to ensuring the

successful introduction of th e new system ; in p a r tic u la r , where they do not pay regard to human factors;

- when firm s underestim ate the time and cost of tailoring software

to their particular needs;

- when firms pay insufficient attention to their hardware needs;

9

- when firm s lack th e un d ersta n d in g to make an a p p ro p ria te

s e le c tio n of task s to m axim ise the gains from installing the

system;

- when workers are not adequately trained;

- when all w orkers and th e ir unions are not consulted prior to the

introduction of the machines.

1.4.7 The analysis of th e problem s which a re en c o u n te re d by firms when

introducing computer-related technologies highlights th e d if f ic u ltie s of realising th e ir p o te n tia l b en e fits. We consider there are a number of actions which the

Government can take to assist in reducing these difficulties.

1.4.8 F irs t, firms would be assisted by the provision of independent advice on

computer-related technologies and their applicability to firm s ' s p ec ific needs and goals. The G overnm ent has re c e n tly a c te d on advice on this m atter from the

Inquiry into Manufacturing Advisory Service on C o m p u te r-a s s is te d M anufacturing and has ag reed to the establishment of a nationwide advisory service (MASCAM). We accept the Inquiry's recommendations, but believe th a t th e conditions under which a service is provided need to be specified in more detail.

ASTEC recommends:

That the M inister fo r Industry, T echnology and C om m erce apply the following cond itio n s to the r e c e n t l y established a d viso ry serv ic e on co m p u te r -a s s iste d

manufacturing (MASCAM):

(i) MASCAM should operate as an independent body;

fill MASCAM should o perate fo r a sp e c ifie d lim ite d period, a f t e r

which an evaluation of its effectiveness should be undertaken;

(Hi) MASCAM should operate as fa r as possible on a fee-for-service

basis, recognising the need to a t t r a c t in dustry in the initial

stages;

(iv) MASCAM should operate substantially through private consultants, who should be p e r m i t t e d to carry out all s e r v ic e s o ff e r e d by

MASCAM; how ever, M ASCAM should approve the CSIRO Division of Manufacturing Technology as a consultant;

(v) MASCAM should ensure th a t, where subsidised feasibility studies

are carried out, management consult w ith th e ir e m p lo y e e s about th e ir proposals for the adoption of new technologies, recognising that co n su lta tio n m ay f a c i l i t a t e the intro d u ctio n o f new

technologies.

(R8: 6.4.19)

1.4.9 Secondly, firm s might also learn about th e experiences of others in

their industry which have successfully introduced new technologies. It would be a useful ea rly task for MASCAM to investigate means by which the experience of successful firms could be transferred to others.

10

1.4.10 Thirdly, the effectiveness of technology transfer programs and the value of consultants' advice will be reduced where firm s th em selv es do not have the

n ec e s s a ry skills to assess the appropriateness of the advice and information given them. In th e im m e d ia te f u tu r e MASCAM will need to ta k e ac co u n t of this

situation to maximise the effects of its efforts.

1.4.11 F ourthly, support should be given to the CSIRO Division of

Manufacturing Technology to increase its consultancy role.

ASTEC recommends:

(i) That CSIRO be req u e ste d to provide additional resources to

enable the Division of Manufacturing T echnology to increase its technology transfer role.

(ii) That CSIRO g ive consideration to the role which CSIRO Divisions

and Units, other than the Division of M anufacturing Technology, have to play in the e n h a n c e m e n t o f A ustralian m anufacturing

technology and its transfer to industry.

(R9: 6.4.22)

1.4.12. C o -o p e r a tiv e research associations are one other means by which firms within an industry can be assisted to overcom e te c h n ic a l and r e la t e d problem s

through th e fo s te rin g of re s e a r c h which is directly relevant to firms' common

needs. Research ass o c ia tio n s a r e g e n e ra lly seen as being most a p p r o p ria te in

s itu a tio n s where they can address the problems common to an industry. They are said to be less successful where th e r e is a high level of c o m p e titio n betw e en

firm s and p a r ti c u la r l y where technology is th e basis for t h a t c o m p e titio n .

However, even in these circumstances, areas of common interest can be id en tified where a c o - o p e ra tiv e r e s e a r c h e f f o r t can be a p p r o p ria te . The M etal T rades

Industry A ssociation (MTIA) in c o lla b o ra tio n w ith CSIRO has r e c e n tly been

examining th e possibility of establishing a research association covering the metal and engineering industry.

1.4.13 Finally, in th e longer t e r m , th e problem of in a d e q u a tely tra in e d

personnel can only be overcome by improving the training of decision m akers. In many manufacturing firms there is a preference for engineers to fill this role.

ASTEC recommends:

(i) That, with a view to ensuring that a shortage o f professional skills

does not impede the adoption of new technologies in industry, the Ministers for Industry, Technology and Commerce, Employment and Industrial Relations, Education, and Science, examine as a m a t t e r o f urgency the adequacy of resources allocated to the training and

retraining o f professional engineers in c o m p u te r -r e la te d

technologies; such an examination to include:

- the availability o f places for initial training;

- the provision o f short retraining and refresher courses for

practising engineers;

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- the number and quality o f teaching staff;

- the adequacy of funding for equipment.

(ii) That immediate support be given to initiatives already underway

a number of tertiary institutions to upgrade and extend training computer-related technologies.

(RIO: 6.4.25)

New technologies and other factors affecting competitiveness

1.4.14 A num ber of conclusions have been drawn concerning the role which

new process technologies can play relative to other factors in the competitiveness, profitability and growth of firms in the metal trades industry.

1.4.15 F ir s t, th e m e ta l tr a d e s in d u stry is o p e ra tin g in an increasingly

competitive environment and firms have adopted a number of s t r a t e g i e s in order to survive in the short term and prosper in the long term. The adoption of new

technologies is one of these strategies, but mergers, takeovers, sourcing of item s from overseas, rationalisation of the number of plants and both the expansion and contraction of product ranges are also part of companies' strategies.

1.4.16 Secondly, new tech n o lo g ies have a m ajor role to play in solving

problems of the metal trades industry. They offer opportunities to m o d e ra te the e f f e c t of high labour, m a t e r ia ls and in v en to ry costs, the problems arising from

small and fragmented markets, inadequate quality assu ra n ce and th e inability to respond to new design challenges.

1.4.17 Thirdly, th e in tro d u c tio n of new p rocess technologies does not itself

guarantee achievements. Existing processes need to be organised in a considered and s y stem atic way; without this occurring the benefits of the introduction of the new technologies will be significantly reduced. The new technologies need to be intergrated into the overall manufacturing process.

1.4.18 F ourthly, firms can also significantly improve their competitive position in a given market for a given product in a variety of ways other than through the

in tro d u c tio n of new technologies. These o th e r ways include attention to the

organisation and flow of work, and materials handling procedures. A num ber of m a n ag e m en t c o n c e p ts such as Just-in-Time (JIT) and Group Technology (GT) are being re c o n s id e re d in a c o m p u te r e n v iro n m e n t and have d e m o n s tra te d th eir

potential for securing significant increases in productivity.

1.4.19 F u rth e r, as noted e a rlie r, even if the successful introduction of new

te c h n o lo g ie s is ac hieved th is will not g u a r a n t e e su ccess as m easured by

p r o f it a b i l i t y and growth. Inadequate given attention to sales and marketing, and high input costs may o f f s e t th e b e n e fits gained from th e in tro d u c tio n of new

processes.

1.4.20 Finally, th e co nditions placed on m a n ag e m en t for th e successful

introduction of computer-related technologies are no different from those required for su cc essfu l management under any changing environment. The inadequacies of management cannot be solved by the introduction of computer-related technologies.

12

•S .£

1.5 The Adoption of New Technologies

1.5.1 We have id e n tifie d t h r e e main groups of influences which inhibit and

enhance the adoption of new computer-related technologies. They are: the im pact of the overall economic environment; the influence of the industry's structure; and the decision-making process within firms.

The Economic Environment

1.5.2 The poor quality of Australian management is often given as the reason for the inadequate performance of Australian manufacturing industry. Although th e r e may be grounds for c r itic is m in particular cases, our view is that management

responds to the p a t t e r n of in c e n tiv e s and d is in c e n tiv e s in the en vironm ent in

which firm s o p erates. Firms will be more innovative and adopt new technologies more rapidly if they have both the incentive through competitive pressure and the resources to do so.

1.5.3 It is one of our important conclusions that the increasingly competitive

environment which has p re v a ile d r e c e n tly has c o n trib u te d p o sitively to firm s' decisions to pursue more vigorously improvements in productive efficiency through the introduction of new technologies as well as by o th e r m eans. The changed

c lim a te has shown t h a t , fa ced w ith in cre ased p re ssu re , firm s re co g n ise the

importance of new technology as a means of re m aining c o m p e titiv e . The rapid in tro d u c tio n of new te c h n o lo g ie s will only o ccur if the economic environment makes th e risks of innovating less for th e firm th an the risks of fa ilu re to

innovate. An industry policy which is highly p rotectionist, emphasises import replacement and provides incentives to firm s to r e s t r i c t th e ir a c ti v i t i e s to the

A ustralian m a rk e t, d isco u ra g es adoption of new technology and other means of raising p ro d u c tiv ity . In A u s tra lia pro d u c ers can, in many cases, e x e rt

considerable market power and the threat of import competition often is the only source of real competition.

1.5.4 One means of maintaining competitive pressure is for the government to

commit itself to a policy of gradually reducing levels of protection. It should be

em phasised t h a t such a policy does not imply the abolition of p ro te c tio n .

C o m p e titiv e p re ssu re will also be m a in tain ed through th e r e a lis a tio n t h a t

unprofitable firms will be likely to fail. This realisation is necessary if firm s are

to be encouraged to focus th e i r e n e rg ie s on innovation as a solution to their

difficulties.

ASTEC recommends:

That the M inister for Industry, Technology and Commerce provide a reference to the Industries Assistance Commission to conduct an investigation into the e x t e n t o f c o m p e titio n in the various s e c to r s o f the m e ta l trades in dustry and its

relationship to the levels of protection provided.

(R ll: 7.2.5)

1.5.5 Strong c o m p e t i t i v e pressures alone are not sufficient to promote rapid

innovation. Firms must also have the m a rk e t p ro s p e c ts to ju stify th e requ ired

investm ent and th e n e c e s s a ry fin an c ial resources. The recent recession, while increasing competitive pressure, has also re s u lte d in low p r o f ita b ility and high levels of excess c a p a c ity in th e m e ta l tra d e s industry. In these circumstances

13

in v e s tm e n t in new c a p ita l equipm ent is unlikely to be p ro f ita b le . This has

severely reduced the opportunity to introduce new technologies in the metal trades ind u stry b ecause th e s e tech n o lo g ies can usually be acquired only in conjunction with new equipment.

Industry Structure

1.5.6. S u b s ta n tia l industry re s tr u c tu rin g will need to occur if the Australian

m e ta l tr a d e s industry is to ta k e a d v a n ta g e of the in tro d u ctio n o f many new

com puter-related technologies. The small size of many Australian plants, together with the wide variety of parts produced by them, generally inhibits new technology adoption, mainly b ecause the volume of output needed to justify investment is

greater than that usually generated by small firm s. G enerally th e view is t h a t

m u lti-s h ift o p e ra tio n s a re requ ired for t h e econom ical o p e ra tio n of most

computerized shop-floor systems.

1.5.7. C onsid e rab le attention has been given recently to the potential for flexible manufacturing systems (FMS) to offset some of th e d isa d v a n ta g e s of small scale and la rg e variety. However, these systems are costly and a high annual volume of all parts and multi-shift operations are generally required to spread th ese costs.

The c o n s t r a in t of sm all annual volume thus lim its the adoption of this new

technology, even though FMS do o ffe r o p p o rtu n itie s to o vercom e some of th e

difficulties imposed by parts variety.

1.5.8 A nother s e t of f a c t o r s which m akes th e adoption of com plex new

technologies more difficult for small firms is the absence of the range of skills

re q u ire d to assess new technologies. Small firms do not have sufficient volumes of work to support th e balan c e of skills n e c e s s a ry to o v ersee th e e f f ic ie n t

operation and maintenance of their machines and equipment. Small firms are also less likely to maintain a research and development effort; without this c a p ab ility the cost of introducing new technologies can be raised.

1.5.9 The r e s tr u c tu r in g requ ired of A u s tra lia n industry takes a number of

form s. F irm s will need to ra tio n a lis e t h e i r product range or put off th e

d i f f e r e n t i a t i o n of pro d u c ts until l a t e in th e manufacturing process so that the

number of common parts can be maximised. Some companies will need to reduce th e num ber of th e ir plants to c o n so lid ate th e ir operations. Competitors in an

industry could find it to their advantage to specialise in th e production of p a rts

and t r a d e with one another to gain sufficient volume. Finally, if individual firms are to operate on a multi-shift basis, it is n e c e s s a ry to re d u c e th e num ber of

firms in an industry segment.

1.5.10 G overnm ent re g u la tio n s can im pede th e process of in dustrial

restructuring, particularly policies whose prime objectives are other than industry a s s is ta n c e . The proposed am en d m e n ts of t h e T ra d e P ra c tic e s Act concerning

mergers and acquisitions are one such example. Currently, S ection 50 of th e Act p ro h ib its acquisitions which result in, or strengthen, the power of the acquirer to control or dominate the market. The test relates to the structure of th e m a rk e t,

not its con d u c t. The proposal is to change the test to whether it results in a

'substantial lessening of competition'.

1.5.11 The Act does make provision for industry rationalisation to proceed

under the authorisation procedure on the grounds of public b e n e fit (Section 88). The M inister may also give d ire c tio n s as to the m a t t e r s to be given special

consideration by the Com mission in d e te rm in in g ap p lic a tio n s for a u th o ris a tio n

14

(Section 2 9). R a th e r th a n r e d r a f t the proposed amending Act, we suggest the

Attorney General should give directions t h a t , in d e te rm in in g a u th o ris a tio n s , the Commission should ta k e into account the need for industry rationalisation if new technology adoption is to be e f f e c ti v e . It is im p o rta n t to recognise t h a t a

m easure of im p o rt c o m p e titio n is required if the Act is to achieve its principle

purposes, while, a t the same time, not impeding industry ra tio n a lis a tio n and new technology adoption.

ASTEC recommends:

That the A t t o r n e y General give direction to the Trade Practices Commission to give special consideration under Section 29 of the Trade Practices Act (1974) to:

(i) the need fo r in d u stry rationalisation as a condition for obtaining

the maximum benefits from the adoption of new technology;

(ii) the role which im port c o m p e titio n may have in maintaining the

level of competition in the domestic market, ev en in a situ a tio n

where a single local producer has a large share o f d o m e stic

output.

(R12: 7.3.14)

The firm's decision to adopt

1.5.12 The th ird group of influences considered which inhibit and enhance the

adoption of new technologies are the decision-making processes within firm s. The p o te n tia l for c o m p u t e r - r e l a te d tech n o lo g ies to improve the competitiveness of firms has already been discussed. Firm s weigh up those e x p e c te d b e n e fits and

compare them with net discounted costs. For computer-related technologies, firms normally look for a payback period of three to five years, and less in v entures

p erceived to be particularly risky. The required payback period reflects the high rate of interest which has been experienced in r e c e n t years and th e deg ree of

u n c e rta in ty about th e fu tu re economic environment and how the new technology will perform.

1.5.13 Economic conditions have a major influence on e x p e c ta tio n s ; in a

fragile economic environment, expectations can be significantly a f f e c te d by the level and continuity of government support. There is the need for governments to adopt policies which are c o n s is te n t, in t e g r a te d and sustained over a s u ffic ie n t

period so t h a t firm s can fo rm u la te their plans in an environment of predictable

government policies. Even in a p re d ic ta b le econom ic environm ent, u n c e rta in ty arises, in p a r t, from less than full information about the characteristics of the

new technology. Because of these information d iffic u ltie s , firm s ' asse ssm e n ts of benefits are often inaccurate.

1.5.14 C osts a re the other element in the payback calculation. Costs include

initial purchase price, sales tax, installation costs and operating costs. If purchases are m ade, th e s e co s ts a r e re d u c e d by taxation concessions such as depreciation and in v e s tm e n t allow ances. We have found ac tu a l costs a re freq u en tly

underestimated particularly the costs of installation.

15

1.5.15 C osts will also include the costs of adjustment to the new procedures

and relationships within the firm, for the introduction of new technologies into a firm can have a p ervasive influence and previously esta b lis h e d working

relationships can be disrupted. A climate is required which enables the w orkforce to c o n trib u te with enthusiasm to the successful introduction of new technology. It is our view that management will be able to introduce change better if they have had th e ex p e rie n c e of adaptation to significant change in the past. Change also

will be managed more effectively if it is incremental and continuous than if it is

occasional and sudden.

Legislative constraints

1.5.16 L eg islativ e c o n s tr a in ts ex ist which inhibit the adoption of new

technologies by firms. For example, regulatory standards can a c t as a c o n s tra in t to new technology adoption where standards are not reviewed to take account of changes in manufacturing technology.

ASTEC recommends:

That the M inister for Industry, Technology and Commerce formulate proposals, in consultation with the Australian Industry and Technology Council, to ensure th a t regulations incorporating technical standards are regularly rev ie w e d to ta ke account of changes in manufacturing technology. Where possible, standards should be s p e c ifie d in te r m s o f final p e r fo r m a n c e . R e g u la to r y authorities should be

encouraged to use their powers and responsibilities to exercise discretion about the manner in which com pliance w ith e x is tin g standards is attained in the light of

changing technology.

(R13: 7.4.10)

1.5.17 The adoption of c o m p u t e r - r e l a te d tech n o lo g ies in p a r tic u la r , is

disadvantaged by the government's differential tax treatm ent of computer capacity em bodied in equipm ent in d i f f e r e n t areas of the firm's operations, and between particular types of computer-related equipment. Currently, a sales tax of 20 per

c e n t is levied on c o m p u ters ex c e p t where th ey a re defined as 'aids to

manufacture'. Computers used in offices, including computer-aided design system s, are not exempt.

ASTEC recommends:

That the Treasurer s ee k to amend the Sales Tax (Exemptions and Classifications) A ct (1935) so that the definition of 'aids to m a n u fa c tu r e ' as given in the First

Schedule be e x te n d e d to include all c o m p u te r s y s te m s used in manufacturing

establishments, in order that they be exempt from sales tax.

(R14: 7.4.11)

1.5.18 T ax a tio n a r ra n g e m e n ts with respect to depreciation can also influence

firm s ' decisions about which types of new technology to adopt. C om puter

hard w are purchased a f t e r July 1982 can be depreciated at a rate of 33 1/3 per

cent but the rate which applies to NC and CNC m achines is 20 per ce n t. The

sam e r a t e should apply to both types of equipment, and the rate should be raised as a means of stimulating investment in new machines and systems.

16

ASTEC recommends:

That the Treasurer seek to amend the Income Tax Assessment A ct (1936) so that the depreciation rate for machine tools incorporating c o m p u te r controls be the same as for computer hardware, and be increased to 100 per cent.

(R15: 7.4.12)

1.5.19 B ecause new technologies a re usually em bodied in co stly new

equipment, their adoption can be a c c e le r a te d by th e p aym ent of an in v e s tm e n t

allow ance. At p re s e n t, firms are eligible for an investment allowance of 18 per

cent and the current scheme will expire in 1985. A num ber of options open to

g overnm ent with respect to using investment allowances to stimulate the purchase of new plant and equipment were considered by us, but we believe th e c u rre n t

scheme is preferable.

ASTEC recommends:

That the G o v ern m en t continue the present investment allowance of 18 per cent for a period of at least three years a f t e r 1985, and make the e a r lie s t possible

announcement of its intentions.

(R16: 7.4.18)

1.6 Industrial Relations, Skills and Training

1.6.1 The in tro d u c tio n of new technologies raises a number of issues in the

areas of industrial relations, skills and training. These m a tte rs are th e final set

of issues considered. Four issues are examined: job security, changing skill levels, occupational health and safety and the extension of m an ag e rial m onitoring and control. These issues are considered in the context of the Australian industrial

relations system which has a major influence on labour management re la tio n s and on the introduction of new technologies into industry in Australia.

The Australian Industrial Relations System

1.6.2 As it a f f e c t s the m e ta l tr a d e s ind u stry , the A ustralian in dustrial

re la tio n s system has tw o main c h a r a c t e r i s t i c s . F ir s t, it has led to the

developm ent of the M etal Industry Award. Second, in operating a t state and

national levels, the system has tended to focus largely on the arbitral process, not on relationships at the workplace.

1.6.3 The M etal Industry Award provides a system of job classification and

payment in terms of work done. The c la s s ific a tio n of jobs r e f l e c t e d in the

Award is based on a historically developed set of skills and the unions to which

workers belong tend also to be organised along th ese lines. In so fa r as new

technology re q u ire s new skills and allows a more flexible approach to the

allocation of job tasks, existing classifications can be in ap p ro p ria te fo r the new technologies and can lead to o v erstaffing. There is a need to explore ways of

reframing the Award which takes account of these changes whilst acco m m o d atin g the interests of the parties to the Award.

17

1.6.4. The A u s tra lia n a r b it r a t io n system tends to o p e r a t e a t two distinct

levels: at the formal arbitration level and a t the informal plant level, with l i t t l e

in te g r a tio n between the two. The system is unique in that it is compulsory and

institutionalises th e a d v e rs a ria l c h a r a c t e r of in d u strial re la tio n s . This is not

conducive to solving problem s which m ight a r is e from the introduction of new

technology. How ever, r e c e n tly t h e r e have been moves tow ard s more

d e c e n t r a l i s e d d ec ision-m aking and m ore in t e r a c t io n b e tw e e n unions and

management at the workplace. These have culminated in the T e rm in a tio n , Change and R edundancy C ase b efo re the C o n c ilia tio n and Arbitration Commission. The Com m ission's Decision provides th a t aw ards must now include provisions for c o n s u lta tio n between management, workers and their unions concerning a range of

changes that may be contemplated within a plant and in the c a se of redundancy. The F e d e r a te d C lerks Union c a se b e f o re th e High C o u rt also has effectively

upheld an award made in a Victorian jurisdiction providing for consultation to ta k e p lace a t th e feasibility stage rather than a fte r the decision is made to introduce

new technology.

1.6.5. We believe th e development of appropriate consultative mechanisms at the workplace offers the possibility of securing a change in the industrial relations c l i m a t e in A u stra lia. We re co g n ise t h a t in many individual instances, good

worker-management relations already prevail, but in those in stances w here this is not th e ca se, th e adoption of a p p r o p r ia te c o n s u lta tiv e mechanisms offers the

opportunity for improved relations between labour and m a n a g e m e n t. The prim ary role of th e adoption of new te c h n o lo g ie s is to make industry more competitive

and profitable and the future of firms and the jobs of its em ployees depends on

th e a c h ie v e m e n t of this goal. Developments in the consultation process need to be considered against this background.

1.6.6 Industrial relations and technological change are both complex areas and neither harmony nor effective c o n s u lta tio n ca n n o t be le g is la te d . A number of

possible s ta g e s in the c o n s u lta tio n process can be identified. There may be an

exchange of information. There may be discussion on th e basis of in fo rm atio n

provided which could in flu en c e m a n a g e m e n t's decision to in tro d u ce new

technologies. If the parties cannot agree the final decision w h e th e r to proceed

re m a in s with m an ag e m en t. Even if the parties do agree, management may still

not proceed.

1.6.7. Steps need to be taken to enhance the development of the consultation

process. Such steps could include a voluntary scheme involving a small number of firm s, in which th e C om m onw ealth Government provides the initiative and some support for the development of consultative m echanism s. (Such an approach has been adopted r e c e n tly to p ro m o te A f f ir m a tiv e Action). By th is m eans the

information and experience gained might then be more widely applied.

ASTEC recommends:

That the Minister for Employment and Industrial Relations consult with the union m o v e m e n t, e m p lo y e e s and em p lo y e r s to produce d e ta ile d proposals for the

im p le m e n ta tio n o f a vo lu n ta r y s c h e m e o f fir m -b a s e d co n su lta tio n b e tw e e n

management and workers on the introduction of new and improved technologies, to serve as a model from which o th e r f ir m s m ight d e v e lo p more e f f e c t i v e

consultation mechanisms.

(R17: 8.2.28)

18

Industrial relations issues associated with technological change

Employment (job security) issues

1.6.8. No o th e r issue associated with the introduction of technological change has attra cted as much a t t e n t i o n as its im p a c t on em ploym ent num bers. From

interview s we found t h a t a t th e rate at which technological change is presently

occurring, there is little concern about redundancy specifically as the result of the adoption of new technology. R a th e r reduction in employment numbers has come predominantly from natural wastage.

1.6.9. In some firm s the introduction of new technology was associated with

increases in employment. The new technology had given these firms a com p etitiv e edge in th e m a rk e t for th e ir prod u c ts and demand for the firm's products had

risen. As a consequence, any labour-saving effects of new technology w ere more than o f f s e t by th e increased scale of output, and employment had risen. In these cases the new technology was introduced not only for the purposes of securing a cost and p ric e ad v a n ta g e but also to achieve c o m p e titiv e advantages through

improved design and faster delivery tim e s. It is th is in t e r a c t io n betw een the

in tro d u c tio n of new technology and the resulting changes in output which makes the prediction of em ploym ent e f f e c t s p a r tic u la rly d iffic u lt. The em ploym ent

o utcom e can vary from one plant to a n o th er depending on th e r a t e of

technological change, the extent to which the new technology is labour-saving, and the responsiveness of demand and output to the cost reductions and other changes in sources of competitiveness achieved through the introduction of new technology.

Changing skills levels

1.6.10 The e f f e c t s of new technology on the 'average' skill requirements of

jobs within an economy depend upon at least three factors: the effect on the skill content of particular jobs; the effect on the 'average' skill requirements of jobs in particular industries, re fle c tin g th e c re a tio n of new jobs and the a l t e r e d skill

re q u ir e m e n t of existing jobs; and the in d u strial com position of the economy

reflecting the relative growth of different sectors in the economy in response to structural change.

1.6.11 In A ustralia there is a widely held belief that technological change has

increased the demand for skills across the economy and that this trend is likely to continue. At the same time, it is said, there is a declining demand for unskilled,

semi-skilled and poorly educated workers. But r e c e n tly this orthodox view has been ch allenged. At th e industry level, and for th e m e ta l tra d e s industry in

p a r tic u la r , t h e r e is also a d iv ersity of view as to th e likely im p act of the

in tro d u c tio n of new technologies on levels of skills. According to some writers, a g e n e ral deskilling of shop-floor w orkers will re s u lt, for th e e f f e c t s of the

ap p lic a tio n of new technology are seen as a part of a more fundamental process of the in cre asin g f r a g m e n ta tio n of work into r e p e t i ti v e and more routine

a c tiv itie s , c o n trib u tin g to the deskilling of jobs. Other writers consider that a

process of 'polarisation' of skills is occuring. Some jobs required in cre ased skills whilst o th ers require a lower level of skill than previously. Others argue there is no p r e d e te rm in e d o utcom e. Whether or not deskilling o ccurs is not simply

determ ined by the new technology. In part at least, it is also a m atter of job

design and work organisation.

19

Occupational health and safety

1.6.12 The in tro d u c tio n of com puter-related technologies into the workplace would appear to have both good and bad e f f e c t s on th e s a f e ty and hea lth of

workers. A United States study has concluded that, in general, the introduction of computer-related technologies in m a n u fa c tu rin g has re s u lte d in a re duction of physical h az ard s in th e work environment, although some new physical hazards associated with the lack of worker control over systems may em erg e. There is

also co n c e rn about robot s a f e ty and u n easiness about the possibility of health

hazards for workers using screen-based equipment. The main psychological e f f e c ts likely to arise from the introduction of computer-related technologies are boredom and stress.

1.6.13 R e c e n tly , t h e r e has been in cre asin g re c o g n itio n t h a t health issues

arising from work cannot be addressed simply by focusing on particular diseases or by c o n c e n tr a tin g on e q u ip m e n t-r e la te d f a c t o r s only. Some consider that the

environmental, o rg a n is a tio n a l and personal c o n te x t in which new technologies o p e r a t e must also be taken into account. In particular, increasing emphasis is

being p laced on th e im p o rta n c e of job design and job orga n isa tio n in th e

maintenance of health at work.

1.6.14 R ecently the Commonwealth Government accepted a recommendation of their Interim National Occupational Health and Safety Commission that a National O c cu p atio n al H e alth and Safety Commission should be established. We draw the Commission's attention to the importance of job design and job organisation in the maintenance of health at work.

The extension of managerial monitoring and control

1.6.15 We found in our visits th a t t h e r e was also some co ncern th a t the

in tro d u c tio n of new c o m p u te r -re la te d te c h n o lo g ie s and th e process of job

fragm entation that generally precedes or accompanies it offers the opportunity for increased control over workers. The monitoring of worker p e rfo rm a n c e is not a new issue on th e shop floor. How ever, what is new is t h a t because

c o m p u t e r - r e l a te d technology allows the r e la tiv e ly easy incorporation of

p e r fo rm a n c e measuring devices within the machine, the new technology permits a th e m ore a c c u r a t e m onitoring of work e f f o r t (pace and output) and the

com paratively easy assembly of this information. Further, it permits the expansion of closer worker monitoring into higher levels of the organisation's hierarchy, for exam ple, to white collar workers in the design office. We should emphasis that at present worker monitoring does not appear to be an important industrial re la tio n s

issue but if it should becom e more w idespread it will undoubtedly in cre ase

conflict between workers and management.

Education and Training

1.6.16 T here is a widespread view t h a t the pace and scope of technological

change are such that there is a need for basic changes in general and vocational

e d u c atio n , tra in in g and re tra in in g and in ed u c atio n serv ic e s such as c a re e r

guidance and job counselling. Yet te c h n o lo g ic a l change is not the only force

reshaping the roles for and the values assigned to education. At any one time

there are a range of demands being made on the education system and th e re fo re a range of views on th e role it should p erfo rm . These various roles are not

always compatible.

20

1.6.17 From a technologica l change perspective an important issue is whether education's role is to fulfill vocational needs or w h e th e r it should be seen in a

broader p e r s p e c tiv e , t h a t of equipping people with skills to deal better with the

impact of technological change on society. If the education and train in g system is seen p rim arily in v o c a tio n a l te rm s , then the competing demands of different s e c to r s of th e economy and d i f f e r e n t types and levels of courses must be

resolved.

1.6.18 F ea rs t h a t th e lack of availability of skilled personnel will inhibit the

adoption of new technologies and lim it o p p o rtu n itie s for industry developm ent underlie much of th e c u r r e n t co n c ern about the system of education and skills

training. We have demonstrated that competitiveness is more than simply an issue of th e a v a ila b ility of skills. It is also q u estio n ab le w hether the widespread

adoption of new technologies will necessitate a b roa d-based, gene ral in c re a se in skills. The main educational issues associated with technological change relate to cu rric u la , th e quality of e d u c a tio n and th e a p p ro p ria te n e s s of th e training

c u r re n tly being o ff e re d , and whether the formal education system has sufficient flexibility to meet changing demands. There is scope for major im provem ents in the formal education system in these areas.

1.6.19 The re p o r t does not develop recommendations in relation to education

and training. There are currently a number of investigations underway or recently co m p leted in g o v e rn m e n t c o n c ern e d with various aspects of education and skills training relating directly or indirectly to technological change. C e rta in problem s raised in this re p o rt can a c t as b a r rie rs to th e implementation of progressive

education and training policies contained in these in v e stig atio n s. Issues such as multi-skilling, the acceptance of new classifications into the Award system and the alignment of new skills with existing trade-based unions are recognised as m a t t e r s requiring th o u g h tfu l a t t e n t i o n in th e c o n te x t of exam ining changes in the

education system.

21

2 INTRODUCTION

2.1 Background to Study

2.1.1 D espite its d ecline in r e la t iv e im p o rta n c e over many years, th e

manufacturing sector retains a significant position in th e A u s tra lia n economy. ASTEC b elieves t h a t its re n e w a l and g ro w th a re very much in our n atio n al

interest. Yet the policies of the past no longer seem appropriate for sustaining a

prosperous and vigorous manufacturing sector into the future. Among alternative new policy proposals it is widely considered that the adoption of new technology has p a r ti c u la r p o te n tia l as a means of achieving industry renewal through its

influence on th e c o m p e titiv e n e s s and p r o f it a b i l i t y of individual firm s and in

facilitating structural adjustment within the manufacturing sector as a whole.

2.1.2 New technology can ta k e th e form of e i t h e r new prod u c t or new

process technology; it can be incorporated in both new and existing in d ustries. While new industries offer an important opportunity for producing innovative goods and services, traditional industries are also a major source of new and im proved p ro d u c ts. The a c h ie v e m e n t of incremental improvements in existing products can

convey a substantial competitive advantage to individual firms [1].

2.1.3 Sim ilarly, whilst new prod u c ts o f f e r obvious o p p o rtu n itie s for the

application of innovative p rocess technology, la rg e p o te n tia l b e n e fits may be

realised from the upgrading of plant, infrastructure and management approaches in existing industry. In a given industry, studies show th a t th e best firm s a re much

more p ro d u c tiv e th an the worst firms. Thus the more rapid diffusion of existing best practice technologies will in c re a s e p ro d u c tiv ity overall. This re p o rt is

concerned with one of these aspects of technological advance, the adoption of new process technologies within a traditional industry.

2.2 Outline o f Report

2.2.1 This report addresses three main issues. They are the contribution which

new process technologies can make to th e im proved p e r fo rm a n c e of individual firm s; th e range of influenc es which favour or r e s tr a i n th e adoption of new

process technologies; and the industrial relations, skills and training issues which arise from the adoption of new technologies.

2.2.2 The f a c to rs which influenc e th e introduction of new technologies and

the assessment of their impact are considered at the plant level, within a specific industry s e ttin g . A firm 's decision to adopt new technologies for its plant or

plants requires assessment of new technological opportunities, existing o p e ra tio n a l conditions, market possibilities and the availability of financial resources; together they ultimately determine the success or failure of the venture. An industry-based study ta k e s these considerations into account, in contrast to a technology-oriented approach which focuses on the technical capabilities of new technologies [2],

22

2.2.3 The industry chosen for study is the metal trades industry. It is defined

to include those firms whose o u tp u ts a re fa b r ic a te d m etal p ro d u c ts, t r a n s p o r t

equipm ent, and other machinery and equipment. The automotive segment has been excluded from consideration.

2.2.4 The m e ta l tr a d e s industry has been chosen for the focus of this study

for three main reasons. First, the metal trades industry is the largest segment of

th e A u stra lian m an u fa c tu rin g sector. The industry accounts for nearly one-third of all em p lo y m en t, tu rn o v e r and value added in th e m a n u fa c tu rin g s e c to r .

Secondly, th e industry group is increasingly operating in an international market. Only a small proportion of its output is exported but the industry is s u b ject to

sev e re im p o rt c o m p e titio n . Thirdly, while some of the output for the domestic

market is sold as intermediate and final products to o th e r s e g m en ts within the

m etal trades industry, the metal trades industry has strong connections with other sectors of the economy, notably agriculture, mining, construction and the provision of public u tilitie s . The p e rfo rm a n c e of th ese s e c to r s in p a r tic u la r , and the

economy in general is heavily dependent upon th e e f fic ie n c y levels a t t a i n e d in th e m e ta l t ra d e s ind u stry [3]. A profile of the metal trades industry is given in

Chapter 3.

2.2.5 The te ch n o lo g ies s e le c te d for exa m in a tio n within the m e ta l trades

industry are based on advanced electronics. They have been te rm e d 'c o m p u te r - r e la t e d te c h n o lo g ie s '. Whilst t h e r e a r e a num ber of new process technologies

currently being adopted by firms in the industry, such as new welding tech n iq u e s, new m a te r ia ls and e n e r g y - e f f i c i e n t tech n o lo g ies, it is co nsidered th a t the

introduction of new computer-related technologies and, particularly, their potential for in te g ra tio n , offers the greatest opportunity for Australian industry to restrain the growth in its costs, to improve the quality of its products and successfully to

ada p t to the l i m ita tio n s im posed by b a tc h production. The c o m p u te r -re la te d

technologies included for consideration in th e study a re those em ployed in th e

design and drafting, purchase, storage and handling of raw materials, preproduction planning and scheduling, production control, processing, assem bly, inspection and te s tin g phases of th e m an u fa c tu rin g process. A d e s c rip tio n of th e s e new

technologies is given in Chapter 4.

2.2.6 The process of adoption of new te c h n o lo g ies within A ustralian

manufacturing industry is not generally well docum ented. In order to supplem ent th e very lim ite d information available, a representative, though small sample of firms within the metal trades industry was selected for interview. Ten firm s were s e le c te d from within th e heavy engineering industry, and seven from within the pump industry. In addition, eleven in te rv ie w s w ere condu c te d with firm s in

o th e r s e g m en ts of th e m etal tr a d e s industry in order to check and v a lid ate

findings.

2.2.7 The heavy engineering industry processes steel and other supplementary metals to produce almost any type of capital equipm ent or its com ponents. The

m a n u fa ctu rin g process in th e industry in c o rp o r a te s the four basic engineering operations of casting, forging, fabricating and machining; many m anufacturers also offer a design capability. Equipment may be produced on small batch basis or as a standard product line, but the greater part of the output of th e industry is work

to order, on a one-off or limited order basis [4]. The heavy engineering industry is one of the largest segments of the metal trades industry.

23

2.2.8 Some la rg e r pump m a n u fa c tu re r s may also be c la s s ifie d as heavy

engineers; they produce large capital items on a o n e -o ff or lim ite d o rder basis,

from c a s tin g s through to the final product and installation. A significant propor­ tion of the output of the pump industry also derives from batch prod u c tio n , with sm a lle r m a n u fa c tu re r s buying in c a s tin g s and lim itin g th e ir a c ti v i t i e s to

machining and sub-assem bly. The m a rk e t for pumps is very broad; it includes

mining and m ineral processing, public utilities, mechanical and general industrial applications, oil and petrochemicals as well as the rural and domestic sectors [5],

2.2.9 It is a characteristic of most pump manufacturers that they each offer

a large range of products and, except where they a re producing to order, hold

high in v e n to ries. In this respect the production patterns of pump manufacturers reflect the dominant pattern observed for A ustralian m an u fa ctu rin g as a whole. Taken t o g e t h e r , an e x a m in a tio n of th e pump and heavy engineering industries

offers considerable insight into the production techniques in a broad spec tru m of the metal trades industry [6].

2.2.10 The survey of firm s in the m e ta l tr a d e s industry took the form of

semi-structured interviews with senior personnel within the firms involved. Usually a sho p -flo o r inspection was und erta k en at the same time. The interviews were

conducted on a confidential basis. Inevitably t h e r e were some v a ria tio n s in the

q u ality of response achieved in the interviews. Therefore, secondary data sources w ere also sought, p a r tic u la rly from com pany p ublications and journals of

pro fessio n al a s s o c ia tio n s, c o m p lem en ted by in terv iew s with o th e r people

knowledgeable about firms or the industry or having views on p a r ti c u la r issues t h a t aro se during the course of the study. In total, 50 interviews were held with

firms and o th e rs d ire c tly a s s o c ia te d with t h e m e ta l t r a d e s industry. ASTEC

records its gratitude to all those who generously gave their knowledge and time to provide the information on which this study is based.

2.2.11 The num ber of firms from which many of our conclusions are drawn is

small in comparison with the total number of firms in the metal tra d e s industry. Thus our conclusions a re q u a lita tiv e not quantitative. We were mindful of the

difficulties of generalising from so small a sample and we went to g r e a t len g th s

to check and confirm our findings w ith o th e r sources of expertise, both in the

private and public sectors. Yet the case study approach adopted in this study has o th e r ad v a n ta g e s . It has o ff e re d the o p p o rtu n ity to examine the technological

change process in g re a te r d e ta il than would have been possible from a la rg e r

survey which would have been, necessarily, of a non-personal type. We would be surprised if we could not generalise our findings for a m ajo rity of firm s in th e

metal trades industry.

2.2.12 A purpose of the in terv iew s was to e s tab lish the contribution which

te c h n o lo g ic a l change can make to th e im proved p e rfo rm a n c e of firm s.

Im pro v e m e n ts in com petitiveness are an important means by which the economic benefits of technological change can be se c u re d . At the sam e tim e , improved

p e r fo rm a n c e arise s from f a c to rs other than technological change. Influences on the competitiveness of firms within the metal tr a d e s industry a re considered in C h a p te r 5; th e re la tio n s h ip betw een technological change and competitiveness is considered in Chapter 6. The in te rv ie w s also id e n tifie d f a c t o r s a f f e c ti n g the

adoption of new tech n o lo g ies in th e indu stry . These f a c t o r s are discussed in

Chapter 7. Chapter 8 examines the industrial relations, skills and tra in in g issues arising from the adoption of the new technologies.

24

2.3 Background to Recommendations

2.3.1 This report contains recommendations for government action to promote the adoption of new technology as a strategy for enhancing industry productivity. Although both the analysis and the recommendations focus upon a particular group of technologies and a particular industry, we believe th a t in many r e s p e c ts they

apply also to o th e r technologies and to other industries. We imply no judgement that computer-related technologies or the metal trades industry should be accorded especially favourable treatm ent.

2.3.2 An im p o rta n t th em e in the report is that new technologies alone will

not tra n s f o rm the m a n u fa c tu rin g s e c to r into a p ro d u c tiv e , c o m p e titiv e and

vigorous s e c to r of th e Australian economy. They are, however, a necessary part of such a transformation. Generally, firms will not be technologically innovative unless they live in an environment which promotes flexibility, a capacity to change and the search for and implementation of all sources of productivity gains. P ast policies have not e n c o u rag e d such an environm e nt. Their em phasis on the

dev e lo p m e n t of im p o rt re p la c e m e n t and th e g e o g rap h ical dispersion of

manufacturing capability has produced a manufacturing sector which, while perhaps appropriate at the time, is ill-equipped to face the technological and in ternational trade challenges of the 1980s.

2.3.3 If th e m a n u fa c tu rin g s e c to r is to r e ta i n its valuable role in the

A u stra lian econom y, it must be both required and assisted to becom e more

p ro d u c tiv e , more flexible and more innovative and actively to seek markets both at home and abroad. Speedy adaptation to the new environment will occur only if firm s a p p r e c i a t e t h a t th e ir p ast s t r a t e g i e s will no longer suffice, and have the

resources and the will to change. The d e lic a te task befo re g o v ern m e n t is to

ensure t h a t th e environm e nt im poses a s tead y pre ssure for change to more

competitive structures, while at the same time providing form s of support which enable p o te n tia lly successful firms to adapt rather than to fail. Without any form of assistance, the sudden shift to a substantially more competitive environm e nt is likely to re s u lt in avoidable social and econom ic dislocation. The set of

recommendations proposed in this r e p o rt is based on the above consid eratio n . They c e n t r e on th e ro le which new technology may play in assisting a relatively smooth transition to a more competitive manufacturing sector.

2.3.4 A num ber of the recommendations may stand on their own. However,

those which we intended to provide support for adaptation to a more c o m p e titiv e en vironm ent (re c o m m en d atio n s 7, 9, 14, 15 and 16) should not be considered

separately from the recommendation (recommendation 11) which seeks to m aintain the p re ssu re to ad a p t. Additional assistance from government, taken alone, runs the real risk of simply reinforcing existing inappropriate structures.

References

[1] Lawrence B. Krause, 'Australia's International Trade' The Brookings Survey of the Australian Economy, Conference, Centre for Economic Policy R esea rch , Australian National University, Canberra, 9-11 January 1984.

25

[2] That is, an in dustry study distin g u ish es betw een what is technologically

feasible and what is economically viable in a particular application.

[3] The c r i t i c a l role of th e c a p ita l goods industry in influencing a country's

competitiveness is discussed in J. Mistial, 'Competitiveness of the Productive System and In te r n a tio n a l S p e c ia lis a tio n ' O rga nisation for Economic

Co-operation and Development, Paris, 1983 [DSTI/SPR/83.31]

[4] 'The A u stra lian Heavy Engineering Industry, A R eport by the Heavy

Engineering Industry Advisory C ou n cil', A u s tra lia n G overnm ent Publishing Service, Canberra, 1979.

[5] 'The Australian Pump Industry, a Report by the Metal Manufacturers Industry Advisory Council', Australian Government Publishing Service, Canberra, 1981.

[6] T here is one o th e r main type of p ro d u c tio n p rocess, th e assem bly line

process as found in the automotive and white good industries.

26

3. THE METAL TRADES INDUSTRY

3.1 Introduction

3.1.1 This c h a p te r outlin e s th e main c h a r a c t e r i s t i c s of th e m etal trades

industry and its importance in the Australian economy. The metal trades industry is defined in this r e p o r t by r e f e r e n c e to the A u stra lian S tandard Industrial

Classification (ASIC) which desc ribes ind u stries larg e ly by groupings of r e la te d p roducts. The m etal tr a d e s industry comprises those plants producing fabricated metal products (ASIC 31), transport equipment excluding motor vehicles and p a r ts (ASIC 324), and other industrial machinery and equipment (ASIC 33) [1].

3.1.2 The industry thus desc ribed covers a d iverse range of activities. It

includes fabricators of s teel and o th e r m e ta ls for c o n s tru c tio n , f a b ric a to rs of

s h ee t m e ta l and m akers of o th e r metal products such as tools, fasteners, spring

and wire products and metal fittings. It includes m a n u fa c tu re r s of ships, boats, a i r c r a f t , railw ay rolling s to ck and locomotives. It also covers manufacturers of heavy and light industrial equipment, and m akers of consum er d u rables for the home [2].

3.2 Background and Structure

3.2.1 The m etal tra d e s industry has been central to manufacturing industry

since the industrial revolution, but its history is measured in thousands of years. Many of th e skills p ra c tis e d in the industry such as forging, rivetting and metal

bending have been known for millenia. Homer's description of Thetis' visit to the g r e a t sm ith H ephaistos and th e making of the shield of Achilleus is one of the

more celebrated, ancient descriptions of the metal trades [3].

3.2.2 In A u s tra lia , the industry had its origins in th e development of the

agricultural and pastoral industries in the first half of the 19th century. Later, the m echa n isatio n of gold mining and the development of railways created a further demand for heavy equipment and other metal products. A number of firms founded

at that time are still in operation.

3.2.3 The major stimulus to the development of the industry this century has

been the growth and the diversification of th e m a n u fa ctu rin g s e c to r and of the

economy generally. The disruption of the flow of imports into Australia during the two world wars also provided an in c en tiv e for the d evelopm ent of a local

ca p a b ility . In th e post-w ar period, the expansion of the automotive, oil refining and chemical industries and the extension in the provision of public utilities were major so urces of in cre ased dem and. Since th e mid 1960s the a c c e l e r a t e d

development of natural resources has had a significant impact on the m ark e t for heavy equipment [4].

3.2.4 The economic downturn of 1982-83 has had a marked adverse effect on

the industry. The re d u ctio n in th e levels of in v estm en t in new plant and

equipm ent since early 1982 has severely undermined the market for a wide range of heavy equipm ent and o th e r m etal p roducts [5]. There has also been a

27

significant increase in the level of import competition. The downturn has severely strained the ability of th e industry to a d ju s t to the changed c irc u m s ta n c e s ,

coming immediately after the surge in activity which preceded it. There has been a major contraction in output and em p lo y m en t levels and a num ber of plants

have closed; a significant amount of excess capacity remains [6],

Industry Structure

3.2.5 The s t r u c t u r e of th e m etal trades industry has been determined to an

important degree by two factors: first, Australia's distance from m ajor suppliers and, secondly, by an in dustry policy d i r e c t e d tow ards import replacement and

relying heavily on a protective tariff [7]. The metal trades industry is fra g m e n te d g e o g ra p h ic a lly , is very diversified in term s of the product it offers and generally tends to operate on a small scale.

3.2.6 Table 3.1 shows the dispersion of plants by State and by employment

size in the metal trades industry. The table shows that in 1982, the l a t e s t y ea r

for which d a t a a re a v a ila b le , th e r e were nearly 9000 plants, of which over 70

per cent are concentrated in Victoria and New South Wales. Part (b) of Table 3.1 in d ic a te s th e e x t e n t of sm all s ca le o p e r a tio n s in th e industry. The gre ater

proportion of plants in 1982 employed fewer than 50 people; only 14 per cent have more than 50 employees and 7 per cent more than 100 employees.

3.3 Production Processes

3.3.1 T ra d itio n ally , m an u fa c tu rin g has been conc ern e d with the Economic

Batch Quantity (EBQ), the o rg a n is a tio n of p ro d u c tio n which will minimise unit c o s ts , given th e c o n s t r a in t s of dem and, s e t-u p co sts and c o s ts of holding

inventory. Three main ty p es of prod u c tio n f a c ilitie s a re found in th e m e ta l

t r a d e s industry. F ir s t, t h e r e a r e jobbing o p e ra tio n s, producing on a one-off or

limited order basis. This type of facility is characteristic of manufacturing in th e heavy en gineering and c o n s tru c tio n s e g m e n ts of the industry, but it is also

representative of many small suburban operations, providing welding and gene ral engineering services. A significant proportion of this work is maintenance.

3.3.2 Secondly, t h e r e a re small to medium batch producers whose output is

usually for stock. Batch production is found, for example, in wide se c tio n s of the pump industry and many a r e a s of m e ta ls fabrication. A CSIRO study estimates that over 50 per c e n t of f a b r i c a t o r s a re engaged in medium to sm all b a tc h

production [8],

3.3.3 Batch p roduction r e f l e c t s a m a n u fa c tu rin g situation characterised by

small volumes and relatively g r e a t v a rie ty . S ignificant s e t-u p co sts are o fte n

in h e re n t in the m achinery employed. The strong incentives to secure economies of batch size usually lead to b a tc h e s being produced which re p re s e n t supplies

s u ffic ie n t for many months. Thus, with conventional technology, batch production usually implies high inven to ry holdings. It was not uncommon to find, among

firm s we in terv iew ed , stock to turnover ratios as high as 1 to 2. However, the

Metal Trades Industry Association (MTIA) - C om m onw ealth Bank 1984 Survey of MTIA m em bers su ggests t h a t firm s a re now holding less stock than they did

previously [9].

28

TABLE 3.1

The Industrial Structure of the Metal Trades Industry Australia 1982

(a) Distribution of Plants Operating at 30 June 1982 by State

Per cent

New South Wales 40.7

Victoria 33.5

Queensland 7.8

South Australia 8.5

Western Australia 8.3

Tasmania 0.9

Northern Territory and Australian Capital Territory 0.3

TOTAL AUSTRALIA 100.0

(b) Distribution of Plants Operating by Employment Size:

100

Number Per c

than 10 employees 4143 46.6

10 - 19 employees 2033 22.9

20 - 49 employees 1458 16.4

50 - 99 employees 611 6.9

or more employees 643 7.2

TOTAL, ALL PLANTS 8888 100.0

Source: (a) Australian Bureau of Statistics, unpublished statistics

(b) A u stra lian B ureau of S ta t is t i c s , M anufacturing Establish­ ments, s e le c te d ite m s of d a ta c la s s ifie d by industry and

em ploym ent s ize, Australia 1981-82, Catalogue No. 8204.0, Table 1.

3.3.4 F inally, in the metal trades industry there are some comparatively high

volume f a b r ic a to r s and asse m b lers. F a b ric a to rs use d e d ic a te d m achinery,

incre asingly a u to m a te d , to manufacture such items as fasteners, wire and spring products, small tools and c u tle r y . The w hite goods segm ent is ty p ical of the

r e la tiv e ly high volume a s se m b lers to be found in the industry. High volume

production is not characteristic of larg e sec tio n s of the m e ta l tr a d e s industry;

th e r e f o r e this study does not examine conditions in plants engaged in this type of production.

29

3.4 The Metal Trades Industry and the Economy

3.4.1 The m etal tr a d e s industry is important in the Australian economy, not

only because of its relative size in the manufacturing sector but also bec ause of

its lin k ag es with o th e r sectors of the economy. Sales data from the 1983 MTIA

-Commonwealth Bank Survey given in Table 3.2 in d ic a te th e e x t e n t of th e se

connections.

3.4.2 T able 3.2 shows t h a t a p p r o x im a te ly 20 per c e n t of th e sales of

respondents in 1983 were to wholesale and r e t a i l o u tle ts , probably as ite m s for

final c o nsum ption. The m a n u fa c tu rin g s e c to r , building and c o n s tr u c tio n , and

government sectors accounted for nearly 60 per cent. Sales to th e s e s e c to r s a re

ty p ic a lly of equipment and intermediate goods requiring further manufacture. The efficiency levels attained in the metal trades industry can thus have s ig n ific a n t

implications for the levels of performance achieved in these other sectors.

TABLE 3.2

The Metal and Engineering Industry Total Sales of Respondent Companies by Markets - Australia, 1983

Markets Per cent

Manufacturing (excluding motor vehicles) 15.7 Motor vehicle manufacture and assembly 8.3 Wholesale and retail outlets 22.2

Building and construction 16.7

Governments and their instrumentalities 16.5 Rural and agricultural 5.0

Mining 9.1

Transport services 3.5

Services 2.8

Other markets 0.2

Source: MTIA-Commonwealth Bank Survey of the Metal and Engineering Industry, July 1983.

3.4.3 The r a t e of grow th of dem and for metal products in turn is likely to

influence the efficiency with which the metal trades industry o p e r a te s . Most new tec h n o lo g ie s a r e em bodied in new equipm ent. New equipment will be purchased either to replace existin g c a p a c ity or to expand c a p a c ity . Where dem and and

hence capacity is growing, the opportunities for introducing new technologies will be greater.

30

TABLE 3.3

Net Capital Stock Estimates in Various Segments of the Metal Trades Industry - 1980-81

Industry Group Value Growth Rates

($ million) 1960-61 1970-71

1970-71 1980-81

(per cent)

Other transport equipment (ASIC 324) 107.3 5.71 -1.11

Photographic, professional and scientific equipment (ASIC 334) 42.4 8.15 5.69

Appliances and electrical equipment (ASIC 335) 235.1 4.61 1.18

Fabricated metal products and industrial equipment (ASIC 2963, 31 and 336) 465.1 6.50 -1.02

TOTAL MANUFACTURING 7338.0 7.50 0.57

Source: George Karpoozis and Terry Offner, 'Capital Stocks of Plant and Equipment in the A u stra lian M anufacturing S e c to r', Bureau of Industry Economics, Working Paper No. 28, Table 7.

Note: N et c a p ita l stock r e f e r s to stock of plant and equipment after

allowance is made for depreciation.

3.4.4 D a ta reproduced in Table 3.3 indicate that growth rates in the stock of

plant and equipment (capital stock) in various segments of the industry in re c e n t years have been below t h a t for m an u fa ctu rin g industry as a whole. In some

segments the capital stock has been reduced. Low grow th r a te s of th e c a p ita l

stock will lim it th e o p p o rtu n ity for new in v e s tm e n t and, to the e x t e n t that

investment provides th e chance to p u rchase new machines in co rp o ratin g new technologies, it in d ic a te s t h a t these opportunities have not been taken up. The

age of plant and equipment in th e industry is th e r e f o r e likely to be older for

manufacturing industry on average and incorporating older technologies [10].

3.4.5 It should be em phasised t h a t th e s e d a ta a re for broad product

groupings. Average experience conceals a great d iv ersity of ex p e rien ce ; it will em brace some firm s which a r e highly pro d u c tiv e and which may be expanding their investment at a faster ra te than implied by th e d a ta . The c o m p a ra tiv e ly

31

poor p e rfo rm a n c e d e sc rib ed for th e industry as a whole therefore should not be allowed to detract from the high lev els of p e rfo rm a n c e achieved by individual

firms within the industry.

Exports and Import Competition

3.4.6 The Australian metal trades industry has not been generally active as a

seller in international markets. With the exception of photographic, professional and s c ie n tif ic e q u ip m en t, th e p ro p o rtio n of e x p o rts to tu rn o v e r has been

considerably below that for manufacturing industry as a whole. Over the 1970s t h e r e was some increase in export activity, but there was a reversal in this trend

in the early 1980s. According to the 1983 MTIA - C om m onw ealth Bank Survey,

TABLE 3.4

Exports as a Proportion of Turnover in the Metal Trades Industry 1968-69 to 1981-82 (per cent)

ASIC CODE *

Year 314 315 316 324 334 335 336

All

Manufacturers

1968-69 1.3 0.6 4.6 1.6 22.8 3.2 4.9 8.5

1969-70 2.2 0.6 3.3 3.5 22.8 3.7 6.0 9.9

1970-71 na na na na na na na na

1971-72 2.0 0.9 3.4 1.6 24.3 4.5 8.4 10.7

1972-73 1.9 0.9 3.5 2.3 24.8 4.1 8.9 12.5

1973-74 1.4 0.8 3.4 1.0 23.8 3.6 7.9 11.4

1974-75 2.4 1.0 4.2 1.7 23.1 5.2 10.2 12.2

1975-76 1.5 0.5 3.4 4.1 22.3 4.1 9.0 11.8

1976-77 1.3 0.7 3.4 1.5 22.4 3.9 8.9 13.0

1977-78 1.7 0.5 3.4 2.1 19.6 4.2 8.6 12.4

1978-79 1.1 0.5 3.8 4.4 20.4 4.1 8.3 13.9

1979-80 1.4 0.8 4.4 5.6 23.4 4.7 8.4 14.7

1980-81 0.7 0.7 3.8 4.8 25.4 5.2 8.0 12.9

1981-82 1.3 0.7 3.7 3.4 25.3 5.0 6.9 11.8

* The corresponding titles to the ASIC codes are as follows:

314 - Structural metal products 315 - Sheet metal products 316 - Other fabricated metal products 324 - Other transport equipment (not vehicles and parts) 334 - Photographic, professional and scientific equipment 335 - Appliances and educational equipment 336 - Industrial machinery and equipment

Source: Industries Assistance Commission

32

the in d u s try 's e x p o rt sales fe ll heavily in th e 12 m onths to May 1983, but

thereafter there was a m o d e ra te in c re a s e . The l a t e s t MTIA - C om m onw ealth

Bank Survey in d ic a te s a likely a c c e l e r a t i o n in e x p o rts during 1984. Table 3.4

shows e x p o rts as a propo rtio n of tu rn o v e r in th e m e ta l t ra d e s industry from

1968-1969 to 1981-1982.

3.4.7 The re d u c tio n in exports during the early 1980s occurred, in part at

least, because firms previously engaged in foreign sales withdrew com p letely from the e x p o rt m a rk e t. This was found to be the case for a number of the firms

interviewed by us. S uccessive MTIA surveys also show t h a t re la tiv e ly few er

re sp o n d en ts a re now exporting than during the late 1970s. Whereas in 1979 over 57 per cent of respondents were engaged in some export a c tiv ity , by 1983 only

39 per cent did so. In April 1984, 41 per cent of firms surveyed were exporting

[ 111.

TABLE 3.5

Imports as a Proportion of Domestic Sales in the Metal Trades Industry 1968-69 to 1981-82 (per cent)

ASIC CODE *

Year 314 315 316 324 334 335 336

All

Manufacturers

1968-69 0.6 0.7 15.0 54.4 66.6 21.9 38.8 16.0

1969-70 0.4 1.0 14.1 52.7 67.4 23.6 41.7 16.9

1970-71 na na na na na na na na

1971-72 0.5 0.8 12.6 38.3 62.9 24.3 38.9 16.0

1972-73 0.3 0.7 12.2 42.6 61.8 24.5 35.2 15.1

1973-74 0.5 0.6 12.5 55.7 65.7 27.4 35.8 17.8

1974-75 0.6 1.6 15.5 41.9 68.9 35.3 41.7 20.4

1975-76 0.6 1.4 14.1 34.2 67.5 35.3 40.1 19.2

1976-77 0.6 1.6 16.8 37.4 69.6 37.9 43.7 21.1

1977-78 0.6 1.2 16.7 41.7 71.0 37.2 43.6 20.3

1978-79 0.6 1.5 17.4 62.7 69.5 40.1 48.2 21.8

1979-80 0.8 1.5 18.3 37.8 68.4 38.5 46.1 21.6

1980-81 0.6 1.6 17.7 37.7 71.0 40.3 48.8 21.8

1981-82 3.4 2.0 18.5 65.6 72.1 42.1 49.6 22.9

* See Table 3.4.

Source: Industries Assistance Commission

3.4.8 The m etal tra d e s industry has been subject to an increasing degree of

import competition. Table 3.5 shows t h a t im p o rts as a proportion of d om estic

sales have increased since the late 1960s and particularly since the mid 1970s. A

33

large proportion of members of the industry have felt that they have been subject to a high degree of import competition, and many have felt the competition to be s ev e re. However, there has been some decline in the respondents' perceptions of the intensity of import competition recently, as data reproduced in Table 3.6 from the 1984 MTIA - C om m onw ealth Bank Survey show. The major sources of this competition were, in d e c re a s in g o rd e r of im p o rta n c e , J a p a n , S outh-E ast Asian countries, North America and Europe.

TABLE 3.6

Import Competition in the Metals and Engineering Industry

Percentage of firms who regard Percentage of vulnerable firms themselves as vulnerable regarding the competition

Survey to import competition as severe

June 1979 78.5 25.6

June 1980 76.9 22.6

May 1981 68.1 38.1

March 1982 72.0 42.0

July 1983 77.0 39.1

April 1984 61.6 29.5

Source: MTIA - C om m onw ealth Bank N ational Survey of the M etal and

Engineering Industry, April 1984, Table 4.

3.4.9 Among the reasons given in the 1984 Survey for the apparent reduction

in import competition in the last year are the g r e a t e r o p e ra tio n a l e ffic ie n c y of

d o m e s tic p roducers, th e g en e rally low er exchange r a t e and g r e a t e r usage of

imported component p a r ts in d o m e s tic p ro d u c tio n proc esses. Senior business personnel interviewed by us expressed the view that increased import penetration of the A u stra lian m ark e t during th e ea rly 1980s was a re f l e c t i o n of the

increasingly competitive international trading environment. Whereas, they believe, in previous years suppliers on the international market often overlooked A ustralia, in the ea rly 1980s they sought to in c re a se their penetration to offset a fall in

demand in other markets and more subdued world trading generally.

3.4.10 A num ber of firms in te rv ie w e d in our survey also believed th a t

reductions in the rates of p ro te c tio n have led to in cre ased im ports. E ff e c tiv e

r a t e s of p ro te c tio n did fall until the late 1970s but since then they have risen

slightly in most c a te g o rie s , as d a t a given in Table 3.7 show. M ovem ents in

exchange rates are equally relevant to changes in exports and imports. The index of the average value of the Australian dollar against the currencies of A u s tra lia 's major partners (the trade weighted index) is given in Figure 3.1.

34

TABLE 3.7

Effective Rates of Protection

ASIC CODE *

Total

Year 314 315 316 324 334 335 336 Manufacturers

1968-69 61 76 53 51 14 47 39 36

1969-70 51 74 53 55 14 49 39 36

1970-71 59 78 51 55 14 46 41 36

1971-72 52 78 50 52 12 45 39 35

1972-73 53 77 48 57 13 44 36 35

1973-74 40 60 37 41 9 32 27 27

1974-75 39 58 31 21 8 28 21 27

1975-76 39 58 29 24 8 30 20 28

1976-77 33 52 27 21 8 27 16 27

1977-78 33 46 254 13 5 22 18 26

1977-78(a) 31 50 24 10 9 23 19 23

1978-79 35 50 24 9 9 23 21 25

1979-80 33 53 23 10 8 24 22 24

1980-81 32 55 24 12 9 24 22 24

1981-82 29 51 24 13 9 25 23 26

* See Table 3.4.

Note: E ff e c tiv e r a t e s of p r o te c tio n m easure the p e r c e n ta g e increase in value

added per unit of output afforded by the assistance structure.

R a te s c a lc u la te d for th e period 1968-69 to 1973-74 employ 1971-72 value added weights; those for th e period 1974-75 to 1977-78 employ 1974-75 w eights whilst those for the period from 1977-78(a) to 1981-82 employ

1977-78 weights.

3.5 Structural Adjustment

3.5.1 The foregoing discussion in d ic a te s t h a t th e r e has been considerable

pressure for s t r u c t u r a l a d ju s tm e n t in re c e n t y e a rs . P ressures for s t r u c t u r a l

ad ju s tm e n t a r e alw ays p re s e n t. F irm s continually seek to adjust to changing

patterns of demand, of technology, of input co sts and a v a ila b ility in s triv in g to

acquire and defend c o m p e t a ti v e positions. Some firms do so more successfully than others. As a result, the industry profile changes as new in d u stries and new

firms enter the market, others mature and some decline or go out of existence.

35

The notable feature of the present situation therefore lies not in the ongoing fact of adjustment; rather it is that firms have been faced with increased pressure to

adjust. This situation has been observed for a number of countries.

1976 1976 1977 1978 1979 1980 1981 1982 1983

FIGURE 3.1

Index of Average Value of the Australian Dollar Relative to Currencies of Australia's Major Trading Partners. January 1976 - December 1982 Source: Drawn from data provided by the Reserve Bank of Australia

3.5.2 In A u s tra lia th e re cession and th e sig n ifican t in cre ase in im port

competition have been major sources of adjustment pressure; the environm ent in which businesses operate has become increasingly competitive. The result has been that some firms have ceased manufacturing o p eratio n s a lto g e th e r , whilst o th ers th a t have rem ained in production have adopted a variety of strategies to meet

the increased co m p e titio n . In a number of c a ses the driving force has been

survival in the short term [12].

3.5.3 The 1984 MTIA - C om m onw ealth Bank Survey questioned respondents about the extent and nature of their restructuring activities in recent years. The

1984 survey found that 64 per cent of respondents had engaged in some type of

readjustment in the previous year to July whereas only 46 per ce n t had done so

in the year previous to 1983. In 1981-82 only 30 per cent of respondents engaged in restructuring.

36

3.5.4 The re s p o n d e n ts engaged in a num ber of adjustment strategies, firms

often adopting a variety of approaches simultaneously although limited a t.tim e s by p o litic a l, community and industrial constraints. These strategies included takeovers and mergers, increasing or dec rea sing p ro d u c t ranges, o ffshore p roduction, and sourcing of p a r ts and c o m p o n en ts from abroad. The most common form of

r e s tr u c t u r i n g how ever, was th e in tro d u c tio n of new te ch n o lo g ies or new

o p e ra tio n a l methods. In the 1984 survey 30 per cent of all respondents indicated that they had adopted a technological solution in response to the p re s su re s for

s t r u c t u r a l a d ju s tm e n t compared to 23 per cent in 1983 and only 18 per cent in

1981-82. As has been observed for a num ber of c o u n trie s, m anagem ent in

A u stra lia is a p p a re n tly viewing new technology as an increasingly significant factor in securing continued viability [13].

References

[1] There is no o f f ic ia l nor com m only ag re e d d e fin itio n of the metal trades

industry. The definition adopted in this report is narrower than t h a t adopted by th e M etal T ra d es Industry A ssociation (MTIA) in its 1982 M etal and

Engineering Industry Yearbook. The MTIA also includes basic m e ta l products (ASIC 29), motor vehicles and parts (ASIC 323), plastic and related products (ASIC 347) and o th e r m a n u f a c tu r e r s (ASIC 348) in its d efin itio n of the

metals and engineering industry. The definition adopted by us nevertheless, would appear to correspond fairly closely to th e M TIA-Com m onwealth Bank Survey of MTIA m em bers. The MTIA-Commonwealth Bank Survey data is used in this chapter to supplement official statistics.

[2] The ASIC codes listed do not include forging and casting which, it might be

argued, should be included as p a r t of th e m e ta l tra d e s industry. These

in d u stries are included in ASIC 29 which covers those industries that smelt and refine metal from mineral ore and transform it into r e la tiv e ly simple

shapes.

[3] Richmond L a t t i m o r e , 'The Iliad of Homer', Chicago University Press, 1951 Book 18.

[4] MTIA 1982 Metal and Engineering Industry Yearbook, pplO-11.

[5] Gross fixed c a p it a l ex p e n d itu re , seasonally adjusted at constant prices has

declined steadily since the December quarter 1981. See Australian Bureau of S ta tistics, Quarterly Estimates of National Income and Expenditure Australia, Catalogue No. 5206.0.

[6] This was id e n tifie d in our survey; also see M TIA-Commonwealth Bank

National Survey of the Metal and E ngineering Industry, July 1983, M etal Trades Industry Association of Australia.

[7] R ichard E. Caves, 'Scale, Openness and Productivity in Australian Industries', The Brookings Survey of the A u stra lian Economy, C o n feren ce , C e n tre for Economic Policy R e s e a rc h , A ustra lian N ational University, Canberra 9-11 January 1984; and 'Study Group on Structural Adjustment', Report, Australian Government Publishing Service, Canberra 1979, 2 volumes.

37

[8] CSIRO, Planning and Evaluation Advisory Unit; Planning D ocum ents on

Manufacturing Industry, No. 6.2 Fabricated Metal Products Industry, Canberra, 1981.

[9] M TIA-Com m onwealth Bank N atio n al Survey of The Metal and Engineering Industry, April 1984, The Metal Trades Industry Association of Australia.

[10] New in v e s tm e n t may not embody the latest technology. Some of the firms we interviewed indicated that they purchased equipm ent on occasion which was not the latest equipment available.

[11] M TIA-Com m onwealth Bank Survey May 1983, and April 1984 Survey, especially Table 4.

[12] H. Ergas, 'C o rp o r a te S tr a t e g i e s in Transition' in A. Jacquemin (ed) 'Policy and International Trade', Oxford University Press, (forthcoming).

[13] Ibid

38

4 COMPUTER-RELATED TECHNOLOGIES

4.1 Introduction

4.1.1 The p re d o m in a n t c o m p u t e r - r e l a te d tech n o lo g ies which apply to the

metal trades industry are now described [1], These technologies have evolved over tim e , and con tin u e to do so, in the process often drawing upon developments in

microelectronics. As they have evolved, the fabrication technologies in p a r tic u la r, have a c q u ired a g r e a t e r d eg re e of flexibility in their specific application and a

greater degree of integration with other stages in the manufacturing process.

4.2 The Manufacturing Process

4.2.1 The m a n u fa c tu rin g pro c ess is d efined in this re p o rt as a series of

i n t e r - r e l a t e d a c t i v i t i e s involving design and d ra ftin g , p urchase, s to ra g e and

handling of raw m a te r ia ls , p re -p ro d u c tio n planning and scheduling, production control, fabrication, assembly, inspection and testing. In a co nventional operatio n where t h e r e a re few, if any, c o m p u t e r - r e l a te d proc esses, m an u fa ctu rin g is

generally organised as a batch operation. Manufacturing p roceeds ac cording to a com ponent drawing and a s s o c ia te d planning d o cu m en ta tio n . A p iece of raw

material, or perhaps a c a stin g from th e foundry, is p re s e n te d seq u e n tia lly to

m achine o p e r a to rs , ea ch o p e r a to r und erta k in g a s p ec ific task. The component progresses through, for example, turning, milling, p lating, inspection and then to th e f ittin g section for assembly with components from other batch activities. The finished item is subject then to a final inspection and testing. The a c ti v i t i e s and

operations involved in manufacturing are summarised in Figure 4.1.

4.2.2 The conventional machinery employed at the fabrication stage is usually single purpose, and machine functions such as tool and workpiece positioning and ro t a t i o n a l speed a re set m anually. In th e metal trades industry, fabrication is

chiefly by various shaping operations. Generic tools include the lathe, mill, drill, grin d er, saw, borer and press. The tr a d i t i o n a l proc esses used for machining

workpieces are illustrated in Figure 4.2.

4.3 Evolution of Computer-Related Technologies

4.3.1 C o m p u te r - r e la te d te c h n o lo g ie s are based upon developments in micro­ electronics which is a major e lem e n t in e le c tro n ic system s. Over the past 35

years, since the d eve lopm e nt of th e transistor, microelectronics technology has centred on the production of increasingly complex electronic circuits on 'c h ip s' of silicon. These circuits are known as integrated circuits.

4.3.2 In 1971 a major advance in m ic ro e le c tro n ic s technology saw the

developm ent of p ro g ra m m a b le in te g r a te d c i r c u i ts or m icroprocessors. The

m icroprocessor p e rfo rm s all the central processor unit operations of a computer and includes a limited amount of memory. By adding other specialised 'c h ip s' to

39

MANAGEMENT

I I I I I

ENGINEERING PLANNING PRODUCTION QUALITY ASSURANCE MARKETING

Marketing and sales

Inspection and testing

Product conception and design

Industrial engineering

Materials selection and procurement

Production scheduling and control

ASSEMBLY

Component supply

Component positioning and insertion

Fastening

Final treatment

FABRICATION

Shaping - cutting, turning - casting - forging - joining

Treatment - heat treatment - plating, anodising - painting

Figure 4.1

The Control and Sequence of Manufacturing Operations - a Model

provide timing, memory and interfaces for input-output signals and other ancillary fu n c tio n s, a complete microcomputer system could now be assembled on a small board about the size of a page. M ic ro e le c tro n ic com ponents are now being

in c o rp o ra te d in an increasing range of machines, endowing them with memory and c o m p u te r logic. The sp ec ific o p p o rtu n itie s o ff e re d to m an u fa c tu rin g can be

a p p r e c ia te d by tra c in g the evolution in m an u fa ctu rin g technologies since the

introduction of numerically controlled (NC) machine tools in the 1950s.

N um erically C ontrolled (NC), Computer Numerically Controlled (CNC) and Direct Numerically Controlled (PNC) Machine Tools

4.3.3 A n um erically c o n tro lled m achine tool is a tool which p rocesses

machining instructions expressed in a numerical code, in contrast to a conventional

40

Work rotates

Tool feeds

Turning

Work rotates

Tool feeds

Boring

Wheel rotates /

Work feeds

Cutter rotates

Work feeds

Grinding Milling

Reciprocating tool

Work feeds: \ laterally j

Shaping

Tool feeds laterally

E

Work I

reciprocates!

Planing

Tool feeds into work

Work stationary

Broaching

Figure 4.2

Drill feeds and revolves

Work stationary

Drilling

Traditional Processes Used for Manufacturing Parts Source: Adapted from Figure 1.2, B.H. Amstead, Phillip Ostwald and Myron L. Begeman, 'Manufacturing Processes', John Wiley & Sons, New York, 1979

41

m achine tool having a mechanical control system. Mechanical controls incorporate rigid co n tro l m edia such as jigs, fix tu re s , screw s and cams to control the

relationship between the tool and workpiece; these need to be reset manually with each change in th e prod u c tio n run. In c o n t r a s t, NC m achines use real tim e

displacem ent measuring systems to control the relationship. A change in machining instructions is achieved through program m ing changes; it does not involve r e ­ o rg a n is a tio n of th e m a c h in e 's co n tro l system [2], This is th e basis of its

flexibility.

4.3.4 The firs t NC m achine tools c o n sisted of a paper tape fed electronic

controller connected to what was essentially a traditional machine tool. The paper ta p e co n tain e d g e o m e tr ic d a ta and a lim ite d number of machine tool function

instructions. It was w ritte n o ff-lin e by an NC p ro g ram m e r and the tap e was

p re p a re d on an electro-mechanical keyboard and punch unit. If the programs were incorrect the tap e had to be repunched, which was a tedious and f r u s t r a t in g

p ro c ed u re . O p p o rtu n ities w ere soon found for editing the tapes on a computer

system. The computer could also a s s is t program m ing by solving tr ig o n o m e tric fo rm u la e and in c o rp o ratin g s ta n d a rd d a t a on c u ttin g speeds e tc . L a te r, the

com b in atio n of g raphic te rm in a ls or s c re e n s and mini co m p u te rs allowed

p ro g ra m m e rs to check, plot or s im u la te th e g e o m e tr ic c o n te n t of a program

before committing to a machine run.

4.3.5 The introduction of microprocessors into the NC control unit led to the

development of computer numerical control (CNC). CNC im proved re lia b ility and enabled the in te rn a l control logic of the machine to be controlled via software,

introduced either by tape or on disk. CNC thus marked a new level of flexibility in c o n tro l and provided for the accelerated development of machinery function and capability. The basic nature of the machine tool now changed. Since m achine in s tru c tio n s were under s o ftw a re c o n tro l, many d iffe ren t sets of instructions

could be used on one general purpose piece of equipment to perform a variety of tasks; many single purpose machines were now integrated under computer control in the one unit (a machining centre) to allow for co n c u rre n t milling, drilling,

boring and tapping o p e ra tio n s on a single workpiece. Machining centres include full co n tro l and au to m a tio n of up to five axes of m otion, a u to m a te d tool

changing, and infinite ly variable spindle speed and table feed. More recently, the direct linking of a central computer to a group of CNC machine tool c o n tro lle rs

has introduced the concept of Direct Numerical Control (DNC). DNC means that programming data can now be fed directly both to and from the CNC machine.

4.3.6 The con v e n tio n a l m ethod of programming CNC machines involves the

programmer using a "fixed" programmed feed rate. Variations in the depth of c u t, type of tool used, to o lw ear, m a te r ia l com position and m a te ria ls hardness are

allowed for by programming sub-optimal feed rates. This contributes to significant p ro d u c tiv ity losses. More re c e n tly CNC m achines a re in c o rp o ratin g adaptive control features; th e m achines can be p rogram m ed to adjust a u to m a tic a lly to

chan g es in m achining conditions. A daptive control is not yet widely adopted by industry [3].

4.3.7 The population of numerically controlled machine tools in Australia was estimated at around 1500 in 1981 [4]; an estimated 540 plants had NC machines in t h a t y ea r [5]. Advanced CNC machining centres, mostly of Japanese origin, are also present but not in large numbers. The prices of advanced systems range from about $200,000 upwards. Some very la rg e in s ta lla tio n s are priced around $1

million. T here is only a very lim ite d num ber of DNC in s ta lla tio n s . P a rt

program m ing for CNC is usually performed manually. Computerised systems are

42

readily available on the Australian market but it is believed that they account for only about 25 per cent of all installations. Australia has one m a n u fa c tu re r of a

s tan d ard CNC m achining c e n tr e and a m a n u fa c tu re r of CNC co n tro ls. These

controls are often employed to upgrade existing equipment (retrofitting) as well as being incorporated in new equipment.

Computer Aided Design and Drafting (CADD)

4.3.8 C om pu te r-A id e d Design and Drafting (CADD) is a design and drafting

technology based on computer storage and manipulation of design sp e c ific a tio n s . Such systems are based on geometrical data and involve extensive numerical data processing. They are e s s e n tia lly e le c tr o n ic d r a ftin g system s which use visual

display units, lig h t pens and plotters linked to computer hardware and software, to g en e rate two dim ensional (2D) draw ings, or th r e e dim ensional (3D) 'wire

fr a m e ' m odels. These s y stem s have now been extended to incorporate solid or

volume-based models [6].

4.3.9 The co n c e p t of C o m p u te r-A id e d Design emerged in the late 1950s in

computer-based techniques for numerical control of simple machine tools, d ra ftin g and m easuring d evices. Early system s in the 1960s utilised the capacity of a

larg e m ain fra m e c o m p u te r and a TV-like gra p h ic s display d evice. Pioneers

subsequently produced sp e c ia lis t graphics-based application programs, eventually building up comprehensive s u ite s of s o ftw a re . Com plex s u rfa c e modelling, 3D r e p r e s e n t a ti o n of solid objects, NC part programming systems and direct graphics

to r e p re s e n t m achining p rogram s were in prod u c tio n use in a few major

com panies, but ex p lo ita tio n was limited by high computer costs and the lack of general purpose systems.

4.3.10 The adv e n t of th e mini co m p u te r coincided with the development of

s o ftw a re for s trin g r e p r e s e n t a ti o n s of th e solid o b je c t which could be

ac c o m m o d a te d , on a p r a c t i c a l sca le , on a m in i-co m p u ter. These new

developments in hardware and complete software system s w ere quickly exploited by prod u c ers of tu rn -k e y systems. The original geometric concepts still account for almost all the systems currently being sold.

4.3.11 In th e early 1970s research was directed to using a genuine description

of dimensional objects called 'volume building blocks' or 'solid modelling sy s te m s '. This m ore a c c u r a te r e p r e s e n t a ti o n avoided th e logic problem s of hidden line

representation and geometry e r ro rs and an o m alies o fte n as s o c ia te d with string models. Working solid modelling systems are now available as turn-key packages, and as specialist software, but g e n e ra l a c c e p t a n c e a w aits fu rth e r re d u ctio n in

co m puter h ardw are co s ts and, for some time, the traditional techniques will be favoured by draftsmen and engineers. By the late 1980s, however, solid modelling should becom e widely a c c e p te d and will be the key to d ire c t design to

manufacturing integration.

4.3.12 With th e adoption of computer modelling for design activities, graphic

visualisation techniques have become important. High speed colour g raphics are now used to display a c c u r a te l y shaded p ic tu re s of solids and su rfa ce shapes,

assembly details, section views and analysis results (for exam ple, s tr e s s con to u rs or t e m p e r a t u r e distribution). Graphics is now one of the most rapidly developing CAD technologies [7].

43

Computer-Aided Engineering (CAE)

4.3.13 C om pute r-A ide d Engineering (CAE) is a s te p beyond CADD. The

essence of CAE is th e system model, c r e a t e d from t e s t , analysis, and s to red

d a ta - b a n k information. By developing a computer model it is possible to simulate a proposed design and analyse its performance prior to making a c o m m itm e n t to p ro d u c t or prototype development, in contrast to the former heavy reliance of the traditional build-and-test method of prototyping. Thus, w hereas CADD g en e rally ad d re s s e s th e physical d e s c rip tio n of the product, CAE in addition, analyses its

functional characteristics [8].

4.3.14 An illustration of an application is in automative design where a model

can be created, say of a tyre and front suspension unit. The model can be te s te d

in many ways, for exam ple to simulate tyre impact with a curb. The computer

program responds by predicting the response of the to t a l vehicle to th e varying

impact conditions.

4.3.15 Sim ulation r e s u lts can be optim ised according to the model, but they

must also be verified in a real prototype situation and th e ir validity depends on

th e assum ptions made. T h e re fo re , whilst CAE can ad e q u a te ly d e m o n s tra te

idealised system s and changes, its use re lie s on expe rien ce d m odelling and

i n t e r p r e t a t io n . This d i c t a t e s th e need for a high level of engineering awareness and skill.

C o m puter-A ided M anufacture (CAM), C o m p u te r Aided Design/Com puter Aided Manufacture (CAD/CAM)

4.3.16 C o m p u te r-a id e d m a n u fa c tu re (CAM) has various meanings. Here it is

defined as those computer-related technologies which a re used prim arily on the shop-floor to help produce products. CAM develo p m e n ts have g enerally been associated with CMC and th e c o m p u ter as s is te d program m ing of p a r ts (part

program m ing) is perhaps the most typical [9], but robots, flexible manufacturing systems and materials handling systems, described in la te r p aragra phs, may also be considered as CAM tech n o lo g ies. CAD/CAM is the integration of CAD and CAM technologies. CAD/CAM utilises a com m on d a ta base of in form ation for

both design and subsequent m an u fa c tu rin g task s, th e ir in teg ra tio n eliminating unnecessary duplication of effort at each stage.

4.3.17 The CAD/CAM process can be b e t t e r understood by considering an

example. We have chosen th e c a se of a mould for a household iron, followed

through each of its progressive steps from initial design to final manufacture. A designer or engineer first develops the pictorial model of the iron casing on the

CAD/CAM te rm in a l to m eet requ ired design sp e c ific a tio n s . By creating a 3D

model he can visualise it exactly as it will appear as the finished product (Figure 4.3). A variety of specialist analysis programs are available to aid the designer in determining the flow of the plastic material and to help define the best processing p a r a m e te rs for optimum cooling in the mould. At this stage a technical illustrator might take the part and merge it with other 3D designs, alre ad y re s id e n t on the

co m p u te r, to c r e a t e an exploded diagram of the total product. At each stage of

this development process, new info rm atio n f u r th e r defining the product can be added to the product d a ta b a s e . If th e re are changes to the design at any point

along th e way, th e original design can be quickly updated with the new

information.

44

Figure 4.3

Wireframe Surface Model of Iron - Above Tool Paths Generated on Surface Model - Below Source: Bell Dies, Sydney

45

4.3.18 The system software allows the designer rapidly to design the mould to

make the iron. All of the necessary entry and exit points and c a v ity d e ta ils are

included. Shrink factors can be determined and tested.

4.3.19 The a c tu a l tooling c o n fig u ra tio n s and manufacturing techniques must

then be determined. Tolerance calculations provide th e d esigner with tech n iq u e s for tooling ev a lu a tio n , and sim ple g e o m e t r ic m anipulation on the CAD/CAM terminal allows th e d esigner to view ea ch of his options from many angles.

P la s tic in jectio n mould tooling may require the addition of standard components. A library containing fr e q u e n tly -u s e d p a r ts can assist this a c tiv ity . Next, all

assem bly and d e ta il drawings including a materials list may be extracted from

the system. A software package could th en be used to provide the shop with

p rocess plans d escribing the o p e ra tio n seq u e n ce for tooling set-up, machining operations and scheduling needed to a c tu a lly m a n u fa c tu re the household iron

mould.

4.3.20 Where mould work is co n c ern e d , th e CAM a c t i v i t i e s usually centre

around th e m achining of com plex shapes and c a v itie s using CNC equipm ent.

Working from the original 3D model, the CNC programmer generates tool paths interactively. Once created, these tool paths and their as s o c ia te d tools and tool holders can be verifie d on the CAD/CAM term in al (Figure 4.3). When the tool

paths have been generated and verified, the programmer can produce paper ta p e s or load th e program d ir e c tly into th e m achine c o n tro lle r via a DNC

co m m u n ic a tio n link. The tooling and fix tu re group can a c c e s s th e product

d a ta b a s e to design hold-down fixtures needed in the machining of the mould. A c o - o rd in a te m ea s u re m e n t m achine can be program m ed d ire c tly from the

CAD/CAM model to check th e finished mould. A m ajor a d v a n ta g e of the

computer-defined model is that it has allowed the engineer to visualise, through th e graphics of CAD/CAM, the actual operations not only to design the iron, but to manufacture its tooling as well.

4.3.21 It is e s t i m a t e d t h a t c u r r e n t l y t h e r e are about 100 CAD/CAM

installations in Australia. System costs are from approximately $200,000 upwards; in addition, as with most system s, t h e r e a re costs of implementation such as

changes in layout, education and installation advice.

Robotics

4.3.22 The co n c e p ts and technology of robotics have evolved from automation techniques which have long been used in the manufacturing process. Many robots are-pick-and place. They utilise mechanical, fluid, and electromechanical controls; however, some have electronic controls. Computer reliability, power and program

s to ra g e have now enabled the production of devices with multi-location and total motion capability and with programable flexibility to allow them to be included in interlinking systems and with sufficient control to allow wide application to tasks such as automobile body assembly and painting.

4.3.23 C u rre n tly , indu strial robots i m it a t e the actions of a human arm and

hand. However, they are likely to be superseded by more em bracing system s

conceived for labour-free operations. Similarly, the development of tactile, vision and other sensory mechanisms may only be required for limited applications.

4.3.24 Today, p r a c t i c a l lim ita tio n s of robots arise from both mechanical and

software limitations. The m ech a n ical l i m ita tio n s derive from th e bulk of the

equipment and the limited dexterity compared with humans, and the inaccuracies

46

and in co n s is te n c ie s which develop with wear of th e ro b o t, tooling, product

fixturing and component tolerances. The system co s ts of using ro b o tic s can be high, not th e le a s t of which are programming and software development. Often they e n ta il an in c re a s e d co st of te c h n ic a l support. They have b e n e fits in

rem oving w orkers from inhospitable environments and in enabling the continuous and precisely interlinked operation of complex associated fa c ilitie s which would not be easily achievable in manned operations.

4.3.25 Most robots in A u s tra lia a re of the p ick -a n d -p lace type. The total

population exceeds 250. Pick-and-place units cost about $10,000 to which needs to be added system engineering costs. More capable systems can cost $40,000 or more. A detailed description of robots is contained in a recent ASTEC report [10].

Automated Materials Handling

4.3.26 As m echanised and a u to m a te d p roduction plan ts a re expanded the

problems of transport, handling and storage become increasingly important. Various in v e s tig a tio n s show t h a t up to 30-40 per c e n t of the manufacturing costs of a

product can be ascribed to m a t e r ia l flow co sts. In the la s t two dec ad es the

b e n e fits of a re d u c tio n in th ese co s ts have been gained in s ev e ral factories

through automated s to ra g e technology, in p a r ti c u la r through high-bay racking technology where the requirements for automated storage could be met.

4.3.27 In te rn a l tra n s p o r t system s a re m ore closely tied to production

processes. Flexible driv erle ss t r a n s p o r t system s a re commonly r e f e r r e d to as

A u to m ated Guided Vehicle System s (AGVS) and they are expected to occupy an increasingly important place in th e g e n e ra l field of m a te r ia ls handling in the

future. The main components of the AGVS are:

. the truck, tractor or pallet truck;

. the floor system with the installation of the wire guidance system

and the information transfer system;

. the load transfer equipment which can be both on board the truck

and/or in a stationery position;

. the truck and traffic control system.

4.3.28 The AGVS is an especially flexible system for horizontal transport and is s u ita b le for both simple t r a n s p o r t o p e ra tio n s with a small number of

d e s tin a tio n s as well as complex and centrally-controlled transport processes. The use of on-board m ic ro p ro c esso rs on th e tru c k and the possibility of process

control by a c e n tr a l c o m p u te r have, in conjunction with a m a tu re tru ck

technology, led to a situation where complex d riv e rle s s system s a re now being incorporated in flexible manufacturing systems.

Flexible Manufacturing Systems

4.3.29 P ressu re s to s h o rten the prod u c t life cycle, reduce product volume

betw een product changes and to re d u c e in v e n to rie s m eans th a t individual

m anufacturing systems are at an advantage if they can produce multiple products and have f a s te r response tim e s to changes in c u sto m er dem ands [11]. One

response has been the combination of the features of CNC and material handling devices, including ro b o ts, with th e grouping t o g e t h e r of diverse m achines to

47

produce a fam ily of p a rts . These a re known as flexible manufacturing systems (FMS). 'Flexibility' refers to the ease with which a v a rie ty of p roducts can be

manufactured in varying lot sizes.

4.3.30 The term flexible m anufacturing has come into use without an agreed

definition and some confusion exists as to what it means. At least two classes of FMS technology have been id e n tifie d [12]. The most widely recognised is the

multimachine type. In this case FMS is an automated production system consisting of a num ber of m achine tools linked by an automated materials handling system, all controlled by a central computer. A schematic layout of flexible manufacturing system is given in F igure 4.4. The second type of FMS to have emerged is the

stand alone unit, often referred to as a flexible manufacturing cell. This usually c o n sists of a single m achining c e n tr e or CNC la th e equipped with automatic

carousels or rotary tables for loading a small variety of workpieces. Sometimes a robot arm is employed for loading tasks. There is obviously some overlap between the concepts of 'machining centre' and FMS.

Goods out

Finishing Computer control room

Automated component and tool store

Automated truck

Machine tool

□ □ □ AssemblyInspection Machining cell Goods in

Figure 4.4

Schematic Layout of a Flexible Manufacturing System Source: Adapted from Ingersoll Engineers, FMS Report, FFS Publications, Bedford, United Kingdom, 1982

48

4.3.31 FMS is seen as being most a p p r o p ria te in the f a b ric a tio n of

mid-volume, mid-variety workpieces. A ttem pts to ju stify a FMS for workpieces with prod u c tio n r a t e s below this range will usually fail because of the resultant

high cost of automation per workpiece produced. FMS applied to higher volume outputs will usually be a more costly alternative than process-specialised methods such as transfer lines. The choices of types of manufacturing technology (process

configurations) depicted in term s of expected volume and variety mix are shown in Figure 4.5 [13]. We note in Chapter 7 that total volume of all p a r ts is also an

important consideration in weighing up the economics of FMS.

4.3.32 In th e mid-volume, mid-variety range, stand alone or NC machines are

associated with capital equip m en t u tilis a tio n of only around 20 per ce n t, high

manning lev els and high w ork-in-progress levels. FMS offers the opportunity to

PRODUCTION EQUIPMENT HIGH 100 - ·

SPECIAL FMS SYSTEM

TYPICAL FMS SYSTEM \

CELL OR STAND ALONE

Q 0 . 7 5 -

eX 0 . 5 -

LOW

LOW NUMBER OF DIFFERENT PARTS HIGH

Figure 4.5

Process Configurations by Volume and Variety - Current Practise

Source: Reprinted from Manufacturing Engineering, September 1983, copyright Society of Manufacturing Engineers, Dearborn Michigan, USA

49

reduce inventories throughout the complete chain of manufacturing. The long lead times and large work in-progress inventories in traditional batch manufacture stem from fre q u e n t w orkpiece handling by operatives during the manufacturing cycle. Workpieces are delivered manually and loaded at each m achine tool only to be

broken down and moved to the next machine. As a result, door-to-door times can be 30 times greater than actual machining times. The full FMS installation is one in which a process is put under to ta l computer control to produce a still fairly

limited variety of products within the s tated c a p a b ility of th e system and to a

pre-determined schedule.

4.3.33 FMS c o n s t i t u te s a high level of manufacturing integration. The number of machines in a system can be as low as one or two. G e nerally the number of

m achines is greater, typically three to ten. One of the world's largest FMS has 18 m achining c e n tr e s . The cost of planning, p ro je c t engineering, installing,

com m issioning and managing a FMS system can be high (greater than $2 million). There are over 200 of these installations around the world, but none in A u stralia. The D e p a rtm e n t of Science & Technology have recently announced a Computer Integrated Manufacturing Demonstration Program which is likely to re s u lt in the development of some FMS in Australia.

Factories of the Future

4.3.34 The following paragraphs represent a scenario for the future, based on

extrapolations of the ca p a b ilitie s of the te c h n o lo g ies desc rib ed above. We are

conscious, however, th a t consideration of non-economic factors may substantially modify this scenario in practice.

4.3.35 The fu tu re factories will be expected to operate around the clock with

only brief stoppages for diagnostic checks and maintenance. Because of the p a rts fle x ib ility inh ere n t in the new technologies, very small batch sizes will become economically justifiable. The time span from product concept through to delivery may be m easured in hours instead of weeks or months. Quick turn-around offers

the possibility that, for relatively simple products, cu s to m e rs will specify th e ir r e q u ir e m e n ts one day and take delivery the next. There would be minimal labour in the fa b ric a tio n and assem bly a r e a s of production and some s h ifts will be

u n a tte n d e d . White collar functions of design, engineering, and management will also be highly computerised and require less human attention.

4.3.36 Such f a c to rie s a re alre ad y in o p e ratio n in Jap a n . At the m otor

manufacturing division of FANUC, there are approxim ately 60 em ployees, only a few of whom are d ire c tly employed in production. Machining and assembly cells incorporating over 100 robots produce 40 different kinds of control m otors a t the rate of 10,000 units per month. Operation goes on non-stop, 24 hours a day [14].

4.3.37 It is a n tic ip a te d t h a t the the factories of the future will also require

changes in the methods of product design, material technology, material handling, processing, assembly and management. Producing only a few copies of a design economically and within a short span of tim e implies th a t no special tools,

fix tu re s , or materials can be used. It must be assumed that fundamental changes will occur in the m achinery and layout of m a n u fa c tu re . Producing goods

a u to m a tic a lly presupposes a much more flexible and 'intelligent' hardware system than any available today. It also im plies m ore advanced s o ftw a re , since the

future factory will need to be not only adaptable but self-adaptive.

50

4.3.38 Some fo re s e e the fa c to ry of th e fu tu re in even broader terms - the

com plete i n te g ra tio n of all c o m p u te r-b a s e d subsystem s in th e m a n u fa ctu rin g process (com puter in t e g r a te d m a n u fa c tu re or CIM). The co n c e p t of t o t a l

integration is already being developed in the process industries, but to apply this co n c ep t to th e design and p roduction of custom ised ite m s is an exceedingly

challenging task. Currently, CIM is developed to th e sta g e where some of the

e le m e n ts of design and m a n u fa c tu re address a lim ited s e t or fam ily of

components. Such system s a u to m a tic a lly produce from the design process a

lim ited list of components and materials, with purchase and lead time information which can be com bined with an independent set of planning and m achine

instructions from which manufacture of the family can proceed.

Factory Management Systems

4.3.39 C o m p u te r-b a se d f a c to ry m anagem ent system s have been developed

independently of fabrication and materials handling systems. From simple reporting system s including production control, scheduling and store management they have grown into fully integrated Manufacturing Resource Planning (MRP) system s. MRP is involved with the allocation and control of most of the major resources of the

company - plan t, equipm ent, labour and m a te r ia ls . MRP thus addresses the

m anagem ent of the manufacturing process, the planning, scheduling and control of work through the fa c to ry . R e c e n tly MRP has been successfully linked to the

financial accounting system (MRP II).

4.3.40 D evelopm ents have also taken place in relation to the systematic and

computer-aided determination of the sequencing of the m anufacturing operatio n s necessary to produce a given part. This is referred to as Computer-Aided Process Planning (CAPP). CAPP involves s e le c tio n , c a lc u la tio n and d o cu m en ta tio n . P ro cesses, m achine tools, o p e ra tio n s and sequences must be selected; machining

feeds, cutting speeds, part tolerances, dimensions and co sts must be c a lc u lated ; docum ents in the form of set-up instructions, work instructions, illustrated process sheets and routings must be prepared. CAPP offers opportunities to ra tio n a lis e and s ta n d a rd is e procedures in relation to production planning, in the face of the

evolution of increasingly sophisticated production methods and the tre n d tow ards the use of FMS [15].

4.3.41 CAPP is not widely im plem ented in Australia. A few attem pts have

been made to introduce variant techniques [16]; however, because of the paucity of group technology it is unlikely that CAPP will progress rapidly. The most likely situation is that CAPP will be increasingly a standard part of CAD/CAM systems.

Management Philosophies

4.3.42 To assist in the computerisation of the manufacturing process, various

m a n u fa ctu rin g co n c e p ts and philosophies have evolved. Among th e s e are the re c o n s id e ra tio n in a co m p u te r environm ent of the established concepts, such as Group Technology (GT), and Just-In-Time (JIT).

4.3.43 Group Technology is a m anufacturing philosophy which identifies and exploits the underlying sameness of p a r ts and m an u fa ctu rin g processes to tak e ad v a n ta g e of th e ir s im ila r itie s in design and production. Forming families, or

groups, with similar characteristics reduces the number of unique tasks th a t must be d ea lt with. GT can provide considerable benefits for most of the functional

areas in a manufacturing organisation: product engineering, production control and p ro c u re m e n t. In pro d u c t engineering, GT can help reduce p art proliferatio n ,

51

e n c o u rag e design s ta n d a r d is a tio n , provide manufacturing feedback, and assist in cost estimating. Manufacturing engineering can be helped with p rocess se le c tio n , tooling selec tio n and grouping, machine procurement, facilities planning, materials flow and materials handling. In production, GT can reduce l e a d - tim e s , production delays and s e t-u p tim es. It can also assist with a s s e t u tilis a tio n ,

materials-handling decisions and equipment selection to achieve appropriate quality levels. P roduction co n tro l can use GT for scheduling, stock a c c o u n ta b ility ,

expediting and reducing work-in-progress inventory. Buy-or-make decisions and the establishment of economic quantities can also be handled through GT

4.3.44 The esse n ce of J u s t-In -T im e is to produce and deliver finished goods

just in time to be sold, sub-assemblies just in time to be assembled into finished goods, f a b ric a te d p a r ts just in tim e to go into subassem blies, and purchase

material just in time to be transformed into fabricated parts; and to do this right

through th e t o t a l raw m a te r ia l to point of sale sequence. JIT thus seeks to

reduce costs by cutting lead times to a minimum by using the n e a r - r e a l - t i m e

control capabilities of a fully computerised factory management system.

4.3.45 The JIT potential is primarily in metalworking and assembly operations, rather than in flow-through processes or non-repetitive manufacture. The goal of JIT is to c o n v e rt a compound m a n u fa c tu rin g and assem bly operation into the

nearest possible equivalent of a balanced flow-through p rocess as seen in an oil re fin e ry . The underlying o b je c tiv e of " ju s t-in -tim e " is to have all e x tern al

material arrive at just the time in the schedule when it is needed and in just the

q u a n tity needed. When m a te r ia l has been received, the objective is to have it

move steadily and without interruption from one processing step to an o th e r with minimum delay, until it is d eliv e re d to th e finished stock or the u ltim a te

customer. Because each request in the chain is precise as to d elivery tim e and

quantity, the result is the minimum practical work-in-process.

4.3.46 The m ultiple consequences of JIT are not intuitively obvious. But the

increase in quality levels, the decreased cost of com plexity in th e product line,

the o ff s e t to th e b e n e fits of sc a le , th e re d u ctio n of working capital and the

changes made in the labour relations and functions all mark JIT as a sig n ifican t

change in the tr a d i t i o n a l approach to m an u fa c tu rin g fabrication and repetitive assembly operations. JIT introduces the kind of management thinking and company c u ltu r e requ ired to enable c o m p u t e r - r e l a te d technologies to be seen as the

ultimate means to succeed fully in manufacturing.

References

[1] This c h a p te r is based in p a r t on a study by the Technology Transfer

Council, commissioned by ASTEC.

[2] John White, 'The Adoption of Numerically Controlled Machine Tools for

the Production of Automotive Components', B. Lit Thesis, A u stralian National University, 1983.

[3] F o rre s t D. B ru m m ett, 'A d a p tiv e C ontrol S y ste m s', C onferen ce

Proceedings, Automach A u s tra lia '84, C o n fe re n c e of th e S ociety of Manufacturing Engineers, Sydney, May 23-25 1984.

52

[4] W. F e rm e , 'CAD/CAM in A u s tra lia ', The D i r e c t o r , September 1982,

re p ro d u ce d from 'CAD/CAM in A u s tra lia ', The Australian Computer Society Bulletin, May 1982. .............

[5] W.P.Lewis and G. Borg, Ά C ase Study in th e Diffusion of New

Technology', Conference on Engineering M anagem ent, Brisbane, July 1983.

[6] Computer-aided design technologies have a wide range of applications in

electronics, architecture, construction and engineering design, as well as in mechanical engineering.

[7] A.O. C u rrie, 'C o m p u te r Modelling for Mechanical Design', Conference

Proceedings, Automach Australia '84.

[8] The fin ite e le m e n t m ethod of analysis in particular, has been widely

applied in com puter m odelling to analyse p e rfo rm a n c e in te rm s of

s tre s s e s , h e a t transfer, buckling, yield and component interaction. The finite element method is a technique used to desc rib e s t r u c t u r e s or

p ro d u c ts m a t h e m a t i c a ll y in o rder to analyse th e ir s tre n g th and

performance c h a ra c te ristic s. For the purpose of analysis using this

m ethod, s t r u c t u r e s a re subdivided into small s tru c tu ra l components, calle d fin ite e le m e n ts , whose p ro p e rtie s a re sim ple enough to be

ex pressed in mathematical terms. The equations for the finite elements are then combined to form a complete mathematical counterpart to the physical s t r u c t u r e . This fin ite element model is analysed by solving a set of simultaneous equations to determine displacements and s tre s s e s

throughout the structure.

[9] Besides p a r t program m ing, th e s e system s can have lim ite d process

planning features for determining a sequence of f a b ric a tio n step s and fa c to ry m a n a g e m e n t c a p a b ilitie s for directing the flow of work and

materials through the factory.

[10] ASTEC, 'R o b o ts ', A ustralian Government Publishing Service, Canberra, 1983.

[11] Robert M. Spencer, 'The Modular Development of Flexible Manufacturing Systems', Conference Proceedings, Automach Australia '84.

[12] M anufactu rin g E n g in ee rin g , S eptem b er 1983, Special Issue on Flexible Manufacturing Systems.

[13] See also E. Walsh and J.M. Day, 'F lex ib le Special Purpose Machine

Tools for Mid and High Volume P roduction through use of CNC

T ec h n iq u es', C o n fe re n c e P roceedings, A utom ach A ustralia '84, and Mariann Jelinek and Joel D. Goldhar, 'The Interface B etween S tra te g y and M anufacturing Technology', Columbia Journal of World Business, Spring 1983.

[14] 'Introduction to Fanuc', Fanuc Fuji Complex, Japan.

[15] J.D . Burgess, Ά Review of Computer Aided Process Planning Systems', Conference Proceedings, Automach Australia '84.

53

[16] There a re basically two approaches to computer-aided process planning: variant and g en e ra tiv e . In th e v aria n t approach, a set of stan d ard

p rocess plans is e s tab lish ed for the p art fam ily groupings that have

been identified. These standard plans are stored in co m p u ter memory and retrieved for new parts according to their family identification. The s ta n d a rd plan is then s e le c tiv e ly edited to suit the sp ec ific

r e q u ir e m e n ts of a part within the family. In the generative approach, an attem pt is made to sy n th esise each individual process plan using

a p p r o p ria te legal pro c ed u re s t h a t define th e various technological

decisions t h a t must be m ade in the course of m an u fa ctu rin g a

n om inated com ponent. In a truly generative process planning system, the sequence of operations, as well as all th e m a n u fa ctu rin g process

p a r a m e t e r s , would be a u to m a tic a lly established without reference to prior plans.

54

5. COMPETITIVENESS

5.1 Introduction

5.1.1 This c h a p te r draw s on our in te rv ie w s and on published material to

d esc rib e the f a c t o r s which d e te r m in e the c o m p e titiv e n e s s of firm s in the

m a rk e t. It emphasises those factors which directly influence the ability of firms to sell th e ir p ro d u c ts and s e rv ic e s succ essfu lly and over which the firm s

th e m s e lv e s have a significant measure of control. Little attention is given to

the impact which the general economic environment, including exchange r a t e v a ria tio n s can have on c o m p e titiv e n e s s . We believe th e s e fa c to rs have an

important influence on competitiveness but consider their detailed consideration lies beyond the scope of this report.

5.1.2 Two main conclusions can be s t a t e d . F irs t, succ essful firms pay

regard to a variety of sources of improved c o m p e titiv e n e s s . Secondly, those

firm s which fe el vulnera b le do so largely with respect to imports rather than

domestically produced goods. They consider th e a t t r a c t i o n of im p o rts to be

th e ir low er price . Local producers also see imports as having a technological edge over their own products [1].

5.2 Definition of Competitiveness

5.2.1 No consensus e x is ts on th e definition of the term 'competitiveness'

and difficulties surround its use [2]. In this report c o m p e titiv e n e s s is taken to

mean th e c a p a c ity of firms to compete more effectively than their rivals, both

on home and foreign markets [3].

5.2.2 F irm s' c o m p e titiv e n e s s is based on a num ber of fa cto rs including

their ability to design, produce and market goods and services whose price and n on-price a t t r i b u t e s form a more a t t r a c t i v e package th an those of th e ir

competitors. In turn, the ability of firms successfully to exploit th e s e sources

of c o m p e titiv e a d v a n ta g e reflects the capacity of management to organise the resources of the firms in the most efficient manner possible to maximise profits and to ensure their survival and growth. The sources of competitive advantage which are considered in detail in this chapter are design, which is r e f l e c t e d in

p e r fo rm a n c e , r e lia b ility and appearance of products, the development of a new products and the efficient engineering of the manufacturing process; production e ffic ie n c y (im pact of sca le , the e f f i c i e n t use of existing resources, quality

assurance and input costs) which is r e f l e c t e d in cost; and m a rk e tin g , th a t is

selling, a t t i t u d e s to the market, market research and relations with customers, which influence such factors as pricing policy, delivery dates, after sales service and i d e n tif ic a tio n of c u s to m e rs ' needs. Even if attention is paid to all these

f a c to rs firm s may not be su cc essfu l n e c e s s a rily in th e m ark e t, for th e ir

competitive positions are influenced not only by their own achievements but also by the performance of their rivals (and the exchange rate). But w ithout giving a t t e n t i o n to th ese sources of competitive advantage firms are most unlikely to survive in the longer term.

55

5.3 Production Efficiency

Impact of Scale

5.3.1 Those firm s which consider they are at a price disadvantage believe

this arises chiefly because of th e ir r e la tiv e ly low p ro d u c tiv ity . These low

p r o d u c tiv ity levels are attributed, to a large extent, to the small size of the

Australian market which p re v e n ts th e a t t a i n m e n t of the b e n e fits of scale.

Instead, a v a r ie ty of p a r ts is produced, each in sm all p roduction runs at

regular intervals (batch production). Alternatively, in the jobbing environm ent, they do not s ec u re th e b e n e fits of moving up the learning curve through the

repetition of orders. It should be emphasised that plants vary a g r e a t deal in

their levels of productive efficiency even within the one industry. One needs to be cautious about making generalisations intended to be applied to all plants

and firms.

5.3.2 The sm all scale of much of Australia's manufacturing industry is the

outcome of both natural factors and government actions. The natural factors are A u s tra lia 's small population size, the wide geographic dispersion of its main centres of population and its distance from th e main i n te rn a tio n a l in dustrial

c e n tr e s . The g o v ern m e n t a c tio n s a ris e a t both s t a t e and federal levels. An

important influence on scale is widely agreed to be A u s tra lia 's long-standing t a r i f f p ro te c tio n a rra n g e m e n ts , but th e pattern of industry development and

decentralisation policies have also had a significant effect on industry p a tte r n s . The re s u lt is t h a t Australia's industrial centres have not specialised and a wide cross-section of industry is represented in most states [4],

5.3.3 S ta te purchasing preference policies, in particular, contribute to the

maintenance of small plants. Some firm s in terv iew ed had e stab lish ed branch p la n ts out of their home states specifically in order that they could compete on an equal basis for public authority tenders in that state. In o th e r ca ses plants

which would have been closed down as part of a firm's rationalisation program have remained in production. The duplication of branch plants arising from this g o v ern m e n t a c tio n reduces overall efficiency through increasing overheads and the under-utilisation of capacity.

ASTEC recommends:

(i) That the M inister for Industry, Technology and Commerce, in

consu lta tio n w ith the A ustralian Indu stry and Technology

Council, give every support to initiatives by State Governments to abolish s t a t e purchasing p r e fe r e n c e s and in particular to

establish a timetable for their phasing out.

(ii) That the M inister for Industry, Technology and Commerce, in

consu lta tio n with the A ustralian Industry and Technology

Council, propose initiatives with the objective of ensuring that S ta te G overnm ent policies, and p a rtic u la r ly policies for

industrial d e v e lo p m e n t, do not lead to an undesirable

fragmentation of industry.

56

5.3.4 For many p la n ts th e diseconomies of small scale are exaggerated by

short production runs for individual items. Econom ies of scale for individual product runs o fte n can n o t be a t t a i n e d because s p e c ific a tio n s incorporating

mandatory standards for commonly purchased items vary betw e en s t a t e s . This occurs in spite of the activities of the Standards Association of Australia, which endeavours to reach uniformity of practice.

ASTEC recommends:

That the M inister fo r Industry, Technology and Commerce, in consultation with the Australian Industry and Technology Council, fo r m u la te proposals to ensure the u n i f o r m i ty o f te ch n ic a l standards incorporated in the regulations o f

reg u la to r y a u th o r itie s w ithin A ustralia. The standards o f the Standards

Association o f Australia should be promoted.

(R2)

5.3.5 Small m a rk e t size is argued to have a 'stra n g lin g lim i t a t i o n ' on

Australian p ro d u c tiv ity [5]. However, it is im p o rta n t not to e x a g g e ra te the

e x t e n t to which a small market in itself is a peculiarly Australian problem. Nor is it one that necessarily poses insurmountable difficulties for firms wishing to o p e r a te in th e in t e r n a ti o n a l m ark e t. In a 'competitiveness ranking' compiled recently, seven European countries with smaller populations than A u stra lia were

lis te d ahead of Australia in their ability to compete [6], The real constraint of

a small domestic market is felt by manufacturers whose focus is confined to the local m a rk e t. Those few firms we interviewed who exported a substantial part of their output did not feel co n s tra in e d by th e sm all size of the A u stralian

m ark e t. We em phasise th e importance of exporting as a means of overcoming the problems of small scale thereby promoting the economic viability of firm s within the industry.

5.3.6 A num ber of firm s in terv iew ed have also secured sig n ifican t

improvements in productivity levels for th e i r p la n ts within the c o n s tra in t of

b a tc h p roduction m a n u fa c tu rin g . They have done so in three main ways. One means is to reduce downtime for ch a ngeover and re to o lin g of m achines. In a

notab le exam ple, one plant e stab lish ed a p r e - s e t room and, by undertaking

many of the set-up a c tiv ities away from th e m achine and in a n tic ip a tio n of

chang eo v er, was able to halve set-up times. The second means is to rationalise the number and size of the parts produced. This is achieved by reducing the

range of prod u c ts or putting off differentation until later in the manufacturing process, thereby increasing the num ber of common p a r ts for a given product range. This allows p la n ts to secure the economic benefits of longer production runs. A third approach is to give greater a t t e n t i o n to grouping sim ilar p a r ts

and simulating a production run in an attem pt to make smaller batch quantities econom ic. This is a s s is te d by the in tro d u c tio n of program m able m achines

allowing fle x ib ility in the m a n u fa c tu rin g p rocess [7]. The e x te n t to which

economic benefits can be achieved through flexibility depends upon th e n atu re of the pro d u c t ra nge as r e f l e c t e d in the extent of dissimilarity in parts, the

tooling capacity of the programmable machine, its c a p ita l cost and th e value

of the parts produced. The impact of the introduction of flexible manufacturing will be further discussed in Chapter 6.

The efficient use of existing resources

5.3.7 Many p la n ts have the o pportunity for sig n ifican t in c re a s e s in

productivity through the more e f f i c i e n t use of existing re so u rces [8]. This

57

involves improved materials handling, plant layout and production control, that is, the organisation of the production facility and th e o p era tio n a l control of

th e p ro d u c tio n p rocess and its inputs. Engineers have long been aware of the

importance of efficient layout to speed throu g h -p u t and to re d u ce m a te ria ls

handling, th e re b y ra ising p ro d u c tiv ity on th e shop-floor. More re c e n tly ,

attention has focused on the scheduling of th e inputs them selves: the right

supplies in, in the right quantity, at the right time, in the right place.

5.3.8 Most firm s in terv iew ed recognised these opportunities but few have

acted to implement them. Trained production engineers were employed in few p la n ts and where they were they were quickly p rom oted away from the

shop-floor into management positions. The salary scales o ffe re d for production engineers in the shop reinforced these moves.

5.3.9 One firm in the survey did s ec u re notable ac h ie v e m e n ts in this

direction. By giving attention to plant layout and production c o n tro l, a sm all pump m a n u fa c tu re r in cre ased o u tp u t from 92 units per day in 1982 to 300

units per day at the end of 1983. Productivity of shop-floor workers increased by 100 per c e n t and t o t a l em ployment also increased, from 30 to 60 persons.

This was achieved with very l i t t l e in v e s tm e n t in new equipm ent, though an

active marketing drive was undertaken.

5.3.10 The im p o rta n c e of knowing the potential of existing resources before deciding that these resources need upgrading cannot be over-em phasised. Not only is it an efficient route to improved productivity but unless these necessary first steps are taken, the likelihood of firm s securing full b e n e fits from the

adoption of new com puter-rela te d technologies into their plants is significantly reduced. 'If you computerise a mess you get a mess faster' succinctly c a p tu re s this view.

5.3.11 We a re concerned a t th e a p p a re n t lack of a p p re c ia tio n of the

importance of the production engineering function in wide sections of Australian m anufacturing industry. The reasons for this are complex. The comparatively low salary scales offered production engineers indicate that the function is generally u nder-valued; m an ag e m en t do not see the need to employ the services of such

people w he th e r as p e rm a n e n t em ployees or as c o n su ltan ts. The supply of

p ro d u c tio n engineers is also limited. There are few training opportunities and student numbers are often low in those courses provided, for s tu d e n ts do not

see th is a r e a of engineering as a major discipline. Furthermore, students are

said to show l i t t l e i n t e r e s t in this a s p e c t of th e ir train in g when it is

incorporated in other engineering disciplines.

5.3.12 We do not consider t h a t d i r e c t in c en tiv es should be provided to

students to encourage them to undertake production engineering studies; we hold th e view th a t more students would be interested in production engineering as a career if there were improved em ploym ent o p p o rtu n itie s for them . Instead, incentives are required on the demand side of the market to encourage firms to give greater attention to production engineering activities.

5.3.13 L a te r in th e re p o rt we discuss the need to create an environment

which strongly encourages firm s co n tin u ally to seek ways of improving th e ir p ro d u c tiv ity in order to survive and grow. More immediate incentives may also be given to firms to encourage research and d evelopm ent into more e f fic ie n t manufacturing systems and the effective use of production engineering activities.

Funds for research and development are one such set of incen tiv es. C u rre n tly

58

re s e a rc h and dev e lo p m e n t on engineering methods and operational research are not eligible ex p e n d itu re under the In d u strial R esea rch and D evelopm ent

In c e n tiv e s A ct (1976). We consider t h a t th e schem e should be extended to

promote inquiry into these activities. We note that the provisions which enable th e AIRDI Board to enter into new commitments expires in June 1986 and that the Act can be reconsidered a t this time. Nevertheless, a c tio n in a c c o rd a n c e

with the following recommendation should be taken before this time.

ASTEC recommends:

That the M inister fo r Industry, Technology and Commerce seek amendment of the Industrial Research and Development Incentives A ct (1976) to allow research s tu d ies o f m a n u fa ctu rin g s y s te m s, the planning o f such s y s te m s and their

development to be eligible for grants under the A c t. In particular, s t a t u to r y

exclusions under S e c tio n 4, su b s e c tio n 3 o f the A c t, referring to m ethods

engineering and operational research, should be removed.

(R3)

Quality assurance

5.3.14 Im pro v e m e n ts in productive efficiency may also be achieved through giving attention to quality assurance. There is a strong a sso c ia tio n betw een

re lia b ility of quality and costs, since the reduction in defects cuts expenditure on rew orks and s c ra p [9]. A tte n tio n paid to q uality is also r e f l e c t e d in

improvements in the efficiency of the manufacturing process.

5.3.15 Quality is widely seen in Australian manufacturing industry as relating to the finished product as it goes out the factory door. The product is te s t e d

in the final s ta g e s of the manufacturing process and those items not meeting

the required standard are rejected or reworked. The In s titu tio n of Engineers, A u s tra lia , 'Task F o rce on M a n u factu rin g ' e s t i m a t e d th a t most A ustralian

businesses accept a reject or rework rate of b e tw e e n 5 per cent and 15 per

cent as normal [10].

5.3.16 More recently, some firms have refocused their attention from quality inspection at the end of the manufacturing process to quality planning at the

initial design stage and followed through all stages of the manufacturing process within the plant. The results of the introduction of a quality control program

to re d u c e th e r e j e c t r a t e in one A u s tra lia n plan t in d ic a te th e e x te n t of

benefits available. The plant produced th ree b a tc h e s of com ponents for which high s ta n d a rd s of quality w ere re quired. The f ir s t b a tc h was produced in

1977-78 using the traditional quality inspection approach. The r e j e c t r a t e was 20.3 per c e n t. The second b atch , produced in 1981 when quality engineering

was in the early stages of im p lem entation, re s u lte d in a 10 per ce n t r e je c t

r a te . The final b a tc h , produced in 1983 when quality planning was further

developed, resulted in a c o m p le te e lim in a tio n of r e je c t s . These re s u lts were

achieved without the introduction of new machinery [11].

5.3.17 New c o m p u t e r - r e l a te d technologies can have a major impact on the

achievement of improved quality through the ac h ie v e m e n t of finer to le ra n c e s , through a d a p tiv e c o n tro l where machines automatically adjust for the effects of w ear, through the a v a ila b ility of c h e ap er sensors for m onitoring and

59

c o r r e c tio n , and devices allowing for more exhaustive and dependable testing in the final stages. The impact of the introduction of these new technologies will be discussed further in chapter 6.

5.3.18 There is a need to stress the importance of quality assurance for the

competitiveness of firms. We note that the Standards Association of A ustra lia and th e A u stra lian O rganisation for Q uality C ontrol and like bodies provide

information and support for the implementation of quality assurance.

Input Costs

5.3.19 Firms claim they are at a price disadvantage compared with imported

goods because of comparatively high input costs, p a rtic u la rly m a te r ia l costs, labour on-costs and the costs of maintaining production standards.

5.3.20 M ateria l co s ts r e p re s e n t in excess of 50 per cent of total costs for

many firms; in contrast, direct labour costs are generally between 10 per ce n t

and 15 per cent and total (direct and indirect) labour costs between 25 per cent and 30 per cent. Steel is an important input in the metal trades industry and

firm s c o m m en ted on its high cost. A recent Industries Assistance Commission inquiry confirmed this claim. Nevertheless considerable variability was found to ex ist betw een local and im port p rice s, depending upon quality and size. The

price differential was g e n e ra lly g r e a t e r for dow nstream products. For more

basic, low carbon s te e ls , which r e p r e s e n t the g r e a t e r proportion of market

demand, the difference was between 5 per cent and 15 per cent, depending upon th e d eg re e of processing; for speciality steels price differentials were nearer 50 per c e n t [12]. Some firm s also claim ed they were requ ired to hold large

q u a n titie s of sp e c ia lty s te e l s r e la t iv e to their needs, since these steels were

often only produced at irregular intervals. This was also costly.

5.3.21 The r e v it a li s a t i o n of the m e ta l tra d e s industry in the longer term

depends upon the ready availability of c o m p e titiv e ly p riced basic inputs. We s tr e s s t h a t unless a t t e n t i o n is given to input co sts, m easures to foster the

revitalisation of downstream industries such as th e m etal tra d e s industry will necessarily be limited in their success [13].

5.3.22 Firm s also claim they are at a competitive disadvantage because of

high labour on-costs. Labour on-costs are those costs which firm s a re obliged to add to stan d ard wage r a te s when employing labour; they include such cost items as workers' compensation, annual leav e loading and long servic e leav e ,

superannuation and payroll tax. Firms interviewed indicated that for every dollar paid in wages they pay an additional 40 to 50 c e n ts as on-c osts. Firm s are

p a r tic u la rly concerned a t the r a t e of grow th of p aym ents for w orkers'

compensation and payroll tax. We note, how ever, t h a t firm s can reduce the

level of th e ir w orkers' com pen sa tio n p aym ents to some e x te n t by giving

increased attention to safety matters.

5.3.23 In te rn a tio n a l com parisons of the level of statutory on-costs are not

easily made; difficulties arise in defining what may or may not c o n s t i t u te such co s ts [14]. It is by no means c le a r t h a t th ese co s ts are always higher in

Australia than in other OECD countries [15], but they are (together with wages) more than those prevailing in some Asian countries from whence an increasing proportion of Australia's imports are derived. Table 5.1 in d ic a te s th a t labour on-costs arise from a variety of sources. As a significant component of total

labour costs they can influence firms' competitiveness in international markets.

60

TABLE 5.1

Components of Total Labour Costs

1983 per cent

DIRECT WAGE COSTS

Wages 83.08

Overtime 6.65

Shift Allowances 10.27

Total 100.00

LABOUR ON-COSTS

Annual Leave 6.34

Annual Leave Loading 1.41

Public Holidays 3.02

Long Service Leave 3.42

Sick Leave 2.22

Compassionate Leave 0.06

Other Paid Work Absences and Benefits 0.32

Allowances 4.43

Non-productive Paid Time 5.14

Superannuation 5.94

Workers' Compensation Insurance 6.24

Payroll Tax 6.45

Employee Amenities 3.83

Employee Health 0.44

Uniforms 0.50

Safety 0.70

Other on-costs 0.50

Total 52.77

Source: Business Council Bulletin Bulletin No.3, March 1984

61

ASTEC recommends:

That the G o v e rn m e n t take action to alleviate the adverse e ffe c t on industrial

competitiveness o f high labour costs, a significant component o f which is labour on-costs. In particular, the Government should:

(i) support and encourage current State Government investigations

into w o rkers' c o m p e n sa tio n a rra n g e m e n ts w ith a- view to

d e v elo p in g a uniform s y s t e m which provides s a t i s f a c to r y

c o m p e n sa tio n a r r a n g e m e n ts in the m o st co st e f f e c t i v e way

possible;

(ii) in itia te discussions w ith S t a t e G o v e rn m e n ts with a view to

establishing the means by which payroll tax can be reduced.

(R4)

5.3.24 S ta te and C o m m onw ealth G o v e rn m e n t charges and regulations also

contribute to raising m anufacturing c o s ts and we con sid er t h a t G o v e rn m en ts should investigate means of reducing these.

ASTEC recommends:

That the G ov ernm ent note th a t State and Commonwealth Government charges and regulations impose an additional burden on manufacturing co sts and that it investigate means by which these costs can be reduced.

(R5)

5.3.25 A nother influenc e on th e level of input costs is the maintenance of

regulatory standards. Firms claim that buyers, testing authorities and licen so rs check com pliance with standards more regularly and systematically in the case of local products than they do for imports. The Standards C o m m itte e of the

N ational E xecutive of the Metal T ra d e s Industry Association (MTIA) recently examined these claims and substantiated them . We consider t h a t local firm s

should be able to d e m o n s tra te c o m p lian ce with standards without incurring a cost disadvantage.

ASTEC recommends:

That the M inister fo r Industry, Technology and Commerce note the disparities which e x is t in arra n g em e n ts made for the v e r ific a tio n o f com pliance w ith

m an d a to ry standards b e tw e e n local and im ported goods and, through the

A u stra lia n Industry and Technology Council, ensure th a t procedures for

verification be the same for imports as for domestically produced goods.

(R6)

5.4 Design

5.4.1 Design can influence c o m p e titiv e n e s s in two main ways. First, it

o ff e rs th e o pportunity for the dev e lo p m e n t of p roducts with superior

62

p e rfo rm a n c e and re lia b ility and improved appearance. Secondly, it permits the development of more efficient manufacturing processes, thereby c o n trib u tin g to improved efficiency of production and the maintenance of consistent quality.

5.4.2 The design co m ponent of c o m p e titiv e s tra te g ie s of firms surveyed

varied. Some firms attem pt to compete in the market on the basis of p rice 'to

an assured quality'. Other firms recognised they could not compete on the basis of price alone so their strategy is to offer a superior product. These are the

firm s who believe t h a t p rice is sec ondary to p e rfo rm a n c e , re lia b ility and

service and being competent in the application. A third group of firms c o m p ete on the basis of product differentiation. These firms have moved to segment the market by offering a wide range of products developed for sp ecific uses. They have com bined a m a rk e tin g strategy to define the market niche with a design

strategy to meet the market demand. Of the three s t r a t e g i e s it would appear

that the first was generally the least successful.

5.4.3 The e f f i c i e n t re a lis a tio n of designs for new and improved products

depends crucially upon the design of the associated m anufacturing process. The In s titu tio n of Engineers, Australia study mentioned earlier indicates that little attention is paid to manufacturing design in Australia; they claim it is unusual to find a situation where an organisation carries a concept through the complete design - manufacturing cycle. There are two main reasons for this. F ir s t, many m a n u f a c tu r e r s a re sub-contractors, which results in a separation between design

and manufacturing. Secondly, there is a tendency for much design to o rig in ate from overseas so that local design input is confined to changing details to fit in with locally available items or to meet local standards [16].

5.4.4 A ccess to foreign designs is o fte n in th e form of licen c es. The

licence package frequently includes 'm a rk e tin g r ig h ts ' (and r e s tr ic tio n s ) , the rig h t to use certain trade marks and access to certain markets and inputs [17].

Until recently, firms regarded licences as a significant source of c o m p e titiv e a d v a n ta g e , but this is no longer th e case. As th e i n te rn a tio n a l trading

environment has become significantly more competitive licensors have, in some in s ta n c e s, c o m p e te d d i r e c t ly ag a in s t th e ir own lic e n s e e s in th e licensee's

'territory'. It is also claimed that US licensors in particular are less willing to

tra n s fe r the latest technology to their licensees. As a result, some firms which depend heavily on licences now find their viability heavily undermined.

5.4.5 F irm s' d is e n c h a n tm e n t with licensing implies they must increasingly

depend upon their own research and development efforts to sec u re c o m p e ta tiv e advantages through the design process. The more successful firms interviewed all possess a research and development capability. ASTEC has argued in its re p o rt 'In c e n tiv e s for Innovation in Australian Industry' that incentives, in addition to AIRDI S chem e g ra n ts , are re q u ired to s t i m u l a t e indu strial r e s e a r c h and

d eve lopm e nt e x p e n d itu re was reco m m en d ed on t h a t occasion [18]. The

G overnm ent has since in d ic a te d its a c c e p t a n c e of the need for a ta x a tio n

in c en tiv e for in d u s tria l re s e a r c h and d eve lopm e nt following the ASTEC

recommendation. ASTEC believ e s t h a t it should be in th e form previously

proposed, and repeats here its earlier recommendation.

63

ASTEC recommends:

(i) That a ta x a tio n incentive scheme be introduced as a matter of

urgency, as an incentive,in addition to the Australian Industrial R e se a rc h and D evelopm ent Incentives (AIRDI) Scheme's Project Grants, to s tim u la te the leve l o f industrial research and

development activity in Australian business;

(ii) That the AIRD I Project Grants Scheme be maintained, with the

sam e m ax im um lev e l o f individual grant and the same

p e rc e n ta g e rate o f g rant as at present, and with the Minister

having discretion to vary both the maximum level o f grant and grant rate;

(iii) That businesses be free to choose one form o f incentive or the

other, according to their own best interests; and

(iv) That with r e s p e c t to ta x a tio n in cen tive s for IR & D a single

premium rate be set at 50 per cent.

(R7)

5.4.6 G o v e rn m en ts alre a d y provide some support to the design function in

Australia through the Industrial Design Council of Australia (IDCA). IDCA was e s ta b lis h e d in 1958 to promote all aspects of design in industry. It offers four

main forms of assistance - design advice, design referral, te c h n ic a l in fo rm a tio n and p ro d u c t a ss e ss m e n t. C u rre n tly , o n e -th ird of the IDCA's revenue derives from government sources (in 1983-84, $270,000 from S ta te g o v ern m e n ts and $180,000 from th e C om m onw ealth Government); the balance of revenue comes

from industry in the form of fees-for-service.

5.4.7 The IDCA's a c tiv ity which has been most successful is its awards

program. Manufacturers, either on their own volition or through c o n ta c t from field officers, submit their products to the IDCA for assessment in order to win an award which can be used as a marketing aid on local and overseas m a rk e ts.

This a c tiv ity usually r e s u lts in design m o d ificatio n s to improve the product.

Other activities of the IDCA which are consid ered more d if f ic u lt to p ro m o te

su c c essfu lly a re sem in ars and workshops, design m a n ag e m en ts, p ro to ty p e

assessment and consumer research.

5.4.8 The IDCA considers t h a t , in g e n e ra l, la rg e organisations are well

aware of the im p o rta n c e of in d u stria l design to ac h ie v e m a rk e t lead e rsh ip ,

im prove qu ality , reduce material costs, and reduce labour costs. However, the IDCA believes that the management of most small and medium sized com panies c o n sid er in d u stria l design to be a 'c o s t adding, cosmetic activity' which only

large organisations can afford. This poses a real problem. In order to maintain its own viability the IDCA needs to concentrate on the large firms, but is well

aware that the most pressing need in the design area is for a tti tu d i n a l change

in small and medium sized com panies. It has observed that many Australian

manufacturers are production rather than market orientated, resulting in products not designed to m e e t the needs of consum ers. Firm s which are not export

orientated in particular, do not give attention to design-marketing function. This a t t i t u d e tow ards design will need to be overcome if firms are to be successful

in international markets.

64

5.5 Marketing

5.5.1 M arketing is an im p o rta n t means by which firm s d i f f e r e n t i a t e

themselves from their rivals. E ff e c tiv e m ark e tin g re q u ire s t h a t firm s study

th e ir c u s to m e rs ' needs in an a t t e m p t to seg m en t the m a rk e t and develop

products and services tailored to specific user applications in t h a t m a rk e t [19]. The most su cc essfu l firm s in te rv ie w e d gave co nsiderable a t t e n t i o n to the

m ark e tin g func tion. One c o m m en t was t h a t 'we make a prod u c t for the

m ark e t; we a r e m a rk e t driven not p roduction d riv en '. A nother ex e c u tiv e

c o m m en ted t h a t th e basis of o p e ra tio n s for th e firm was to provide 'a

te c h n o lo g ic a l solution to a market need'. Others took the view that they were

selling a service rather than a product, which em phasised th e ir aw aren e ss of

th e ir c u s to m e rs ' needs. In contrast, measures to improve productive efficiency have a much reduced impact on profitability where the m arketing function is n e g le c te d and th e firm is selling the wrong product or operating in the wrong

market.

5.5.2 G o v e rn m en ts can play an im p o rta n t role in assisting firms in the

m a rk e tin g of th e ir p ro d u c ts o v erseas through the provision of financing

a r ra n g e m e n ts . R e c e n t am e n d m e n ts to the Export Finance and Insurance

Corporation (EFIC) A ct and th e accom panying guidelines, and th e increased willingness of g o v ern m e n t to in c o rp o ra te the D evelopm ent Im port Finance F a c ility (DIFF) as an e le m e n t in an export finan c e package, have placed

g o v ern m e n t a s s is ta n c e on a more competitive basis than previously. However, the Report of the Committee to Review the A ustralian Overseas Aid Program (the J a c k so n R eport) has ex pressed c a u tio n from a development perspective about the value of 'mixed credit' schemes (packages where an aid com ponent is added to a c o m m e rc ia l bid to secure contracts for the supply of capital goods

or services to a developing country). Others have questioned the longer term

b e n e fits of e x p o rt assistance schemes which have the effect of moving against the liberalisation of i n te rn a tio n a l tra d e . We un d ersta n d these co ncerns but

believe it is not in A u s tra lia 's best i n t e r e s t to move unilaterally to remove

financial incentives for exports. The Government should ensure t h a t A ustralian com panies a r e not disad v an ta g ed in international markets by the credit terms they are able to offer.

References

[1] For an i n t e r e s t i n g e l a b o r a tio n of th is view, see PA Technology,

'Attitudes to New Technology - an In t e r n a t i o n a l S u rv ey ', London, Spring 1984.

[2] O rg a n is atio n for Econom ic C o o p e ra tio n and Development, (OECD)

'Draft Interim Analytical Report of the ad hoc group of G o v ern m en t E x p erts on S cien ce, Technology and C o m p e titiv e n e s s ', Paris 1983 [DSTI/SPR/83.30.]

65

[3] Ibid; see also European M anagem ent Forum, 'R e p o rt on

Competitiveness', Geneva 1983.

[4] R ichard E. C aves, 'S ca le , O penness and P roductivity in Australian

In d u s trie s '. The Brookings Survey of the A ustra lian Economy,

Conference, Centre for Economic Policy Research, Australian National University, Canberra 9-11 January 1984.

[5] Ibid.

[6] European Management Forum, 'Report on Competitiveness'. Australia

was ranked 12 in an ordering of 22 countries.

[7] Jo el G oldhar and Mariann J e lin e k , 'P lan for Economies of Scope',

Harvard Business Review, November-December 1983.

[8] This focuses on th e e c o n o m is ts ' c o n c ep t of X-efficiency. Harvey

L ieb e n ste in , 'A llo c a tiv e E ffic ie n c y and X - E f f ic ie n c y ' A m erican

Economic Review Vol.56 (1966) pp 392-414.

[9] David A. Garvin, 'Q u a lity on th e Line', H arvard Business Review,

September-October 1983.

[10] J.W. Thompson, 'Quality: An Essential Requirement in the Australian

M anufacturing In d u stry ', The In s titu tio n of Engineers, A u s tra lia , Canberra 1983.

[11] G.B Bibby, 'New Directions for the Foundry Industry'; paper presented

to a combined meeting of the I n s t i t u te of British Foundrym en and

the Australian Foundry Society, Geelong, August 1983.

[12] Industries A ssistan ce Com m ission R ep o rt, 'C e r ta in Iron and Steel

Products and Certain Alloy Steel P ro d u c ts ', 25 May 1983, No. 321. Australian Government Publishing Service, Canberra 1983.

[13] The S te el Industry A ssistan ce Plan announced in August 1983 is

intended to achieve this end.

[14] Karen H em p stea d , 'Labour cost: an i n te rn a tio n a l com parison of

concepts'; ILO Bulletin of Labour Statistics, 1983-84.

[15] O rganisation for Economic Co-Operation and Development, 'Non-Wage Labour C o s ts ', Working P a rty No.l of th e Economic Policy

Committee, Technical Note, Paris, 1981 [CPE/WPI/(81)5].

[16] J.W. Thompson, op.cit p.24.

[17] Law rence S. Welch, 'The tech n o lo g y t r a n s f e r p rocess in foreign

licensing arrangements', in Stuart Macdonald, D.McL. L am berton and Thomas M andeville (eds), 'The Trouble with T echnology', Frances Pinter, London, 1983.

6 6

[18] ASTEC, In c en tiv es for Innovation in Australian Industry', Australian

Government Publishing Service, Canberra 1983.

[19] Theodore L e v itt, 'M a rk etin g su ccess through d i f f e r e n t r a ti o n - of

anything', Harvard Business Review, January-February 1980.

67

6. TECHNOLOGY AND COMPETITIVENESS

6.1 Introduction

6.1.1 This c h a p te r d esc rib es how new co m p u te r-re la te d technologies can

contribute to improved com petitiveness in th e m etal tra d e s industry and the

circ um sta nces under which the potential gains are most likely to be attained. In the course of the interviews it was learnt th a t a s ig n ifican t num ber of firm s

had not introduced th e s e tec h n o lo g ie s su ccessfully. Their ex periences and

possible causes of their difficulties are considered. The c h a p te r concludes with an assessm ent of the relative importance of new process technologies and other influences on th e c o m p e titiv e n e s s of A u stra lian firm s in the m etal tra d e s

industry.

6.2 Benefits of Specific Computer-Related Technologies

6.2.1 There is a w idespread view t h a t the dom inant motivation for the

introduction of new process technologies is to reduce labour co sts. While this is important, we have found that new technologies have the potential to provide significant improvements in competitiveness in other ways. In this s ec tio n the ra nge of b e n e fits available from the major technologies is described. It should be noted that a competitive edge is achieved only if these b e n e fits t r a n s l a t e

into a p rice advantage or into non-price characteristics valued by customers in the market place.

Computer Numerically Controlled Machines (CNC)

6.2.2 Five major b e n e fits of c o m p u te r n um erically c o n tro lled (CNC)

m achines have been id e n tified . F ir s t, th e ir adoption p e rm its a significant

re d u c tio n in tool change and setting-up times, given the power, the geometry and the types of tools incorporated in the tool change. A CNC m achine can be

program m ed to s e le c t th e a p p r o p ria te tool, to drive the tool on the correct

tool path, to set machining speeds and feed rates, and to estab lish a c c u ra te ly

th e g e o m e try of th e c u ttin g p ath to achieve the desired dimensions of the

workpiece. In contrast with conventional machinery, many operations thus can be achieved with one set-up.

6.2.3 As a re s u lt, when CNC m achines a re used, production takes less

time. One supplier estimates that the production rate of a CNC la th e is th re e

tim e s t h a t of a conventional lathe, and for a machining centre is at least five

times that of conventional operations. Production is less labour intensive; th e re is a reduced am ount of necessarily idle machine time, and users are able to

respond more quickly and econom ically to changes in demand p a tte r n s . In

consequence, th e cost of production can fall and delivery tim e s can be

improved.

6.2.4 The second major benefit derived from the adoption of CNC is that

it o ff e rs the opp o rtu n ity for g r e a t e r co n tro l over th e m achining process.

6 8

B ecause co n tro l is ac h ie v ed through program m ing, p e rfo rm a n c e is more

predictable; there is a greater consistency in the tim e ta k e n to accom plish a

given task and in the quality achieved. Labour savings can result and there may also be a reduction in rework and r e j e c t r a te s and consequently a saving in

yaterial costs.

6.2.5 Thirdly, CNC m achines offer opportunities for a greater freedom of

machining. The prod u c tio n of com plex shapes and co ntouring is d if f i c u l t to

ac com plish with con v e n tio n a l m achines. CNC m achines p erm it a g r e a t e r

fle x ib ility in th e v a r ie ty of shapes t h a t can be produced. The econom ic

realisation of more sophisticated designs may thus be achieved.

6.2.6 F ourthly, th e adoption of CNC m achines has p e r m itte d the

achievement of sig n ific a n tly b e t t e r t o le r a n c e s and these to le ra n c e s can be

achieved repeatedly with less reliance on operator intervention, especially where gauging and feedback mechanisms are incorporated. A number of firms indicated t h a t buyers are incre asin g ly dem anding g r e a t e r quality assurance and finer

tolerances, especially where sales are made by tender to a s p e c ific a tio n . This dem and can o fte n only be s a tis fie d through using CNC m achines. Firms

reported that the adoption of CNC m achines enabled them to achieve the

standards required for work under the Government's Offsets Program.

6.2.7 Finally, th e adoption of CNC m achines has allowed a reduction in

lead times and in costs due to the re duced am ount of jigs and fix tu re s now

re q u ired [1], P reviously, b efo re work could be u n d erta k en it was o fte n

necessary to await the design and production of these tools; o fte n th e r e were

long delays. With CNC machines, programs have replaced the jigs and a number of fixtures. Furthermore, programs can be stored cheaply on disk or ta p e until requ ired again w h e reas the s to ra g e of jigs is co stly in te rm s of handling,

racking and shelving, inspection and retrieval.

Computer-Assisted CNC Programming

6.2.8 As noted in C h a p te r 4, p a r t program m ing for CNC is usually

performed manually in A u s tra lia , but one user re p o rte d s ig n ifican t gains in

p ro d u c tiv ity when em ploying a co m p u te r spec ia lly designed for CNC

programming. Such a system assists in preparation and evaluation (prove-out) of the program.

6.2.9 The p ro d u c tiv ity gains of this user a s s o c ia te d with program

preparation can best be illustrated by changes in the o utput produced. In 1978 five te c h n ic a l officers, whose duties along with NC programming also included job quotation and detailed production planning, produced 80 CNC programs each year for 8 NC machines. They now prepare an average of 500 CNC programs each y ea r for the s ix te e n NC m achines c u r re n tly engaged on jobbing

production. A nother 100 program s a re g e n e ra te d on the shop floor. S ta ff

additions have been restricted to one support person whose re sp o n sib ilitie s are those of system manager.

6.2.10 The p ro d u c tiv ity gains a t pro v e -o u t have re s u lte d in a marked

increase in machine utilisation. Prior to 1979, some of the user's more complex machine tools were engaged on prove-out up to 40 per cent of operation time. It now assessed that this has been approximately halved [2].

69

Direct Numerical Control (DNC)

6.2.11 D ire c t N um erical Control (DNC) describes where the NC machine is directly linked to a c e n tr a l co m p u te r so th a t program m ing d a ta can be fed

d ir e c tly to it. Major b en e fits d eriv e from eliminating the use of paper tape;

punching and reading problems no longer exist and there is a reduction in delays in w aiting for program changes. It has also been r e p o rte d t h a t it is now

possible to produce very lengthy programs in segments or join sm all program s using th e central computer facilities. These programs are then available to the shop-floor by keying in the appropriate program number [3],

6.2.12 In the longer te rm , th e m ajor b e n e fit of DNC will be that it will

link the shop-floor manufacturing system with other computer-based system s in th e organisation, as an element in a computer integrated manufacturing system. In its present form, it r e s u lts in a savings in tim e and labour, conveying a

c o m p e titiv e advantage particularly in terms of delivery dates but also in terms of reduced labour costs per unit of output.

Computer-Aided Drafting and Design Systems (CADD)

6.2.13 Users responding to our survey indicated that there were few if any

competitive advantages in using c o m p u te r-a id e d d r a ftin g (CAD) system s for producing single n o n -r e p e titiv e drawings; p ro d u c tiv ity is greater where such draw ings are produced m anually. But t h e re a re ad v a n ta g e s in using

c o m p u te r -a id e d d r a ftin g for th e bulk p roduction of highly complex drawings which may require modification and where there is repetition. Then a lib rary of com m on ele m e n ts and p a s t designs can be a c cesse d to speed th e drafting

process. The competitive advantages are secured through savings in labour and in tim e , which enables firms to tender more competitively in terms of delivery times and cost.

6.2.14 The use of CAD in the analysis of design gives other competitive

advantages in addition to those observed for computer-aided drafting. A ccess to c o m p u te r modelling m eans t h a t a l t e r n a tiv e designs can be tested without the need for physical models, prototypes or tests which ta k e tim e and are costly.

Higher e f fic ie n c y and p e rfo rm a n c e levels can be quoted and the quoted

performance can be guaranteed; quality can therefore be assured. This can be an im p o rta n t f e a t u r e where prod u c ts a r e designed to meet specifications, which sellers argue are becoming increasingly rigorous. Furthermore, whereas previously p ro d u c ts ten d ed to be overdesigned as a re s u lt of u n c e rta in ty about

p e rfo rm a n c e , pro d u c ts can now be designed using th e optim a l am ount of

m a te r ia l to ach ie v e a given s ta n d a rd of p e rfo rm a n c e . This reduces material

costs.

6.2.15 The adoption of c o m p u te r-a id e d design also conveys sig n ifican t

marketing advantages. One firm reported increased customer satisfaction; o fte n th e custom er now visits the firm to approve layouts and general arrangements. If there is a problem then the customer can work with the design and adjust

th e design until satisfied. The CAD system then takes the changes and updates all the other elements of the system autom atically. This has saved tim e and

reduced possible communications problems when the final drawings are sent to the customer for approval [4]. A nother firm re p o rte d th a t the possession of

th e s e new tech n o lo g ies conveys an image of a highly progressive management and it marketed itself as having this ca p ab ility . O thers said t h a t c u sto m ers

p referred receiving computer drawn rather than manually drawn documents. With

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some advanced CAD sy stem s colour bro c h u res of m arketing quality can be

produced from coloured graphics [5],

6.2.16 The p ro d u c tiv ity gains that can be achieved from CAD systems vary

sig n ific a n tly ac ro ss ta s k s and, for the sam e task , from in s ta lla tio n to

in s ta lla tio n . How ever, som e in d icatio n of the benefits that can be gained is

given in an O ccasio n al P aper published by th e D e p a rtm e n t of S cience and

Technology. This reports the performance of an interactive graphics system for engineering applications installed by a c o m p u ter bureau providing engineering support services [6]. Savings were reported in terms of labour, space and time. If the firm had to execute a large engineering project it believed t h e r e would

be a reduction in the number of skilled staff required from 68 to 45. (See Table

6.1) Labour savings also would produce co nsiderable savings in o ff ic e space. These s t a f f savings can only be achieved, however, if all staff understand how CAD is to be used. Further it is unlikely that such savings could be secured if

CAD w ere em ployed on sm all p ro je c ts . Finally, because the CAD facility is

likely to provide about a 75 per cent reduction in elapsed time over tra d itio n a l m ethods in th e d e s ig n -d r a ftin g a re a s , there is an improvement in the time to

complete a project. Up to a 75 per cent reduction in elapsed tim e was in fa c t

reported for several jobs undertaken by the bureau.

Table 6.1

Expected Impact of CAD on the Labour Profile of a Computer Bureau in the Case of a Large Engineering Project

Labour Requirements

Discipline Salary Traditional

methods

Computer-Aided methods

Project Manager 30,000 1 1

Engineers 23,000 10 8

Designers 20,000 20 15

Drafters 16,000 20 10

Estimators 22,000 4 3

Checkers 20,000 10 5

Clerks 12,000 3 3

Total 68 45

Source: BSP T ec h n ical S ervices, 'The M anagem ent and Use of Interactive

G raphics E ngineering A p p licatio n s', a re p o rt p re p are d for the

Department of Science and Technology, 1981.

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Computer Aided Design/Computer-Aided Manufacturing (CAD/CAM)

6.2.17 CAD/CAM is th e in te g ra tio n of CAD and CAM, usually incorporating CNC machining elements in the manufacturing process. In practise it means the e lim in a tio n of a num ber of 'p a p e r' steps: designs are no longer produced on

paper and tapes are no longer produced from paper drawings. Instead they are developed by c o m p u te r as p a r t of th e design process. As a result there is a

s ig n ific a n t re d u c tio n in lead tim e s from design c o n c ep t through to

m an u fa c tu rin g . There is also a re d u c tio n in errors in the production of tapes

since human intervention is significantly reduced.

6.2.18 S ig n ific an t tim e savings have been re p o rte d by firm s utilising

CAD/CAM. One firm considered that, at a most c o n s e rv a tiv e e s t i m a t e , tim e

from c o n c ep t of prod u c t through to manufacturing had been halved since the introduction of a CAD/CAM system; often it was down to o n e -th ird of th a t

previously recorded. Prices for its products were higher than for his rivals but since its delivery times were so much better it had becom e a m a rk e t leader.

The tim e savings a t the point of programming vary with the type of product.

For very simple shapes having a single tool-path, time savings may only be of th e o rder of 1.5:1; for very com plex shapes such as conto u rs, it can be

significantly greater than 50:1. On average it is considered to be approximately 10:1.

Flexible Manufacturing Systems (FMS)

6.2.19 T h e r e a r e no f le x ib le m a n u f a c t u r i n g s y s t e m s (FMS) in s t a l le d in

Australia, but b e n e f i t s g a in e d from t h e i r i n s t a l l a t i o n in o t h e r c o u n t r i e s a r e

w idely r e p o r t e d . H e re tw o e x a m p le s are quoted which indicate the extent of

benefits in particular applications.

6.2.20 The f i r s t is t h e sy ste m o p e r a t i n g a t Messerschmitt-Bolkow-Blohm's

plant in Augsburg, West Germany to manufacture the centre section of Tornado fighter planes a t a r a te of 10 per month. One observer reports:

The s y s te m has d e m o n s t r a t e d remarkable efficiencies. They find th a t the

machines in the system are cutting m e t a l , on t h e a v e r a g e , ab o u t 75 per

c e n t , or m ore, of the time - i.e., machine utilisation is 75 per cent. Lead

time for the production of a T o rn a d o is only 18 m o n th s, c o m p a r e d to

a b o u t 30 m o n th s fo r p la n e s p ro d u c e d by more conventional means. The

system reduced the number of NC machines required (c o m p a re d to doing t h e sa m e job with s t a n d - a l o n e NC machines) by 52.6 per cent, required

personnel by 52.6 p e r c e n t, r e q u ir e d flo o r s p a c e by 42 p e r c e n t , p a r t s

th r o u g h - p u t t i m e by 25 per cent, total production time by 52.6 per cent,

tooling cost by 30 per cent, total annual costs by 24 per cent and c a p i t a l

i n v e s t m e n t c o s ts by 10 per cent. This last fact alone illustrates that the

idle capital associated with n o r m a lly u n d e r - u t il i s e d m a c h in e s, f r e e d by

a p p l i c a t i o n o f c o m p u t e r integrated manufacturing, is more than sufficient to p ro v id e t h e a d d itio n a l s o p h i s t i c a t e d c a p i t a l e q u ip m e n t n e e d e d to

implement flexible manufacturing production systems [7].

6.2.21 The sec o n d e x a m p le d e s c r i b e s th e r e s u l t s r e p o r t e d by Mazak, the

Japanese machine tool maker, which has introduced FMS in to i t s f a c t o r i e s in

t h e U n ite d S ta te s and Japan. At its United States factory two FMS lines have

been introduced. One system, called the f r a m e l i n e , m a n u f a c t u r e s beds, b ase s,

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colum ns and saddles; th e second is the gear box line which machines smaller

components. Mazak officials report th a t only 25 per ce n t of norm al process

in v e n to rie s a re needed in th is FMS approach. In-process tim e is less than

one-tenth of th e norm al tim e allowing quick responses and d eliv erie s, and

few er w orkers are needed to do th e m an u fa ctu rin g . O ther benefits of the

fa c ility , which can m a n u fa c tu re 180 p a r ts for 4 m achines, include

s ta n d a r d is a tio n of manufactured components, fixtures and tools; quality control; and a c c e l e r a t i o n of equ ip m en t d e p r e c ia tio n through th e 24-hour-a-day

operations.

6.2.22 At its J a p a n e s e fa c t o r y where components for CNC machining tools

are produced, the FMS system consists of 18 machining c e n tr e s , two p a lle t

lo ad ers and a c o m p u te r fa c ility to co n tro l p roduction plus tool setting. The

introduction of this system led to a reduction in the workforce from 215 to 12, in-process time from 90 to 3 days and floor space by one half. The plant works three shifts, one unmanned. Observers reported that the cleanliness of the plant was beyond belief; all floors were resin coated and there was no trace of oil,

dirt or metal particles [8].

6.3 F actors a ffe c tin g the Level of Benefits from the Introduction of New Technologies

6.3.1 A num ber of conclusions have been drawn from the interviews con­

cerning th e e x t e n t of th e b e n e fits arising from the adoption of new

c o m p u t e r - r e l a te d process tech n o lo g ies. F ir s t, benefits were not as great as

expected because of the im pact of th e re cessio n . The volume of work being

handled in th e p la n ts of all th e firm s in te rv ie w e d was significantly below

capacity and systems and machines were noticeably under-used. In some cases firm s w ere undertaking types of work in which they normally did not specialise in order to maintain profitability, and machines purchased to serve th e ir main

purposes were so m e tim e s not as a p p r o p ria te for th ese new ventures; the

benefits secured were consequently significantly reduced.

6.3.2 Secondly, b e n e fits w ere g re a te r where users of the new technologies

had a clear view of the overall goals for their organisation and where they had

approached th e in tro d u c tio n of new technologies from the viewpoint of their ability to solve m ajor problem s r a t h e r than simply from a technological

p e r s p e c tiv e . Such problem s m ight include th e need to reduce inventories or

improve the consistency of quality. One firm we interviewed identified its high inventory levels in the form of components as a major barrier to efficiency [9]. Holding inventories was costly, but they were necessary because it was d iffic u lt to fo r e c a s t dem and. F u rth e rm o re , the company often found it had most, but

not all, of the parts to fill an order; they th e r e f o r e had to w ait until the

appropriate batch was produced to complete the order.

6.3.3 The company's response was to rationalise its operations. It closed two plants, reduced the number of components and is seeking to produce all the high volume components every week so that orders can be met quickly, whilst at the same tim e reducing inven to ry levels. This is being accom plished by the

in tro d u c tio n of a computer-controlled metal panels line, a machine which can be program m ed to ta k e plain se c tio n s te e l p la te s and m achine them in a

v a rie ty of dim ensions, shapes and styles. As a result of its introduction, the

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two m ajor line ite m s a re being produced on a two week as compared to the

previous 13 week cycle, and the stock to annual turnover ratio has fallen from 1:5 to 1:12 with further improvements envisaged.

6.3.4 A third f a c t o r which is im p o rta n t in affecting the level-of benefits

a t t a i n e d from a new technology is th e a b ility of m anagem ent to enlist

e f f e c ti v e l y the skills and enthusiasm of its workforce. This refers not only to

the operators but also to workers not directly involved with th e system . The

p re s e n c e of a 'champion' to actively and continually promote the system is part of this process.

6.3.5 F u rth e r, th e b e n e fits secured from these new technologies are not as

great in a stand-alone situation as when they are integrated with o th er system s or m achines in the m an u fa ctu rin g p rocess. This applies p a r tic u la rly to NC

machines. At least three major benefits were observed concerning integration. It p e r m its th e rem oval of c e r t a i n pro c ed u re s in the m an u fa c tu rin g process.

Integration can exert a pressure to keep goods moving through the production p ro c ess th e re b y reducing the level of w ork-in-progress. The in te g ra tio n of

processes can also, in a p p ro p ria te c irc u m s ta n c e s , reduce m a te r ia ls handling, which is labour intensive and in some cases dangerous.

6.3.6 Finally, b e n e fits can be enhanced when product design is adjusted to

the new production environm ent. This applies p a rtic u la rly to robots. Many

p ro d u c ts are designed to be built by human beings, not to be handled in a

blind, deaf and senseless environment. One firm we visited found t h a t , because of th e design of its product it needed fourteen different grippers (’hands') on

its robot to handle a particular product in a p a r ti c u la r machining operatio n .

G rippers a re costly and the dow ntim e needed for cha nge-ove r re la t iv e to

operation time would be significant. In this particular case the robot rem ained idle.

6.4 Problems with the Introduction of Computer-Related Technologies

6.4.1 It was le a r n t from th e interv iew s th a t a number of firms had

e x p e rie n c e d consid erab le d iffic u ltie s in th e ir plan ts with th eir new

c o m p u te r-b a s e d system s - o th e r than NC and CNC machines - to the extent

t h a t some of them had e ith e r a lre ad y withdraw n th e ir system s or were

co nsidering doing so. No accurate estimate can be made of the overall extent of firms' disappointment, but extensive enquiry confirms that disappointment is widespread. As one commentator, summing up the proceedings of a CAD users' seminar noted, 'experience has ranged from disappointment to disaster'; sim ilar

statem ents have been made for other types of computer systems.

6.4.2 G enerally, we found disappointment to be greater the more recent the

development of the system, the more the system represented a radical departure from previous o p e ra tin g p r a c tic e s , and the more the users were required to

conceive of the systems and their applications in an abstract fashion. Thus we found firm s had l i t t l e d if fic u lty in im plem enting NC and CNC machines,

s ig n ific a n tly g r e a t e r problem s with CAD system s whose intro d u ctio n is

becoming increasingly widespread and it was reported to us that the introduction of manufacturing management systems, while appearing to be easy, was in fa ct a formidable task.

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6.4.3 We did en c o u n te r some firms who are having great success with their

systems; the systems have measured up to expectations technically and the users consider t h a t th e in v e s tm e n t was w orthw hile econom ically. This s ec tio n

identifies the elements of their success and uses this as a basis to identify the

sources of the problems encountered by disappointed users. We illustrate these difficulties chiefly by r e f e r e n c e to the in s ta lla tio n of CAD system s. CAD

sy s te m s a re more common and we encountered more firms having difficulties with them; thus we chose to examine the sources of these difficulties in more

d e ta il. We believe however, th a t th e ex p e rie n c e s observed for CAD can be

extended to other computer-based systems.

6.4.4 There a re a t le a s t five conditions n ec essary for the successful

in tro d u c tio n of c o m p u t e r - r e l a te d sy stem s into firm s and plants. F irs t,

m a n ag e m en t must know th e ir business; they must know their customers, their rivals, and the basis of competitive advantage for the products they produce. They need to have a systematic view of what they are doing in the production

process and they must know their products. Secondly, management must have a good a p p r e c ia tio n of e x a c tly what benefits there are to be gained from these

new technologies. Thirdly, management must choose the system most appropriate for th e ir needs. F ourthly, they must give prio rity to fa c ilita tin g the

introduction of the system. Finally, m anagers must ensure th a t workers are

a d e q u a te ly tra in e d to have th e c a p a c ity to o p e r a te the system s and feel

comfortable with them.

6.4.5 The firs t condition focuses prim arily on management's knowledge of

their business and emphasises the conditions necessary for ensuring the economic viability of an installation rather than its technically efficient operation. If the wrong product is produced for the particular market even the most te c h n ic ally efficient systems will not be profitable [10].

6.4.6 The second condition for success is that management needs to know

what the new systems have to offer th e ir p a r tic u la r operatio n . They need to

have a good a p p r e c ia tio n of exactly what the benefits are and whether these

benefits convey a significant competitive ad v a n ta g e for them . This, in turn,

depends upon t h e i r knowledge of th e ir products and their markets. Problems arise when firm s do not m atch th e ir needs with the diverse range of

o p p o rtu n itie s provided by the computer systems. For example, many firms use CAD when it is in a p p ro p ria te to do so. P e rfo rm a n c e depends heavily upon

design; n e v e rth e le s s , a s ig n ific a n t propo rtio n of the design content of the

output of many Australian firms derives from licence agreem ents. We found a firm which had no independent design input in its product using CAD for

one-off drafting which could be done more e f f ic ie n tly manually. O ther firm s were r e lu c t a n t to in v e s tig a te the benefits of computer systems. One firm was having difficulty meeting tender dates but shied away from CAD which could help re d u ce lead tim es; th e manager could not see how he might establish his

data base. This firm produced 14,000 p a rts and put through 10-15 changes a

week. The manager's reluctance, of course, might be a rational response to the high set-up costs of the data base. There was a gen e ral view th a t CAD was

not a p p r o p ria te for engineering jobbing operations because of the great variety of tasks undertaken.

6.4.7 Thirdly, many problem s surround the choice of the right system; this

particularly applies to the in tro d u c tio n of CAD, but it also applies to oth er

co m p u te r system s. This set of problems derive from what was referred to as a

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'c ollusion of d elusion' by buyers and sellers; there was a widespread lack of

knowledge within firms about c o m p u te r s y stem s, a lack of knowledge on the p a r t of the suppliers about the design and production process in firms and there are few independent sources of advice available to purchasers. With p a r tic u la r

r e f e r e n c e to CAD, th e m a rk e t in A u s tra lia has been very competitive; some

vendors have understated hardware requirements whilst others have played down the extent to which software needs to be adapted to particular applications.

6.4.8 Firm s which have a clear idea of what they want and of the potential

of computer systems will not be misled by vendors claim s. However, firm s

o f te n do not have th e personnel q u alified to assess the v a rie ty of systems

available; some do not see the need to have such personnel. Buyers o fte n had

u n r e a lis tic expectations about the likely productivity improvement to be gained, especially from CAD.

6.4.9 The fo u rth co ndition for th e succ essful in tro d u c tio n of c o m p u ter

r e l a t e d technology into firm s is t h a t m anage m ent must give p rio rity to

ensuring the successful introduction of the new system; having the nucleus of a good system is not sufficient to ensure that full benefits will be secured, even

in a te c h n ic a l sense. Success a t the implementation stage also depends upon

involving the right people in using the system and recognising t h a t th e system is a prod u c tio n tool and not a s u b s t it u t e m anager. The play of c o rp o ra te

politics can also influence the success of the implementation process.

6.4.10 The in tro d u c tio n of a computer-based system is a major project for a

business and the view is very widespread that it requires the commitment of top management to ensure its success. Management must be freed to give priority to the new undertaking, to d e te r m in e how th e new system s a re to fit into the

o rg a n is a tio n s t r u c t u r e of the firm, to select the right people, and to oversee

the implementation of procedures. To fre e top m anagem ent for th e s e tasks

how ever, means firm s must add resources in the implementation stages. This has been difficult to achieve in a period when finances a re tig h t and p ro fit

m argins have been squeezed. Moreover, managers have often been preoccupied with keeping their businesses afloat. In one firm interviewed, top m anagem ent w ere a lre a d y fully c o m m itte d els e w h e re when a new CAD system was

purchased and they did not take time to supervise its introduction. That t h e re

w ere five ste p s in th e chain of com m and from the CAD m anager to the

general manager did not help the situation.

6.4.11 One of the most striking c h a r a c te r i s t ic s evident in firms which had

successfully introduced computer-related systems was that managers had a very re a l a p p r e c ia tio n th a t th e s e system s were tools which processed information. They understood their capabilities and possibilities, they knew where th e s e tools could be implemented best, they recognised that the scope for productivity gains was greatest where th e system s could i n t e r a c t with oth er ele m e n ts in the

m a n u fa c tu rin g process. In less successful firms there was the impression that managers often treated computer-related systems as d evices th a t would make decisions for th em , so t h a t in some way they could take over some of the

managerial responsibility. The lack of understanding of what the system s could and could not do severely hampered the implementation process in some firms visited.

6.4.12 The need for ta ilo rin g th e softw are to suit particular applications is

not not universally appreciated. Some firms were surprised and dismayed at the tim e and the cost of this exercise. One firm paid insufficient attention to its

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hard w are needs at the time of initial purchase and subsequently overloaded the system . At one s ta g e o p e r a to r s w ere experiencing response tim e s of six

m inutes and s o m e tim e s even 15 m inutes with th e ir CAD system . Lack of

understanding also has resulted in the inappropriate selection of the task s to be p e rfo rm e d by th e sy stem . S uccessful firm s have a good appreciation of what activities enable the greatest gains to be secured; they think ca re fu lly about

each workpiece and they refrain from putting all their work on the computer.

6.4.13 One of th e most im p o rta n t decisions required of management is the

selection of a good CAD manager. One vendor drew comparisons betw een CAD m anagers with whom he dealt in recent installations. The managers he felt to

be good were flexible, inventive in their determination to overcom e problem s and fearless in that they were prepared to try anything. They constantly sought advice. The less successful managers were staid, w ithout flair, and unable to

c o n c e p tu a lis e or visualise a way of approaching the problem in a computerized environment. At the practical level they often did not supervise the installation of the s y stem , no s y stem s manuals were developed and no library of common elements was prepared.

6.4.14 We believe there is a shortage of people who combine engineering and sophisticated computing skills. The shortage appears at present to be especially s ev e re in th e a r e a of com puter-aided design. There is a widespread view that

there are not sufficient engineers and draughtspersons being trained in CAD to form a pool of potential CAD managers and operators [11].

6.4.15 C o rp o ra te p o litic s can influence th e success of the implementation

process. New systems are som etim es in tro d u ce d following the a rriv a l of new m anagers, th e new m an ag e rs th e m s e lv e s having been brought in to change or restructure the business. Their arrival can be g r e e t e d with re s e n tm e n t and so

too may th e ir new system s. S ystem s m anagers a re o fte n given all the

responsibility but none of the authority to im plem ent th e new system s. When the users do not belong to the power base they can use or misuse the system

as an opportunity to 'get back'. The resentment in one firm at having a CAD

system im posed was quite tangible; the manager felt that if it was his choice

he would have chosen a d i f f e r e n t system . These o b servations serve as an

im p o rta n t re m in d e r th a t business operations are not only production systems, they are also social systems and that the quality of human re la tio n s can have

an important influence on economic outcomes.

6.4.16 The final condition n ec e s s a ry for the successful in tro d u ctio n of

computer-related systems into firms is that managers must ensure th a t workers a re adequately trained. Not only will this reduce the time taken to achieve the

full operation of the system, but it will increase the likelihood of acceptance of th e system by those using it, which is vital to its effective performance. In

one firm visited by us the manager had sent an o p e ra to r for training on the

chosen CAD system for five months prior to its introduction to the firm; part

of this training included a period in Japan. When the system was installed it

was in full p roduction in less than one week. The manager attributed this in

part to the skill and enthusiasm of his s ta ff . In another firm some of the

d i f f ic u ltie s encountered at the implementation stage must be attributed to the CAD m anager having l i t t l e ex p e rie n c e or understanding of th e co m puter

system.

6.4.17 The co nditions for success around which the foregoing discussion has been organised are all interrelated and one is rarely present without the others.

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They r e f l e c t , to a sig n ific a n t extent, the degree of managerial knowledge and skills p re s e n t in th e firm . We a re c o n c ern e d to find many firm s are not

e x p e rien cin g the p ro d u c tiv ity gains th ey might have expected following the introduction of these new technologies. It has been found that firm s having

had an u n s a tis f a c to r y experience with one form of computer-based system are reluctant to introduce others. In view of the fact that the adoption of the new

p rocess technology has a particular potential for improving the competitiveness of firms these negative experiences are especially unfortunate.

6.4.18 The analysis of the problem s which are encountered by firms when

introducing computer-related technologies highlights the difficulties of realising th e i r p o te n tia l benefits. We consider there are a number of actions which the

Government can take to reduce these difficulties.

6.4.19 F ir s t, we believe th a t firm s would be ass is te d by the provision of

independent advice on computer-related technologies and th e ir a p p lica b ility to firm s ' s p e c ific needs and goals. The Government has recently acted on advice on this m a t t e r from the Inquiry into M anufacturing Advisory Service on

C o m p u te r-a ss is te d M anufacturing and has agreed to th e establishm ent of a

nationwide advisory se rv ic e (MASCAM). However, d e ta ils of the working a rra n g e m e n t have not y et been d ecided. Firms a lre ad y have access to the

advice of the Technology Transfer Council, the CSIRO Division of Manufacturing Technology and o th e r c o n s u lta n ts . It is proposed in the report of the Inquiry

that the structure of th e Technology T ra n s fe r Council be inco rp o rated into

MASCAM, and t h a t the CSIRO Division be utilised where a p p ro p ria te as

consultants and in the implementation of programs supported by MASCAM. We a c c e p t the Inquiry's re c o m m e n d a tio n s , but believe that the conditions under which a service is provided need to be specified in more detail.

ASTEC recommends:

That the M inister fo r Industry, Technology and Commerce apply the following conditions to the r e c e n tly esta b lish ed adviso ry s erv ic e on c o m p u te r -a s s iste d manufacturing (MASCAM):

(i) MASCAM should operate as an independent body;

(ii) MASCAM should o p era te f o r a s p e c ifie d lim ite d period,, after

which an evaluation of its effectiveness should be undertaken;

(iii) MASCAM should o p era te as fa r as possible on a fee-for-service

basis,. recognising the n ee d to a t t r a c t in dustry in the initial

stages;

(iv) MASCAM should operate substantially through private consultants, who should be p e r m i t t e d to carry out all s e r v ic e s o ffe r e d by

MASCAMj however, MASCAM should approve the CSIRO Division of Manufacturing Technology as a consultant;

(v) MASCAM should ensure that, where subsidised feasibility studies

are carried out, management consult with their em p lo y ees about their proposals for the adoption of new technologies, recognising

78

th a t co n su lta tio n m ay f a c i l i t a t e the introduction o f new

technologies.

( R 8 )

6.4.20 S e c o n d l y , we c o n s i d e r t h a t f i r m s m i g h t als o l e a r n f r o m t h e

experien ce s of ot h e rs firms in th eir industry which have s u c c e s s fu l l y i n t r o d u c e d

new t e c h n o l o g i e s . We e n c o u n t e r e d some firms which are having g r e a t success

w i t h t h e i r s y s t e m s w i t h i n t h e i r p l a n t s ; t h e s y s t e m s h av e m e a s u r e d up t o

e x p e c t a t i o n s t e c h n i c a l l y a n d t h e y h av e been a worthwhile in vestment. Firms

co nt em pl ati ng introducing new t e c h n o l o g i e s c o u l d g ai n v a l u a b l e i n s i g h t s fr o m

observing th ese op er ati on s and from talking with the personnel responsible. These firms, in some cases, alre ady o p e n t h e i r d o o r s t o i n t e r e s t e d p e r s o n s b u t t h e

t i m e sp ent with visitors re p re s en t s a diversion of th ei r resources. It would be a

useful ea rly tas k for MASCAM to i n ves ti gat e means by which the e x p e r i e n c e o f

these firms could be t r a n s f e r r e d to others.

6.4.21 T h i r d l y , we a r e a l s o c o n c e r n e d t h a t t h e ef fe cti ven es s of technology

t r a n s f e r programs and the value of c o n s u l t a n t s ' a d v i c e will be r e d u c e d w h e r e

f i r m s t h e m s e l v e s do not have the necessary skills to assess the appropriateness

of t he advice and inform ation given them. In t h e i m m e d i a t e f u t u r e MASCAM

will need to tak e acco un t of this s it u at io n to maximise the e f f e c t of its ef fo rts .

6.4.22 F o u r t h l y , we c o n s i d e r t h a t s u p p o r t s h o u l d be g i v e n t o t h e CSIRO

Division of Manufacturing Technology to increase its consultancy role.

ASTEC recommends:

(i) That CSIRO be req u e ste d to provide additional resources to

enable the Division of Manufacturing Technology to increase its technology transfer role.

(ii) That CSIRO give consideration to the role which CSIRO

Divisions and Units o th e r than the Division of M anufacturing T echnology have to play in the enha n c em e n t o f A ustralian

manufacturing technology and its transfer to industry.

(R9)

6.4.23 R e s e a rc h as s o c ia tio n s a re one other means by which firms within an

industry can be assisted to overcome technical and related problems. Industry groups, p a r tic u la rly in the U nited Kingdom, have used co-operative research ass o c ia tio n s as a m eans of obtaining access to re s e a rc h which is d ire c tly

r e le v a n t to th e ir common needs. In A u s tra lia th ere are eight re s e a rc h

associations jointly funded by firms and the C om m onw ealth G overnm ent. The Australian Welding Research Association is the group most closely related to the metal trades industry. The current federal government allocation for re s e a rc h a sso c ia tio n s is $1.9 million to cover the operatio n s of existing re searc h

associations only.

6.4.24 R e s e a rc h a s s o c ia tio n s are generally seen as being most appropriate in situations where they can address problems common to an industry. They are said to be less su cc essfu l where there is a high level of competition between

firms and p a r tic u la rly where technology is th e basis for th a t c o m p etitio n .

However, even in these circumstances, with care, areas of common interest can

79

be id e n tifie d where a co -o p era tiv e research effort may be appropriate, as the

early experience of the Medical E ngineering R esea rch A ssociation shows. It would seem suitable for the metal trades industry to investigate further whether the research association mechanism is an appropriate means of addressing some of the problem s id e n tifie d e a r l i e r . We understand th a t the M etal Trades

Industry Association (MTIA) in collaboration with CSIRO has been examining the p o ssibility of e s tab lish in g a r e s e a r c h a s so c ia tio n covering the m etal and

engineering industry. Although the concept has not y et been finalised, in itial reaction has been favourable. The proposal is being further developed.

6.4.25 Finally, in the longer te rm , we consider the problem of inadequately

trained personnel can only be overcome by improving the train in g of decision makers. In many manufacturing firms there is a preference for engineers to fill this role.

ASTEC recommends:

(i) That, w ith a view to ensuring th a t a shortage of professional

skills does not im pede the adoption o f new technologies in

industry, the Ministers for Industry, Technology and Commerce, Employment and Industrial Relations, Education, and Science, exa m in e as a m a t t e r o f urgency th e adequacy o f resources

allocated to the training and retraining of professional engineers in c o m p u te r -r e la te d technologies; such an exa m in a tio n to

include;

- the availability o f places for initial training;

- the provision o f short retraining and r e fr e s h e r courses for

practising engineers;

- the number and quality of teaching staff;

- the adequacy of funding for equipment.

(ii) That immediate support be given to initiatives already underway

in a num ber o f t e r t i a r y in s titu tio n s to upgrade and e x te n d

training in computer-related technologies.

(RIO)

6.5 New Technologies and Other Factors Affecting Competitiveness

6.5.1 A number of conclusions can now be drawn from the information given in this chapter and in previous chapters concerning the role which new process technologies play re la tiv e to other factors in the competitiveness, profitability and growth of firms in the metal trades industry.

6.5.2 F irs t, the m etal tra d e s industry is o p e ratin g in an increasingly

competitive environment; it has undergone a significant co n tra c tio n as a re s u lt both of the recent recession and increased import competition. Companies have

80

adopted a num ber of s t r a t e g i e s in order to survive in the short term and to

prosper in the long term. The adoption of new tech n o lo g ies is one of th e s e

s t r a t e g i e s but m e rg e rs , ta k e o v e rs , sourcing of ite m s from overseas,

rationalisation of the number of plants, and both expansion and c o n tra c tio n of product ranges, are also part of companies' strategies.

6.5.3 Secondly, new te c h n o lo g ies have a m ajor role to play in solving

problems of the metal trades industry. The adoption of new technologies can help o v erco m e high labour, materials and inventory costs, the problems arising from sm all and fra g m e n te d m a rk e ts, in a d e q u a te quality assurance and an

inadequate ability to respond to new design challenges.

6.5.4 Thirdly, th e in tro d u c tio n of new process technologies does not itself

guarantee achievements. Existing processes need to be organised in a considered and s y s t e m a t i c way; w ithout this occurring the benefits of the introduction of the new technologies will be significantly reduced. Careful a t t e n t i o n must also be given to th e in te g r a tio n of th e new te c h n o lo g ies into the overall

manufacturing process and their compatibility with current o perations, including prod u c t design. This in te g ra tio n will only be successful if it is realised that

firms and their plants are social systems as well as p roduction system s. The

economic advantages to be gained from the introduction of new technologies can only be secured if attention is also given to the human factors.

6.5.5 We note t h a t firm s can also s ig n ifican tly improve their competitive

position in a given market for a given product in a v a rie ty of o th e r ways. In

p a r ti c u la r , firm s can secure improvements in unit costs by giving attention to the flow of work and handling procedures, and by paying g r e a t e r a t t e n t i o n to

the planning and scheduling of production in plants.

6.5.6 F u rth e r, even if th e su cc essfu l in tro d u c tio n of new technologies is

achieved in the technical sense it will not g u a r a n te e success for th e firm , as

m easured by p r o f ita b ility and grow th. Firms must give attention to sales and

marketing. The firm must be producing the right product for the right market; it must be a c tiv e ly engaged in sales and market research. High levels of input

costs including material costs, wages and statutory labour on-costs may o ff s e t b e n e fits gained from th e in tro d u c tio n of new proc esses in terms of firms'

ability to export and to compete with imports.

6.5.7 New p ro c e s s te ch n o lo g ies will serv e the co m p e titiv e n e s s and

profitability of firms best where firm s have an overall business s tr a te g y for

th e ir longer te rm develo p m e n t, and can e n lis t th e enthusiasm of th eir

employees. They need to identify their com petitive weaknesses and s tre n g th s and r e l a t e them to th e ir overall m an u fa c tu rin g and marketing process. They

must u ndersta nd where the new te c h n o lo g ies as tools can best provide a

solution to their more important problems and clearly see how these tools will work for them.

6.5.8 In b rie f th e conditions for the successful introduction of

c o m p u t e r - r e l a te d te c h n o lo g ie s a re no d i f f e r e n t from those re quired for

su cc essfu l m a n ag e m en t under any environm e nt. Inadequacies of management cannot be solved by the in tro d u c tio n of c o m p u te r -re la te d technologies, but

their strengths can be reinforced.

81

References

[1] Jigs a re te m p l a t e s to guide th e c u ttin g tool; fix tu re s hold th e

work-piece in place whilst it is being operated on.

[2] R. Thompson, 'CAM D evelopm ents a t O rdinance F a c to ry ,

M aribyrnong', C o n fe re n c e P roceedings, A utom ach A u stra lia '84, 'C o n fe re n c e of the Society of Manufacturing Engineers, Sydney, May 23-25 1984.

[3] Ibid.

[4] Rex Swensen, 'In te g ra tin g CAD/CAM with P roduction C ontrol

Systems', Conference Proceedings, Automach '84.

[5] A.O. C urrie, 'Computer Modelling for Mechanical Design', Conference Proceedings, Automach 1984.

[6] BSP T echnical Services, 'The M anagem ent and Use of Interactive

Graphics for Engineering A p p lic a tio n s ', a re p o rt p re pared under

c o n t r a c t for th e Australian Department of Science and Technology, January 1981.

[7] M.E. M erchant, 'C u rr e n t States of, and Potential for, Automation in

the Metal Working Manufacturing Industry', Annals of the CIRP, Vol 32, No 2, 1983. ..............................

[8] 'M a z a k 's FMS: Making Machine Tool M anufacturing Look Easy',

Manufacturing Engineering, September 1983.

[9] The company produced 30,000 components in batches in four plants in

three states; the components were assembled four times a year.

[10] One firm visited by ASTEC has installed a number of computer-based

technologies, but their business is o p e ratin g a t a loss and its long

term viability is in question. A major reason for this, we believe, is

that the firm produces a s ta n d a rd product which is produced in

many less developed c o u n trie s , and for which the competition is

severe. No amount of new technology is likely to overcome the very significant differences in labour and materials costs.

[11] Some c o m m e n ta to rs believe t h a t d ra u g h tsp e rso n s are not the

appropriate persons for CAD o p erato rs; th e e f f i c i e n t o p e ratio n of

CAD re q u ire s t h a t th e user be able to conceptualise in 3D, which

engineers are better able to do.

8 2

7. THE ADOPTION OF NEW TECHNOLOGIES

7.1 Introduction

7.1.1 The f a c t o r s which inhibit and enhance the in tro d u c tio n of new

computer-related technologies in firms and plants in the m e ta l t ra d e s industry are now considered. This c h a p te r firs t exam ines the impact of the overall

economic environment on new technology adoption. Then the influence of the industry's structure is addressed. The final section examines the firm's decision making process when considering technological change.

7.2 The Economic Environment

7.2.1 The view is o fte n expressed t h a t th e poor quality of A u stralian

management is largely the reason for the inadequate perform ance of A u stralian m an u fa c tu rin g industry and its apparent reluctance to innovate. Although there may be grounds for criticism in particular cases, our view is that the problem is more com plex th an this c r itic is m im plies. M anagem ent responds to the

environment in which it operates. In the past th e p a t t e r n of incen tiv es and

disincentives in the economy has not been conducive to rapid innovation.

7.2.2. The in flu en c e on the adoption of new technologies of the general

economy and its structure of incentives and disincentives involves issues such as the role of t a x a tio n and p ro te c tio n policies, the impact of regulation and the

exchange rate environment. It is beyond the scope of this study to in v e s tig a te this network of relationships in any detail. However, it is clear that firms will

be more innovative and adopt new technologies more rapidly if they have both the in c e n tiv e , through co m p e titiv e pressure, and the resources to do so. One

means of supplementing these resources is through giving g r e a t e r em phasis to the direction of government procurement towards Australian firms. This m atter was discussed in a recent ASTEC report on government purchasing and o ff s e ts policies [1].

7.2.3 It is one of the im p o rta n t conclusions of this re p o rt th a t the

increasingly c o m p e titiv e environm e nt which has prevailed r e c e n tly has

c o n trib u te d p o sitively to firm s' decisions to pursue more vigorously

im p ro v em en ts in p ro d u c tiv e e ffic ie n c y through the intro d u ctio n of new

tech n o lo g ies, as well as by o th e r m eans. Increased c o m p etitio n has been

brought about by the recession and a more challenging in te rn a tio n a l trading s itu a tio n . The changed c lim a te has d e m o n s tra te d t h a t, faced with increased pressure, firm s recognise th e im p o rta n c e of new technology as a means of

remaining competitive. Many firms which have recently adopted new technology said that the will to survive in th e fa c e of in creased c o m p etitio n was the

driving force behind their decision.

7.2.4 The rapid in tro d u c tio n of new technologies will only occur if the

economic environment makes the risks of innovating less, for the firm, than the risks of fa ilu re to innovate. It is in this way that competition acts as a spur

to new technology adoption. We consider that an industry policy which is highly

83

p ro tec tio n ist, emphasises import replacement and provides incentives to firms to restrict their activities to the Australian m arket, d iscourages adoption of new technology and o th e r m eans of raising p ro d u c tiv ity . A number of countries

pursue a policy of maintaining high levels of p ro te c tio n a g a in st im ports, but, unlike Australia, countries such as Japan and the United States have large home markets and thus are able to m aintain vigorous c o m p e titio n within them . In

Australia producers can, in many cases, exert considerable market power and the threat of import competition often is the only source of real competition.

7.2.5 One means of maintaining competitive pressure is for the government

to commit itself to a policy of g ra d u ally reducing levels of p ro te c tio n . It

should be em phasised t h a t such a policy does not imply th e abolition of

p r o te c tio n . We also reco g n ise t h a t such a policy m ight expose Australian

industry to dumping. However, the problem of dumping should be resolved by im proving p ro c ed u re s ag a in s t dumping in particular, rather than by restraining all im ports. C o m p e titiv e pressu re will also be m aintained through the

r e a lis a tio n t h a t u n p ro fita b le firm s will be likely to fail. This realisation is

necessary if firms are to be encouraged to focus their energies on innovation as a solution to their difficulties.

ASTEC recommends:

That the Minister for Industry, Technology and Commerce provide a reference to the Industries Assistance Commission to conduct an investigation into the e x te n t o f c o m p e titio n in the various s e c to r s o f the m etal trades industry and its

relationship to the levels o f protection provided.

(R ll)

7.2.6 Strong competitive pressures alone are not sufficient to promote rapid innovation. Firms must also have the market prospects to ju s tify the required in v e s tm e n t and the n ecessary financial resources. The recent recession, while increasing competitive pressure, has in other ways had a detrim ental im p act on te c h n o lo g ic a l change in th e m e ta l t r a d e s industry. This industry has been

esp e cially s ev e rely hit because a la rg e portion of its prod u c t com prises

in v e s tm e n t goods for o th e r firm s, and overall investment levels in Australia

have been low. Low p r o f ita b ility and high levels of excess c a p a c ity have

ex is te d in th e m etal tr a d e s in dustry for a num ber of years. Nearly all the

firms we visited were operating substantially below capacity and major item s of c a p ita l equipment were underutilised. In these circumstances investment in new capital equipment is unlikely to be profitable. This has s e v e rely reduced the

o p p o rtu n ity to in tro d u ce new te ch n o lo g ies in the metal trades because these

technologies can usually be acquired only in co njunction with new equipm ent. High r a t e s of gross in v e s tm e n t a re very conducive to rapid adoption of new

technologies [2].

7.3 Industry Structure

7.3.1 It is our view th a t substantial industry restructuring to increase the

average size of firms and the degree of specialisation will need to occur if the

A u s tra lia n m e ta l t ra d e s industry is to tak e advantage of the introduction of

many new computer-related technologies.

84

7.3.2. It has been a m atter of debate among researchers whether plant and

firm size influences the speed of adoption of new technologies. The indications a re t h a t sm all size g e n e ra lly in hibits adoption and our in v e s tig atio n s lend

support to this view. The main reason is that the volume of o utput needed to

ju s tify in v e s tm e n t is g r e a t e r than that usually generated by small firms. The

problem is made more difficult by the fact that many A ustra lian firm s in the

m e ta l t r a d e s ind u stry produce a wide v a rie ty of p a rts in their plants which

means that change-over and set-up times are high where c o m p u ter n um erically co n tro lle d (CNC) m achine tools a re employed in stand-alone situations, even allowing for the fle x ib ility in h ere n t in p rogram m able m achines. Perhaps

offsetting this is the greater scope for entrepreneurial vigour in small firms [3].

7.3.3 Lack of volume also means that machines do not wear out as fast. In

these circumstances firms are reluctant to scrap and replace existing m achines in p la n ts with new m achines embodying new technologies. The tax regime

favours maintenance of old equipm ent as co m pared with r e p la c e m e n t by new equipm ent b ecause full m ain te n a n c e co sts can be written off in the year in

which they are incurred, whereas new m achines may c u r re n tly be w ritte n o ff only over t h r e e to five y ea rs. In some cases, because of low volumes, firms

find it more economical to re p la c e m achines t h a t have com e to the end of

th e ir life with o th e rs , in c o rp o ra tin g newer but not th e l a t e s t technologies.

G enerally, the view is t h a t m u lti-s h ift o p e ra tio n s are re quired for the

economical operation of most computerized shop-floor systems.

7.3.4 C o n sid e rab le a t t e n t i o n has been given recently to the potential for

flexible manufacturing systems (FMS) to o ffe r th e sort of econom ies usually gained by th e pro d u c ers of high volumes of a lim ite d range of products, to

firms producing smaller volumes and greater variety. This is referred to as the econom ies of scope, whereby efficiencies can be gained through variety rather than volume. The American lite ra tu re on econom ies of scope focuses on how

larg e , high volume pro d u c ers can move away from the mass production of a

limited range of items to extend th e ir range; in th e A ustralian case FMS is

su ggested by its proponents as a m eans of continuing to produce a range of

products but at a more competitive cost [4],

7.3.5 In our view th e r e are re a l questio n s about the appropriateness of

FMS technology for Australian manufacturing, given the current structure of the in dustry s e c to r . T here are the set of factors which derive from a recognition

that the economies of scope are not limitless. First, the v a rie ty to which the

proponents of FMS r e f e r is r e s t r i c t e d in ra nge to a family of quite similar

p arts; A u stra lian firm s o f te n produce an astoundingly diverse range of

com ponents. Secondly, while the cost of set-up is reduced as firms move from stand-alone CNC machines towards FMS, the cost of the provision of fix tu re s tends to rise. T here may also be s ig n ific a n t co sts a s s o c ia te d with design

programming which need to be spread over a substantial number of p a rts to be econ o m ic al. Thirdly, the c a p it a l co s ts are high even if o p e ratin g costs are

reduced. A high annual volume of all p a rts plus m u lti-s h ift o p e ra tio n s are

g en e rally re quired to spread these costs. Figure 7.1 shows the configuration by volume and variety of the installations of a major supplier in the United S ta te s of FMS systems.

7.3.6 A nother s e t of f a c t o r s which makes the adoption of complex new

technologies more difficult for small firms is the absence of the range of skills necessary to assess the suitability of these new technologies. In some cases,

85

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firms are aware that they do not know of new technologica l o p p o rtu n itie s; in

o th e r ca s e s , we b elieve, they a r e not even aware that they do not know. A

survey in the United States of 200 metal working corporations revealed that one in five lacked the necessary understanding of advanced process technology. This was seen as a m ajor reason why they did not adopt c o m p u te r-a id e d

manufacturing (CAM) techniques. Another study from the United States suggests that many small and medium sized companies cannot properly ev a lu a te w hether they need numerically controlled (NC) machines [5].

7.3.7 Sm aller firm s also do not have sufficient volumes of work in their

plants to m ain tain the balance of skills n ecessary to oversee the e f f i c i e n t

o p e ra tio n and m ain te n a n c e of their machines and systems. At the same time

they report that specialist maintenance services are not readily ava ila ble from o utside th e firm . One firm reported, for example, that they had to wait three

days for a piece of machinery to be serviced after it had broken down.

7.3.8 A final way in which sm all firms are disadvantaged in the adoption

of new tech n o lo g ies is th a t th e ir c a p a c ity to m aintain a re s e a rc h and

dev e lo p m e n t e f f o r t is lim ited. F irm s which have some re s e a rc h and

development capacity of their own and a re expe rien ce d in th e m a n u fa ctu rin g p ro c esses in which they a r e engaged find they are able to introduce even new

technologies developed outside the firm at a lower cost than firms w ithout this capacity [5].

8 6

7.3.9 The discussion of the disadvantages of small firm size should not be

taken to imply that small firms are always less innovative than la rg e ones or

t h a t big firm s a re always to be p r e f e r r e d . What is important is that firms

have s u ffic ie n t volume of dem and for individual p roducts to be able to

s p ec ia lise . The c ir c u m s ta n c e s which make it p a r tic u la rly difficu lt to take

advantage of the new technologies are the combination of small volumes with an e x ten siv e prod u c t range. Even in th is s itu a tio n , m anagem ent flair and a

committed and skilled workforce can overcome th e e x tr a d iffic u ltie s , but the task is harder.

7.3.10 We co n sid er that substantial industry restructuring will need to occur if the Australian metal trades industry is to take advantage of the in tro d u ctio n of many new c o m p u t e r - r e l a te d tech n o lo g ies. Individual firm s will need to

rationalise their product range or put off the d i f f e r e n t a t i o n of pro d u c ts until

l a t e in th e m anufacturing process so that the number of common parts can be

maximised. Some firms will need to reduce the number of plants to consolidate th e ir operations. Competitors in an industry could find it to their advantage to sp ec ia lise in th e prod u c tio n of p a r ts and t ra d e with one an o th e r to gain

s u ffic ie n t volume. F inally, if individual firm s are to o p e r a te plants on a

multi-shift basis we consider it necessary that the number of plants and probably firms in an industry segment be rationalised.

7.3.11 The rationalisation we propose could lead to a very limited number of

plants competing in a given product market. This is less worrying if th e re is

e f f e c ti v e im p o rt c o m p e titio n than if firm s with some monopoly power are

protected. A lte rn a tiv e ly , th e ad v a n ta g e s of volume p roduction of specific

p ro d u c ts can be obtain ed w ithout the need to move to a more concentrated

industry structure through the development of an export capability.

7.3.12 We are concerned that government regulations can impede the process of industrial restructuring. Measures intended to assist particular seg m en ts can also inhibit moves tow ard s a more c o m p e titiv e industry structure. Policies

whose prime objectives are other th an industry a s s is ta n c e can also have this

e f f e c t . The proposed am e n d m e n ts to the Trade P r a c ti c e s A ct concerning

mergers and acquisitions are one example.

7.3.13 C u rre n tly , S ection 50 of the Act prohibits acquisitions which result

in, or strengthen, the power of the acquirer to control or dominate the m ark e t. The t e s t r e l a t e s to the structure of the market, not its conduct. The proposal

is to change the t e s t to one based on the likely c o m p e titiv e e f f e c t of the

merger; that is, whether it results in a 'substantial lessening of competition'. If ad o p ted , th e proposed a m en d m e n t would have the e f f e c t of lowering the

threshold; more acquisitions and mergers would now come under the scrutiny of the Act than is the case at present.

7.3.14 The T ra d e P r a c ti c e s A ct does make provision for industry

rationalisation to proceed under the authorisation procedure on the grounds of public b e n e fit (S ection 88). The M inister may also give directions as to the

m atters to be given sp ec ia l co n s id e ra tio n by th e Commission in determ in in g ap p lic a tio n s for a u th o ris a tio n (Section 29). Rather than redraft Section 15 of the proposed amending Act, which replaces Section 50 of the Principal A ct, we consider t h a t th e A tto rn e y General should give directions that, in determining authorisations, the Commission should take into account the need for industry

ra tio n a lis a tio n if new technology adoption is to be e f f e c ti v e . There are

87

provisions in th e Act for the Attorney General to proceed in this manner. We

note that a measure of import competition is required if the Act is to achieve

its principa l purposes, while a t th e sam e tim e not impeding industry

rationalisation and new technology adoption.

ASTEC recommends:

That the A tto r n e y General give direction to the Trade Practices Commission to give special consideration under Section 29 o f the Trade P ra ctice s A c t (1974) to:

(i) the need for industry rationalisation as a condition for obtaining

the maximum benefits from the adoption of new technology;

(ii) the role which import competition may have in maintaining the

level of competition in the domestic market, even in a situation where a single local producer has a large share of domestic

output.

(R12)

7.4 The Firm's Decision to Adopt New Technology

7.4.1. The p o te n tia l for c o m p u t e r - r e l a te d technologies to improve the

competitiveness of firms has already been discussed in Chapter 6. Firms weigh up the e x p e c te d b e n e fits and co m p are them with net discounted costs. For

computer-related technologies we found firms normally look for a payback period of three to five years, and less in ventures perceived to be particularly risky.

7.4.2 The requ ired payback period r e f l e c t s two factors. One is the high

rate of interest which has been experienced in recent years. The second arises from th e degree of uncertainty about the future economic environment and how the new technology will p e rfo rm . F irm s discount more heavily the more

u n c e rta in they are about th e likelihood of th e e x p e c te d s tre a m of fu tu re

earnings being re alise d . The sh o rt payback period has im plica tio n s for the

tim ing of g o v ern m e n t a s s is ta n c e . U nder conditions of uncertainty, programs o ffe rin g ea rly (up front) a s s is ta n c e a r e p re fe ra b le to program s where the

assistance comes later.

7.4.3 The condition of the economy has a major influence on expectations.

In a fragile economic environment, firms' expectations about the likely b e n e fits to flow from th e adoption of new technologies can be significantly affected by the level and c o n tin u ity of g o v ern m e n t support. The lack of co n tin u ity in

g o v ern m e n t policy and th e am biguity that governments have displayed in the past towards th e m an u fa ctu rin g s e c to r are re p o rte d to have reduced those

e x p e c ta tio n s . The t e rm s of th e d e b a te about the role of the manufacturing

sector in the Australian economy have now changed, from whether th e re should be a m an u fa c tu rin g s e c to r to how th e s e c to r can be assisted to becom e

efficient and competitive. We emphasise th e need for g o v ern m e n ts to adopt

policies which are consistent, integrated and sustained over a sufficient period so that firms can formulate their plans in a predictable environment.

8 8

7.4.4 Even in a p r e d ic ta b le econom ic env iro n m e n t, u n c e rta in ty will

surrounds a firm 's a s s e ss m e n t of how a new technology will perform in its

p a r ti c u la r c irc u m s ta n c e s . The u n c e rta in ty arises in part from less than full

information about the characteristics of the new technology. The way in which it will be re c e iv e d by th e workforce may also be imperfectly known. It was

apparent that many firms did not have access to the body of knowledge about

re le v a n t new technologies that is currently available. Firms reported that they often found it difficult and expensive to get information from impartial sources within A u s tra lia or from o v erseas. Many of those interviewed had travelled

abroad for this purpose. Universities and research institutes were not considered to be important direct sources of information. Similarly, private consultants did not appear to play an important role. Some firms had made c o n t a c t with the

Technology T ra n s fe r Council and with the CSIRO Division of Manufacturing Technology; others however, are unaware of the activities of these bodies. We consider th e r e is scope for em ployer organ isa tio n s to fu rth e r in cre ase the

awareness of their members about the advisory services which currently exist.

7.4.5 B ecause of th e s e in fo rm a tio n d if f ic u ltie s firm s ' asse ssm e n ts of

benefits are often inaccurate. On the one hand, stu d ies re p o rt t h a t the full

b e n e fits may be u n d e r e s tim a te d . Firms tend to focus on narrow productivity gains (labour and time savings) and ignore other b e n e fits which so m etim e s are less easy to quantify. A recent study in the United States of the evaluation of

CAM in d ic a te d t h a t 70 per c e n t of com panies surveyed e v a lu a ted th e ir

in v e s tm e n t on th e s e sim ple productivity criteria alone. The same users found ad d itio n al b e n e fits a f t e r in s ta lla tio n . These include re d u ctio n in

w o rk -in-progress and finished goods stock reduction due to reduced lead times, reductions in scrap and rework, b e tte r quality leading to savings in assembly co sts, savings in inspection on NC machining centres, and increased flexibility. The firms surveyed had expected benefits in term s of reduced fixture costs and

re d u ctio n s in skills levels but th e s e were not realised; further, they reported

extra costs resulting from programming [7]. Firm s also tend to overlook the

possibility of downstream benefits. For example, computer-aided design (CAD) may not only bring b e n e fits in the design o ff ic e , it may also re s u lt in a

reduction of reject and rework rates on the shop floor [8], Furthermore, benefits may include opportunities to provide new services which were unforeseen at the tim e of in s ta lla tio n [9]. On the other hand, benefits are often overestimated

because of an over-optimistic view of cost reductions achievable, for example, the extent of labour savings.

7.4.6 C osts a r e the other element in the payback calculation. The cost of

new technology is the net discounted cost over the lifetim e of the m achine or

system . L ife tim e c o s t includes in itia l pu rc h ase price, sales tax, installation

costs and operating co sts. If p ro f its a r e m ade, th e s e co sts are reduced by

ta x a tio n concessions such as depreciatio n and investment allowances. Actual costs are frequently underestimated, particularly the costs of installation. These will vary betw e en firm s, depending upon the skills available and the ability of the firm to digest the new ways of doing things. Firms say that CNC machines

are r e la tiv e ly easily introduced onto the shop floor but indicate that off-floor computer-based systems re q u ire co nsiderable a d ju s tm e n t, p a rtic u la rly to the softw are, before they are fully operational in a given installation. A number of firms reported that implementation costs relative to initial purchase price of a

large turn-key CAD system can be as high as 2:1.

7.4.7 The co sts of in s ta lla tio n include not just the direct employment of

skilled people for th e purpose but also the co sts of a d ju stm en t to the new

89

p ro c e d u re s and re la tio n s h ip s within the firm . O ften the new technology is

complex and not easily comprehended in an overall sense. People have to learn

th e new skills which a r e re q u ired and th e potentialitie s and limitations of the

new system. Previously established working relationships may well be disrupted.

7.4.8 It is h ere t h a t our previous re fe re n c e to the firm as a social system

is e s p e c ia lly r e le v a n t. The social system may be one which w elcom es th e

ch a lle n g e p re s e n te d by th e new tech n o lo g y , or it may, instead, resist it. The

difference can have a profound effect on th e pro b a b ility of the in tro d u c tio n of

th e new technology being profitable. It is management's responsibility to create a constructive climate which enables its workforce to co n trib u te with enthusiasm to th e su cc essfu l in tro d u c tio n of th e new technology. Management are more

likely to be successful if they have had e x p e rie n c e of a d a p ta tio n to s ig n ifican t

change in th e p a s t. They may also be ab le to learn from th e ex p e rie n c e of

others.

7.4.9 The a b ility to m anage change successfully is, like any skill, improved

w ith e x p e rie n c e . A firm which has been able to con tin u e for long periods

w ith o u t th e need to make many c h a n g es will not be well placed to cope with

the challenge of introducing a com plex new technology, though now it may be

fo rced to do so in o rd e r to survive. C hange, including technological change,

will be managed far more effectively if it is increm ental and continuous than if

it is o cc asio n al and sudden. This is a further reason why industry should not be

insulated from market pressures for change.

7.4.10 L e g is la tiv e c o n s t r a in t s also e x is t which contribute to an environment

which inhibits the adoption of new technologies. Mention has been made e a r lie r of S ta t e and C om m onw ealth G ove rn m en t a c tio n s in the area of industry policy and regulatory standards which restrict the attainm ent of sca le econom ies. The lack of s c a le econom ies acts as a disincentive to new investment and technology ad o p tio n , as th e volume of o u tp u t is o fte n in s u ffic ie n t to ju stify new

in v e s tm e n t. R e g u la to ry s ta n d a r d s can also a c t as a c o n s tr a in t to new

technology adoption w here s ta n d a rd s a r e not review ed to ta k e a c co u n t of

changes in manufacturing technology.

ASTEC recommends:

That the M inister fo r Industry, T ech nology and Commerce formulate proposals, in consultation with the Australian In d u s tr y and T echnology Council, to ensure th a t reg ulations incorporating technical standards are regularly reviewed to take a c c o u n t o f changes in m a n u fa ctu rin g technology. Where possible, standards

should be s p e c ifie d in terms of final performance. Regulatory authorities should be encouraged to use th e ir pow ers and r e s p o n sib ilities to e x e r c is e d is cretio n

about the m anner in which compliance with existing standards is attained in the light o f changing technology.

(R13)

7.4.11 The adoption of c o m p u t e r - r e l a te d tech n o lo g ies in p a r tic u la r , is

disadvantaged by the government's d i f f e r e n t i a l t r e a t m e n t of co m p u te r c a p a c ity em bodied in equip m en t in d i f f e r e n t areas of the firm's operations, and between particular types of c o m p u te r -re la te d eq u ip m en t. C u rre n tly , a sales tax of 20

per c e n t is levied on c o m p u te rs e x c e p t w here they a re defined as 'a id s to

m a n u f a c t u r e '. C o m p u te rs used in o ff ic e s , including c o m p u te r-a id e d design

systems, are not exempt. Activities in the office contribute to the overall

90

productivity of the manufacturing enterprise in the same way as do activities on the shop floor and their c o s ts a re equally p a r t of the co st s t r u c t u r e of the

enterprise. There is no warrant for treating them differently.

ASTEC recommends:

That the Treasurer seek to amend the Sales Tax (Exemptions and Classifications) Act (1935) so that the definition of 'aids to manufacture' as given in the First

Schedule be e x te n d e d to include all c o m p u te r systems used in manufacturing establishments, in order that they be exempt from sales tax.

(R14)

7.4.12 Computer hardware purchased after July 1982 can be depreciated at a

rate of 33 1/3 per cent but the rate which applies to NC and CNC machines is

20 per c e n t. We co nsider th a t th e sam e r a t e should apply to both types of

equ ip m en t, and t h a t the r a t e should be ra is e d as a means of s tim u latin g

in v e s tm e n t in new m achines and system s. The co sts of m odificatio n and

upgrading of existing machinery - in contrast to the purchase of new m achinery - are allowable deductions in the year in which they are incurred.

ASTEC recommends:

That the Treasurer se e k to amend the Incom e Tax Assessment Act (1936) so

that the depreciation rate for machine tools incorporating computer controls be the same as for computer hardware, and be increased to 100 per cent.

(R15)

7.4.13 B ecause new te c h n o lo g ies a re usually embodied in costly new

equipment, their adoption can be accelerated by the payment of an in v estm en t allow ance. Such an allow ance makes all forms of investment, including those which incorporate new tech n o lo g ies, more p ro f ita b le . At p re s e n t, firm s are

eligible for an investment allowance of 18 per cent; firms may write off a sum

equivalent to 18 per cent of the initial purchase price of the machine or system

against taxation. The current scheme will expire in 1985.

7.4.14 There a r e a num ber of options open to government with respect to

using in v e s tm e n t allow ances to s t im u la te th e p u rchase of new plant and

equipment.

7.4.15 F ir s t, th e Government could extend the existing scheme for a period

of at least three years. Such a period is requ ired to allow a s u ffic ie n t tim e

for th e planning of some p ro je c ts . To announce now the continuation of the

existing schem e would re m o v e an e le m e n t of u n c e rta in ty in the minds of

decision makers about the future of the allowance.

7.4.16 Secondly, the investment allowance could be raised substantially for a limited period to stimulate in v e s tm e n t. Such a move would have a twofold

im pact on the m e ta l trades industry. The output of firms in the metal trades

is chiefly plant and equipment and other metal products. Increased demand for these products would help utilise the excess capacity in the industry, which is a major factor limiting the adoption of new technology. The investment allowance would also act as a direct incentive for new technology adoption in the industry.

91

7.4.17 A th ird p o ssibility is for a t w o - t i e r in v e s tm e n t allowance. Firms

would be eligible for an investment allowance of 18 per ce n t on item s of new

plan t and equipm ent and the allow ance would be doubled for an Australian

value-added component. Such a scheme would provide in centives to A ustralian in v e s to rs to buy locally produced machinery and equipment which would provide a stimulus to local suppliers.

7.4.18 C hanges in in v e s tm e n t allowances, particularly short-term increases, create their own problems. Although th ey en courage im m e d ia te in v e s tm e n t, t h e r e is l i t t l e evidence th a t th ey ra is e it in the longer te rm . A possible

d is a d v a n ta g e of th e t w o - t i e r proposal is t h a t it may persuade firm s to

com prom ise their technological objectives for the sake of the allowance. Other m eans of giving support to th e local m achine tool industry may be more

appropriate.

ASTEC recommends:

That the Government continue the present investment allowance of 18 per cent for a period of at least three years after 1985, and make the e a rliest possible

announcement of its intentions.

(R16)

7.5 The Environment for Innovation

7.5.1 Our views of the conditions in which computer-related technologies

can most effectively assist the economic health of firms in the metal trades are summarised below.

7.5.2 New tech n o lo g ies have a s u b s ta n tia l c o n trib u tio n to make to the

increased productivity of firms. But perceiving the need and then identifying and successfully in troducing th e right technologies is no easy task. The risks are large and the financial resources available to firms in a period of re cession and in cre ased import competition are meagre. The task is made more difficult by a history which has not re q u ire d firm s to be esp e cially innovative and

ris k -ta k in g . Thus management approaches, work culture and structure of skills in many firm s is not g e a re d to dealing with a re q u ir e m e n t for s u b s ta n tia l

change.

7.5.3 Yet s u b s ta n tia l change is required, and is occurring. Without it, the

expected profitability of major new computer-related systems will not be large enough to justify the risks involved in their introduction. The required changes have two a s p e c ts . One is t h a t firm s m ust be encouraged and allowed to

r a tio n a lis e th e i r o p e ra tio n s to ena ble them to achieve volumes of throughput which justify the in s ta lla tio n of expensive c a p ita l equipm ent. G overnm ents inhibit this process in various ways, including anti-monopoly regulations and state preferences. We draw atten tio n to the c o n trib u tio n which im ports can

m ake to pre v en tin g th e abuse of m a rk e t power by firm s which d om inate

domestic production.

7.5.4 The o th e r a s p e c t of change is to le t change happen. Attempts to

insulate an industry from requirements to modify, adapt and initiate reduce both

92

the c a p a c ity (through e x p e rien ce ) and the incentive to adopt and develop new technologies. Should the protective policies fail or subsequently be a lte r e d , the industry is left poorly equipped to cope with the new environment; in particular,

the option of utilising the opportunities provided by the l a t e s t tech n o lo g ies is made much m ore d if f i c u l t by th e lack of past ex perience in identifying and

introducing new methods. In this situation firms need some assistance to adjust to th e new e n v iro n m e n t, if unnec essary social and economic costs are to be

avoided. This assistance should be carefully tailored to increase the capacity to ada p t without reducing the pressures to do so. It should be timely, limited and be a complement to, rather than a substitute for, firms' own c r e a t i v e e f fo rts .

Our recommendations are framed with this in mind.

References

[1] ASTEC, 'G ov e rn m en t P urchasing and O ffsets Policies in Industrial

Innovation', A ustra lian G overnm ent Publishing Service, C anberra, 1984.

[2] We n o te th a t firm s which are ab le to develop a significant export

market can diminish the impact of domestic recession on their overall level of demand.

[3] We visited two small firm s - in one case with 33 employees and in

another case with nine - who are in the forefront of the adoption of

c o m p u t e r - r e l a te d technologies. Both firms had introduced CAD/CAM systems, one having a DNC link between the drafting office and CNC m achines. These firm s have ex c e p tio n a l ta l e n t s among th eir

employees and in their management in term s of th eir understanding of c o m p u te rs and how they can be used in th e ir p a rtic u la r

environment. However, this is not typical of most of the firm s we

visited.

[4] C. Voss, 'CAD/CAM and S t r a t e g y ', Warren C e n tre for Advanced

Engineering Seminar Papers, June 1984.

[5] Donald Gerwin, 'D o's and d o n 'ts of co m p u te riz e d manufacturing',

Harvard Business Review, March-April 1982.

[6] P. Stonem an, 'The Econom ic Analysis of Technological C hange',

Oxford University Press, 1983, ppl20-121.

[7] Reported in C. Voss, op.cit.

[8] One reason why downstream benefits are difficult to quantify within a

firm is that they cut across traditional organisational divisions, and b e n e fits do not n ec essarily fall in the department making the most

use of the system.

93

[9] One firm interviewed had installed a comprehensive inventory control

and supply system to monitor some 18,000 line items in sto res. The re ady a c cess to p ric e , in fo rm a tio n and a v a ila b ility allowed the

production of a marketing c a ta lo g u e to 'm a r k e t ' the spares r a th e r

th an th e wait for ord e rs. The firm now a d v e rtis e s i t s e l f as a

one-stop shop for spare parts for use in the mining industry.

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8. INDUSTRIAL RELATIONS, SKILLS AND TRAINING

8.1 Introduction

8.1.1 The in tro d u c tio n of new tech n o lo g ies in the metal trades industry

raises a number of issues in the areas of industrial relations, skills and training. An e x a m in a tio n of in d u s tria l relations (labour management) issues is important for two main reasons. F ir s t, the in tro d u c tio n of new technologies in the

w orkplace can s ig n ific a n tly a f f e c t w orkers' job s e c u rity and th e ir working

environments. Secondly, th e c a p a c ity and the willingness of em ployees and m a n ag e m en t to a c c e p t and to operate new technologies can have an important influence on their successful introduction and ex p lo ita tio n . In some firm s we v isited it was a p p a re n t t h a t poor la b o u r-m a n a g e m e n t relations inhibited the

adoption of new technology, increasing the uncertainty with which firm s viewed the likelihood of th e ir securing th e e x p e c te d b en e fits. In other cases, good

labour-management relations contributed to the successful e x p lo itatio n of new technologies. Skills and training issues are addressed because it is apparent that basic changes are necessary in general and v o ca tio n a l education, train in g and retraining in order to respond to the challenge of technological change.

8.1.2 The industrial relations issues arising from technological change which directly affect workers and employers at the w orkplace cannot be considered separately from the specific culture in which those changes are taking place [1]. A country's industrial relations system is an in te g ra l p a rt of its social system

and work c u ltu re and is seen as a major influenc e on la b o u r-m a n ag em e n t

re la tio n s [2]. These m a t t e r s are considered under th e heading of 'c u ltu ra l

c o n t e x t ' in the f ir s t p a rt of the chapter. Included in this section is a review

of the Australian indu strial re la tio n s system as it a f f e c t s the m e ta l tra d e s

industry and an o utline of the recent Decision of the Australian Conciliation

and Arbitration Commission to grant employees the right to c o n su ltatio n with re g ard to the in tro d u c tio n of change [3], A proposal for the development of

effective consultative mechanisms in the light of this Decision is advanced.

8.1.3 In subsequent s e c tio n s four major indu strial re la tio n s issues are

addressed which directly concern people working with new technologies in the m e ta l tr a d e s industry. They are job security, changing skill levels, occupational health and safety, and the exten sio n of m a n ag e rial m onitoring and control.

C o n su lta tio n is likely to e m b ra c e these issues. The chapter concludes with an examination of skills and training issues.

8.2 The Cultural Context

8.2.1 When considering the in d u strial relations issues associated with the

introduction of new technologies, it is of lim ited value, or even p o te n tia lly

m isleading, to consider a technology independently of the environment in which it is operating. The impact of the adoption of new technologies needs to be

considered in the context of the work culture into which it has been introduced [4],

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8.2.2 The re la tio n s h ip b e tw e e n technology and the work culture is one of

interdependence. The nature and the extent of th e b e n e fits derived from the

introduction of new technology can be shaped by values and social structures; in turn, new technologies can influence the work culture. Thus the introduction of new te ch n o lo g ies can affect methods of work, levels of staffing, the classifica­

tion of employees, the levels of skills, social interactions, union affilia tio n s and the order of the hierarchy within an organisation [5]. In turn, values and social structures can affect the successful exploitation of the new technologies. Their p e r fo rm a n c e depends not only on their technical characteristics but also upon their acceptance and use by a workforce which has its own interests, objectives and motivations [6],

8.2.3 The pattern s of interdependence between technology and work culture and its relationship to the s u cc essfu l adoption of new technologies can vary

b e tw e en firm s and betw een c o u n trie s. In p a r tic u la r, re c e n t studies reveal

differences in a number of countries in the relationship between their respective industrial relations systems and technological change [7,8].

The Australian Industrial Relations System

8.2.4 One c o m m e n ta ry observes that 'no discussion of technological change in Australia can ignore the influence of the fe d e ra l and s t a t e trib u n als which

have shaped industrial relations since the turn of the century' [9]. As it affects

the metal trades industry, the system has two main characteristics. First, it has led to the development of the Metal Industry Award. Secondly, the system, in operatin g at s t a t e and n atio n a l levels, has tended to focus largely on the

arbitral process, not on relationships in the workplace.

8.2.5 The Metal Industry Award was first introduced in 1971. Among other

m atters it provides a system of job classification and paym ent in te rm s of the

work done in the industry. The Award r e f l e c t s , to some e x te n t, both the

content of jobs and th e ir h ie ra rc h y in o rg anisations. It also in d ic a te s the

d e m a rc a tio n of jobs between different unions. There are many other federal and s t a t e aw ards, d e te r m in a tio n s and a g r e e m e n ts applying to a wide range of

em ployees in th e metal trades industry. However, the Metal Industry Award is considered the 'parent' for m ost, being g en e rally a c c e p te d as a 'b e n ch m ark '

aw ard. The parties bound by the Metal Industry Award (which is in five parts) are listed in Table 8.1.

8.2.6 The M etal Industry Award constitutes a vital ingredient in the work

culture of firms in the metal trades industry and any new technology introduced into the workplace will interact with the provisions of the Award. Nevertheless, the impact of new technology cannot be determined simply; changes introduced into this environm ent can re q u ire e ith e r the changing of existin g job

classifications or the addition of new classifications. For exam ple, the Award was varied in November 1981 to ac co m m o d ate th r e e new cla s s ific a tio n s :

Instrument Tradesmen (complex systems), Instrum ent and C ontrols Tradesm en, and E le c tro n ic s T radesm en, which resulted from the introduction of electronic and computer controlled equipment, re quiring com plex m aintenanc e. In o th e r c a ses the c la s s ific a tio n of an individual's job may rem ain unchanged. For

example, a first class machinist's job could be deskilled by the introduction of a CNC m achine. However, the operators may still be classified as before because of what is regarded as added responsibility for the running of a highly expensive machine, despite atrophy of the operator's skills.

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Table 8.1:

Metal Industry Award 1984 Parties Bound

PART 1: Wages Employees

Unions: Amalgamated Metal Foundry and Shipwrights Union Australasian Society of Engineers Australian Glassworkers Union Building Workers Industrial Union of Australia

Electrical Trades Union Federated Ironworkers Association Federated Miscelleneous Workers Union Federated Storemen and Packers Union Plumbers and Gasfitters Employees Union

Employers: Metal Trades Industry Association Metal Industries Association of South Australia Metal Industries Association of Australia V ictorian C ham ber of M a n u factu re s and m em bers of

such organisations.

PART II: Draughtsmen, Planners and Technical Officers

Unions: Association of Draughting, Supervisory and

Technical Employees

Employers: As in Part I, plus

Metal Manufacturers Limited

PART III: Professional Engineers

Unions: Association of Professional Engineers

Employers: As in Part I

PART IV: Professional Scientists

Unions: Professional Scientists of Australia

Employers: As in Part I

PART V: Firemen and Supervisors

Parties as in Part II of the Award

P a r t I of the Award has two appendices: Appendix A

-O n -s ite C o n s tr u c tio n Work and Appendix B - S te el Industry

Establishments.

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8.2.7 The cla s s ific a tio n of jobs and the demarcation between jobs which is

reflected in the Award is based on a historically developed set of skills [10].

The unions to which workers belong tend also to be organised along these lines. Insofar as new technology requires new skills for its succ essful o p e ra tio n and o ff e rs the o p p o rtu n ity for a more flexible ap proach to the allocation of job

tasks, existing classifications can be inappropriate for the new te c h n o lo g ies and can lead to overstaffing. Multiskilling (work performed across job classifications) arrangements have sometimes been in stitu ted but, g en e rally , m ultiskilling has m et with a n e g a tiv e re a c tio n from unions. Multiskilling is seen by some in the

union movement as substituting a ra n g e of in fe rio r skills in p lace of a high

level of skill in a p a r ti c u la r c r a f t and w orkers a re jealous of th e ir skills.

Others see the introduction of multiskilling on a shop-by-shop basis as posing d ifficu lties for comparability between jobs in different locations and a threat to jobs and pay. Because a union may see an established c la s s ific a tio n or task as

solely within its constitutional coverage, some unions also see the introduction of multiskilling as an encroachment on their membership base.

8.2.8 New technology is tra n s f o rm in g th e p rinciples on which job

classifications incorporated in the Metal Trades Industry Award have been based. Thus there is a need to explore ways of framing the Award which takes account of this pressure while accommodating the interests of the parties to the Award.

8.2.9 The second im p o rta n t characteristic of the arbitration system which

has influenced labour-management relations is th a t it tends to o p e r a te at two

d is tin c t levels: at the formal arbitration level, and at the informal plant level,

with little integration between the two. The work at the formal level involves

an aw ard-m aking and d is p u te -s e ttlin g process which may cover more than one establishment within a particular jurisdiction. The Australian arbitra tio n system is unique in that it is compulsory and institutionalises the adversarial character of Australia's industrial relations; th is is not conducive to solving problem s

which might arise from the introduction of new technology.

8.2.10 R e c e n tly , there have been moves towards more decentralised decision making and more interaction between union membership and m anagem ent a t the w orkplace. These moves were a p p a re n t as far back as the early 1970s when

unions attem pted to gain a consultative role in relation to technological change. L a te r, unions and m an ag e m en t w ere able in individual cases to n e g o tia te

technology and redundancy agreements [11]. Moves towards increased shop-floor c o n s u lta tio n have now culm inated in the Termination, Change and Redundancy Case. As a result of the Decision handed down in this ca se, aw ards must now

include provisions for c o n s u lta tio n betw e en m an ag e m en t, workers and their unions concerning a range of changes that may be contemplated within a plant, and in the case of redundancy.

Termination, Change and Redundancy Case

8.2.11 The Decision on the Termination, Change and Redundancy Case was handed down in August 1984. It relates to a claim by the ACTU on b ehalf of

th e m etal t r a d e s unions, seeking to estab lish in fe d era l aw ards a right for

individual em ployees not to be unfa irly dism issed, a rig h t for individual

em ployees in the ordinary termination of employment to an increased period of notice based on length of service, obligations on employers to notify and consult w ith em ployees about changes which a re likely to have significant effects on em ployees, and in redundancy s itu a tio n s , in cre ased n o tice and a right to

co m p en sa tio n and a s s is ta n c e for employees dismissed due to redundancy. The

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claim thus had a d i r e c t b earing on two im p o rta n t industrial relations issues

arising from the introduction of new technology: em ployee c o n su ltatio n befo re the in tro d u c tio n of new technology, and redundancy that might arise from its implementation.

8.2.12 In its Decision, the Com mission s t a t e d t h a t the proc edure s for

notification, consultation and provision of information do not lend themselves to e f f e c ti v e legislation or award prescriptions. However, the Commission indicated that it was prepared to include in awards a requirement that c o n s u lta tio n ta k e

place 'a s soon as a firm decision had been ta k e n about major changes in

production, program, organisation, structure or technology which a re likely to have sig n ific a n t e ffec ts on employees' [12]. The Commission also decided that the employer should provide in writing to employees and th e ir r e p r e s e n ta tiv e s

all relevant information about the changes proposed and their likely employment e f f e c ts . However, the em ployer is not re q u ired to disclose co n fid e n tia l

information.

8.2.13 The Commission adopted similar provisions for consultation in respect of redundancy as for the introduction of change. The Commission did not lay down p ro c ed u re s for n o tific a tio n , consultation or provision or information. It was prepared only to make an award provision recognising the im p o rta n c e of

involving employees and their representatives in the problems of redundancy 'as soon as a firm decision had been ta k e n ' t h a t r e tr e n c h m e n ts a re necessary.

F u rth e r, it fe lt t h a t s u ffic ie n t tim e must be allowed and sufficient material

provided if discussions a re to be s a t i s f a c t o r y . The Commission also made

provision for severance payments resulting from redundancy.

8.2.14 The Decision e s ta b lis h e s th e in d u s tria l right of em ployees to

c o n s u lta tio n w ith re g ard to the in tro d u c tio n of change and in cases of

redundancy; previously, c o n s u lta tio n betw e en labour and m anagem ent was voluntarily e n te r e d into by the p a r tie s . However, th e Decision ta k e s a

r e s t r i c t e d view of th e c o n s u lta tio n process; consultation need only take place after management has decided to in tro d u ce changes into the firm or, in the

case of redundancy, 'as soon as a firm decision had been ta k e n ' th a t

r e tr e n c h m e n t s a re n e c essary . This could be i n t e r p r e t e d as meaning th a t

m anagem ent need only provide information and even at a very late stage, given the confidentiality provision. Furthermore, the Commission did not distinguish betw e en those cases where change was part of a planned on-going process with significant lead times before implementation and those cases where change may be unfo rse en and a b ru p t. Yet th e e f f e c t of th e proposed con su ltatio n

a r ra n g e m e n ts on th e change process could have very d iffe re n t outcom es

depending upon the circumstances.

8.2.15 The Commission saw its Decision as being consistent with National

Labour Advisory Council (NLAC) Guidelines on the introduction of change [13]. These guidelines w ere f ir s t issued in 1969 and revised in 1972; thus they were drawn up in a different economic and industrial relations environment. In 1972 the economy was r e la tiv e ly buoyant and few unions were concerned about the

issue of new technology [14]; w orke r-e m p lo y e r con su ltatio n was much less common than it is now. Workers now are demanding a greater say in matters

that directly affect their working environment. Perhaps of g r e a t e r im p o rta n c e is the fact that unions have become much more concerned with the survival and viability of industry whereas previously th e ir c h ie f i n t e r e s t s were wages and conditions. Their in volvem ent in various high level tripartite discussions also

serves to widen t h e i r i n t e r e s t and e x p e rien ce . For th e s e reasons we are

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c o n c ern e d that in spite the NLAC Guidelines being a basis of the Decision they are an inappropriate model for the developm ent of c o n s u lta tiv e p ro c edures in the 1980s.

8.2.16 The Commission's decision largely leaves managements' right to make decisions relating to how their business should be operated unchanged. However, since t h a t decision was handed down, th e High C ourt of A u s tra lia , in the

Federated C lerks Union ca se, has e f f e c ti v e l y upheld an aw ard made in the

V ictorian Industrial R e latio n s Com mission providing for consultation to take place at the feasibility stage rather than after the decision has been made to

introduce new technology [15]. The full implications of the High Court Decision have not yet been canvassed, but the view has been expressed that as a re s u lt

of th e ju d g em en t, both s t a t e and federal awards could be extended into areas

that have previously been regarded as management prerogatives.

8.2.17 As has been recognised elsewhere in this report, the primary goal of

the adoption of new technologies is to make industry m ore c o m p e titiv e and

p r o f ita b le . It is clear that the future of a firm and the jobs of its employees

depend on the achievement of this goal. T h e re fo re , any indu strial r e la tio n s

p r a c t i c e s which underm ine this p o t e n t i a l are aga inst the best i n t e r e s t s of

employees in industry. Developments in the c o n s u lta tio n process need to be considered against this background.

Effective Consultation Mechanisms

8.2.18 In in d u strial re la tio n s , th e term 'consultation' is given a variety of

interpretations. For some, it means n o tific a tio n a f t e r decisions a re made to

im p le m e n t new tech n o lo g ies or to in tro d u ce o th e r changes. For o th e rs ,

c o n s u lta tio n m eans em ployee p a r ti c ip a ti o n in th e decision-m aking process com m encing a t th e fe a s ib ility s ta g e . There a re many i n t e r p r e t a t io n s in

between.

8.2.19 Our view is that the consultation process should be structured in such

a way that it contributes not only to the avoidance of conflict, but also tak es

a d v a n ta g e of the experience and ideas of employees to the benefit of the firm. We believe that this important source of support and ideas is o fte n untapped.

Consultation also promotes opportunities for the development of efficient forms of work organisation.

8.2.20 In taking this view we are conscious of the need for a change in the

c lim a te of in d u strial re la tio n s in A u s tra lia , from one which too o fte n is

c h a r a c te r i s e d by c o n flic t r a t h e r th an co -o p era tio n . International experience strongly indicates that th e system of in dustrial re la tio n s and th e a s s o c ia te d

c li m a t e of labour-management relations is a major determinant of the extent to which benefits are gained from the introduction of new technology.

8.2.21 At the w orkplace level th e introduction of substantial technological

change emphasises the nature of the relationships which already exist betw e en m an ag e m en t and w orkforce within th e firm . If t h a t re la tio n sh ip is one of

reasonably open, two-way communication management will naturally consult and th e w orkforce will most likely respond in a constructive way. At its best, the

changes will be much improved by the ideas and contributions of the workforce. However management may be concerned that advance information will be used to oppose the changes or simply to extract com pensation. R a th e r than being

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able to draw upon th e co-operation and talents of its employees, management then will be faced with overcoming resistance and possible hostility. Thus the e s ta b lis h m e n t of a positiv e in d u s tria l re la tio n s c lim a te is an im p o rta n t

investment in the future successful introduction of technological change.

8.2.22 The d ev e lo p m e n t of a p p r o p ria te c o n s u lta tiv e m echanism s a t the

workplace offers the possibility of securing a change in the indu strial re la tio n s c lim a te . We do re cognise t h a t in many individual instances good industrial

re la tio n s alre ad y pre vail. In some cases it is th e outcom e of a shrewd

a s se ssm e n t by both em ployees and management of their common interests. In o th ers, it r e f l e c t s a more fu n d a m e n tal value, of th e dignity of human

re la tio n sh ip s. But in those in s ta n c e s where such conditions do not hold, the

adoption of a p p r o p ria te c o n s u lta tiv e m echanism s o ffe rs the o pportunity for improved relations between labour and management. This has implications for a wider range of issues than technological change.

8.2.23 From the p e rs p e c tiv e of te c h n o lo g ic a l change, an a p p ro p riately

s t r u c t u r e d c o n s u lta tiv e m echanism is likely to p rom ote the adoption and

ex p lo ita tio n of new technologies; many studies have established the importance of consultation to the su ccess of th is process. F u rth e rm o re , it is likely to

enhance employee job satisfaction. It is also consistent with the Commonwealth Government's moves in the area of industrial democracy.

8.2.24 A u s tra lia n industrial history and current structures are not, however, conducive to firm or plant based co n su lta tio n . There may be a number of

unions re p re s e n te d within th e one firm. Much more than is th e case in

negotiation over wages and conditions, the introduction of tech n o lo g ica l change re q u ire s c o n s u lta tio n and negotiation on a firm rather than on an occupational basis. Substantial technological change will have an im pact right across the

firm . If all the workers who are affected are to endorse and contribute to the

effective working of the new technology, they must all be given the opportunity to understand and, if appropriate, modify the changes which are proposed.

8.2.25 R egardle ss of th e e x t e n t of th e ch a nge, one form of consultation

which would make this possible is for management to consult d ire c tly with its w orkforce without involving formal union representation. But it is possible that a workforce (especially one which the management does not regularly tak e into its confidence) may find it difficult to appreciate the implications of what is

being proposed. Experienced union officials can provide valuable support in such c irc u m sta n c e s . A desirable consultation structure thus is one which provides a plant-based grouping of the workforce yet one which incorporates the support of union resources. We note that the provision of these resources would be costly

to the union movement.

8.2.26 Industrial re la tio n s and technological change are both complex areas and neither harmony nor effective consultation can be legislated. A number of possible stages in the consultation process can be identified. There may be an exchange of information. There may be discussions on the basis of information provided which could influence m a n a g e m e n t's decision to introduce new

technologies. If the parties cannot agree the final decision whether or not to

proceed re m a in s with m anagem ent. Even if the parties agree, management may still make the final decision. Finally, both parties may agree that c e rta in

actions might proceed.

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8.2.27 Steps need to be ta k e n to enhance th e d evelopm ent of the

consultation process. Such steps could include a voluntary schem e involving a sm all num ber of firm s, in which th e Commonwealth Government provides the initiative and some support for the d evelopm ent of co n s u lta tiv e m echanism s along the lines suggested above. (Such an approach has been adopted recently to promote affirmative action). By this m eans the in fo rm atio n and experienced gained might then be applied more widely.

8.2.28 An e f f e c t i v e c o n s u lta tiv e mechanism should, in our view, contain

these elements:

. agreement on the goals sought by both labour and management;

. th e need to e s tab lish a t what sta g e in th e change process

consultation should commence;

. th e need to e s tab lish a proper fram ew ork within which

consultation take place;

. the need to estab lish a code of p r a c t i c e to d efine how

consultation should take place; and

. a decision on w he th e r th e code of practice should be uniform

for all firm s or should apply d iffe re n tly for d i f f e r e n t firm s

(being aw are th a t forms of consultation which are likely to be

appropriate for larg e firm s may d iffe r from those which are

best suited to small firms).

ASTEC recommends:

That the M inister for E m plo ym en t and Industrial R elations consult with the

union movement, employees and employers to produce d eta ile d proposals for the im p le m e n ta tio n o f a volu n ta ry scheme of firm-based consultation between management and workers on the introduction of new and improved technologies, to serve as a model from which o th e r fir m s m ight d evelop more effective

consultation mechanisms.

(R17)

The Resources of Unions

8.2.29 We have one o th e r co n c ern about c o n s u lta tio n which is t h a t the

consultation process can be fully effective only if both p a r tie s p a rtic ip a tin g in n e g o tia tio n s are equally well inform ed about the issues and options. It is

evident that many unions, particularly small unions, have n e ith e r the financial re s o u rc e s nor the personnel to engage in the c o n s u lta tiv e process on these

terms. We are informed that in some cases, where c o n s u lta tio n a g re e m e n ts

a lre a d y exist, the unions a re weighed down with the flood of in form ation

presented to them and are unable to engage effectively in c o n su ltatio n to the

extent that they would wish. This can retard the adoption of new technology.

8.2.30 We consider th a t th e s e d if f i c u l t i e s can, in p a r t, be overcom e by

unions forming themselves into larger units (although even la rg e r unions have re s o u rc e s problem s of this n a tu re ). Union a m a lg a m a tio n has been widely

canvassed in Australia for a number of reasons, most recently by the R eport of

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the C o m m itte e of Inquiry into Technological Change in Australia, the CITCA report [16] (some of whose recommendations have been implemented). The issue is also currently under consideration by the Committee of Review into Industrial Relations Law and P r a c tic e . In the light of this review we do not wish to

make specific recommendations, but simply to add the weight of the interests of te c h n o lo g ic a l change to th e b a lan c e, on th e side of fa c i l it a t i n g union

a m a lg a m a tio n . The C om m onw ealth Department of Employment and Industrial Relations is to release in 1985 a green paper on industrial democracy which will look a t , in te r a l i a , the issue of t r a d e union re s e a rc h support needs in the

context of consultation and technological change.

8.2.31 The CITCA r e p o rt also recommended, with a view to enhancing the

capacity of the union movement to study and respond to te c h n o lo g ica l change, t h a t th e Trade Union Training Authority (TUTA) be requested to examine the adequacy of the provision of training relevant to th e needs of t ra d e unionists

involved in negotiations on technological change issues, and that funds should be made available by government where significant needs were identified [17]. This e x a m in a tio n was u n d e rta k e n as p a r t of an in te rn a l review of TUTA's wider

training activities. Subsequently, additional re s o u rc e s were provided by the G overnm ent to expand TUTA's activities not specifically for, but to encompass, training on technological change matters. At present TUTA conducts re la tiv e ly few co u rses s p e c ific a lly on technological change but these issues are discussed

in courses conducted for particular industries as the need arises.

8.3 Industrial Relations Issues Associated with Technological Change

8.3.1 N ext, we review four issues which have arisen in labour-management relations at the workplace as a consequence of technological change. They are em ploym ent (job s e c u rity ), changes in skill levels, o cc u p atio n al hea lth and

safety, and the extension of m a n ag e rial m onitoring and control. The review

em phasises the role which job design and work organisation can play in ensuring that the adverse social effects of technological change are am eliorated and the potential benefits to workers are maximised.

Employment (Job Security) Issues

8.3.2 No o th e r issue a s s o c ia te d with the in tro d u c tio n of technological

change has attracted as much attention as its impact on em ploym ent numbers. From our in te rv ie w s we have been able to draw some conclusions about the

impact of techological change and employment in the m etal tra d e s industry at the workplace level.

8.3.3 F ir s t, a t the r a t e a t which te c h n o lo g ica l change is p resently

occurring, we found there is little concern about redundancy specifically as the re s u lt of adoption of new technology. R a th e r, labour-saving through

te c h n o lo g ic a l change has come p re d o m in a n tly from n a tu ra l w astage.

R e tre n c h m e n ts had o cc u rre d in many firms visited by us, and in others there

had been a fall in employment numbers achieved through a t t r i t i o n , but these

falls w ere larg e ly a consequence of the downturn in demand for the output of

the industry and of increased import competition, rather than the d ire c t re su lt of th e introduction of new technologies. We noted, however, that in many cases it was expected that employment would not return to former levels even if the

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lev el of econom ic a c ti v i t y in c re a s e d su b s ta n tia lly . In th e s e cases the new

machines and systems were labour-saving and firms would also continue to give more careful attention to staffing practices.

8.3.4 Secondly, t h e re is a growing ap p re c ia tio n by workers and th e ir

representatives that the failure to introduce new technology, r a th e r than save jobs, is likely to c o n trib u te to f u r th e r job loss in the metal trades industry.

Unions a p p r e c ia te t h a t new tech n o lo g y has a role to play in ensuring the

con tin u ed e x is te n c e of many firms and they are sensitive to the dilemma that

the survival and viability of a firm or industry s e c to r (and th e ir r e la t e d jobs)

may re q u ire the in tro d u c tio n of new technology which red u ces the number

employed within each firm or industry. As one union leader put it, if firm s do

not in c re a s e th e ir p ro d u c tiv ity by, among o th e r things, introducing new

technology, 't h e r e will be nothing to have in dustrial re la tio n s ab o u t'. We

believe t h a t current job losses are, a t least in part, the outcome of the failure

to introduce new technology in the past. The continued use of old technology has c o n trib u te d to th e decline in the industry's competitiveness, and jobs have been lost as a result.

8.3.5 Thirdly, in some firms we visited, the introduction of new technology

was associated with increases in employment. The new technology had given the firm s a c o m p e titiv e edge in the market for their products and demand for the

firms' product had risen. As a consequence, any labour-saving e f f e c t s of new technology w ere more th an compensated for by the increased scale of output, and employment had risen. (We note, however, that employment levels for the industry as a whole would rise only in those circumstances where these firms' domestic market share rises a t the expense of im p o rts, or if t o t a l dem and,

including exports, rises.)

8.3.6 In the cases to which we have just referred, the new technology was

introduced not only for the purposes of securing a cost and price advantage but also to achieve c o m p e titiv e a d v a n ta g e s through im proved design and faster d e liv ery tim e s. The firm s in q uestion had id e n tifie d a m a rk e t and were

successfully marketing their products to meet these perceived needs. The result was a growth in output and an expansion in employment. This illustrates at the lev el of the firm that employment numbers are determined not just by the type of technology used, but also by the volume of production, and th a t more

efficient firms are likely to have higher volumes of output.

8.3.7 It is this interaction between the introduction of new technology and

the resulting changes in o utput which makes the p re d ic tio n of em ploym ent

effec ts particularly difficult. The employment outcome can vary from one plant to another, depending upon the r a t e of technologica l change, the e x t e n t to

which the new technology is labour saving and the responsiveness of demand and output (the compensating changes in scale) to the cost re d u ctio n s and oth er

changes in sources of competitiveness achieved through the introduction of new technology. These findings highlight the difficulties of making judgem ents about th e em ploym ent im p act of new technology from individual case studies.

Individual case studies can be found to support a range of views about the

em ploym ent im p act of new technology; no one case study can be used to

indicate the employment impact for the industry as a whole, let alone serv e as a basis for an econom y-w ide prediction. We repeat, however, that a failure to adopt new technology in this industry will c o n trib u te to a fu r th e r decline in

employment numbers.

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8.3.8 In th e a r e a of job security, workers' fears about job loss are greatly

reduced if there is a growth of job opportunities elsewhere. It is one thing to

change jobs; it is quite another to face long-term unemployment. However, in an environment where the introduction of new technology is perceived prim arily as labour-saving and w here t h e r e a re no apparent compensating changes in scale (which is usually the case during tim es of recession), w orkers see the choice

b e tw e en some job losses if new technology is introduced and a even greater job loss and possibly closure of the firm w ithout th e in tro d u c tio n of new

technology. Such an environment is very threatening. Retrenchment can mean financial hardship and a loss of self esteem in a society where status is heavily

d ep e n d en t upon o c c u p a tio n , and having and holding a job. The result is severe stress on a worker and his or her family and even fam ily breakdown. In these

circum stances it is not surprising that workers and their representatives want to extend the basis of consultation beyond retrenchment and redundancy matters, to m a tte rs having to do with the organisation and operation of the firm which have traditionally been management's prerogative.

Changing Skills Levels

8.3.9 The e f f e c t s of new technology on the 'average' skill requirements of

jobs within an economy depend upon at least three factors: the e f f e c t on the

skill c o n t e n t of p a r ti c u la r jobs; th e e f f e c t on 'average' skill requirements of

jobs in particular industries, reflecting the creation of new jobs and the a lte r e d skill r e q u ir e m e n ts of existing jobs; and the in d u strial com position of the

economy, reflecting the relative growth of different sectors of the economy in response to structural change.

8.3.10 In A u s tra lia t h e r e is a widely held belief that technological change

has increased the demand for skills across the economy and th a t this tre n d is

likely to contin u e. At th e same time, it is said, there is a declining demand

for unskilled, semi-skilled and poorly educated workers [18]. But r e c e n tly this 'orthodox' view has been challenged:

Support for th e proposition t h a t the dem and for skills is rising,

ir r e s p e c tiv e of cause, is a t b est equivocal. A more a c c u r a te

s t a t e m e n t would be a t both ends of the skills dimension demand is

rising for reasons that have little to do with technology; that a shift

in the balan c e b e tw e e n 'w h ite collar' and 'blue collar' employment

cannot be equated with a shift towards higher skill dem ands; t h a t in many o c c u p a tio n s a t the middle level, both reduced dem and and

deskilling appear to be the general effect of technology; and th at for youth the general trend in the demand for skills has been downwards rather than upwards, with technological innovation being a significant factor in the trend. [19]

8.3.11 Sim ilar claim s have also been made for the United States. Studies

show t h a t the a g g r e g a te skills re q u ir e m e n ts of jobs in the United S ta te s

economy have changed very little over the last two decades, despite automation in many industries. Further, it is claimed th a t in the fu tu re 'while some jobs

will re q u ire rising skills levels, the majority will not' [20]. The United States

Bureau of Labor Statistics employment projections lend support to this view. The p ro je c tio n s through to th e 1990s indicate that the future expansion of jobs in

absolute terms will be the g r e a t e s t in lower skilled occupations, th e la r g e s t

increase being for janitors, cashiers, secretaries and office and sales clerks [21].

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8.3.12 At th e in dustry level, and in the metal trades industry in particular,

there is also a diversity of views as to the likely impact of the introduction of

new tech n o lo g ies on lev els of skill. According to some w riters, a general

deskilling of sh o p-floor workers will re s u lt. B raverm an, for exam ple, sees

deskilling as a n e c e s s a ry ou tco m e of th e general 'tendencies' or 'laws' which

govern the behaviour of c a p it a li s t i c m an ag e m en t [22]. O thers see the

a p p lic a tio n of technology as p a rt of a m ore fu n d a m e n tal process of the

increasing fragmentation of work into r e p e t i t i v e and m ore ro u tin e a c tiv itie s , c o n trib u tin g to th e deskilling of jobs. This fra g m e n ta tio n o ffers increased

opportunity for those tasks to be automated [23]. 8.3.13 A second group of writers considers that a process of 'polarisation' of

skills is occurring. Some jobs require increased skills whilst o th e rs re q u ire a

lower level of skill than previously. However, the general view of this group of writers is that the growth in skilled jobs is likely to be smaller in num ber than

is the growth in the less skilled jobs [24].

8.3.14 A third group argue that there is no one predetermined outcome. For

example, a study of the e f f e c t of th e in tro d u c tio n of c o m p u ter n um erically

c o n tro lle d (CNC) machine tools in West German and British firms indicates that the impact of these new technologies on skills can vary depending upon p a ttern s o f labour u tilis a tio n and training. The authors found there was a consistently

held view in Britain that CNC tended to be deskilling and th a t CNC o p e ratio n was more routine. In Germany CNC operation was tied to tradesman status and g e n e ra lly an in cre asin g com m and over skills. Both the program m ing and

o p e r a tio n of m achines w ere c a r r ie d out by th e m achine o p e r a to rs on the

shop-floor; in B ritain these task s w ere g e n e ra lly s e p a ra te d . The g r e a t e r

s e p a ra tio n in B ritain was seen to tie in with the increasing differentiation of

technician and worker apprenticeships; in Germany craftworker training precedes technician training [25].

8.3.15 A nother study of th e in tro d u c tio n of NC m achines within British

firm s found t h a t th e d is trib u tio n of task skills to d i f f e r e n t occup atio n al

c a te g o r i e s (upon which the overall skill level of any given job depend) depended upon trade union positions and their relationship to the relevant labour m ark e ts, m a n ag e m en t o rg a n is a tio n a l s t r u c t u r e s , and the market for the firm's product which is allied to the physical c h a r a c t e r i s t i c s of the product. The au th o r

concluded there was nothing inherent in NC hardware or its concept that would necessarily result in deskilling [26].

8.3.16 W hether or not deskilling o ccurs as a result of the introduction of

new technologies is also a m atter of job design and work organisation. Jobs can be looked upon as a combination of tasks. Employers create jobs by combining sets of tasks and allocating them to individuals. The skill levels of a particular job depends upon th e skill c o n t e n t of ea ch task and how tasks are allocated

between jobs, and between people and machines [27].

8.3.17 The e f f e c t of the introduction of new technology on skill levels will

operate first through its e ffec t on th e skill c o n te n t of p a r tic u la r tasks. The

co n c e p t of 'skill' is a com plex one. One approach is to argue t h a t the

introduction of new technologies will change the 'd e p th ' and the 'b r e a d th ' of

skill requirements. Skill 'depth' refers to the time taken to master a particular

task and the judgement inherent in the task; skill 'breadth' r e f e r s to the input

needed to perform a s e t of non-sim ila r tasks. Our p erc e p tio n of deskilling

usually centres on reductions in skill 'depth' [28].

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8.3.18 The in tro d u c tio n of new technologies is expected to result in some

tasks being destroyed, others deskilled and in th e c r e a tio n of new tasks. A

study of c o m p u t e r - r e l a te d tech n o lo g ies in manufacturing in the United States concluded that the introduction of these technologies seemed to lower the tim e , p ro fic ie n c y and judgement required to acquire efficiency in the performance of many tasks, both by craftworkers and professional workers. A reduction in skill

d ep th and deskilling occurred in the performance of these tasks. The study was less clear about the impact of new technologies on skill bre ad th . However, it

was g e n e ra lly e x p e c te d t h a t personnel working with the new technologies will require less intimate knowledge of a single task but a more g e n e ral knowledge of more tasks [29].

8.3.19 The e f f e c t on p a r ti c u la r jobs, .whether they are destroyed, deskilled

or upgraded, will depend significantly upon how tasks are com bined. In theo ry a t least, some of the adverse effects of the introduction of new technologies on workers' jobs could be ameliorated by giving greater attention to job design and job o rg a n isa tio n . It is argued t h a t the flex ib ility inh ere n t in many

microelectronics-based te ch n o lo g ies could f a c i l i t a t e this process. There are in d ic a tio n s , however, that jobs will be fragmented into an even narrower range of tasks. H is to ric a lly , th e co n n e ctio n has been strong betw e en rigid work

o rg a n is a tio n and the use of new technologies and, as we have earlier noted, job organisation has tended, with some notable exc ep tio n s, to fra g m e n t work into more narrowly defined sets of tasks to secure the benefits of specialisation. The flexibility of m ic ro e le c tro n ic s -b a s e d tech n o lo g ies can also be employed to

r e in f o rc e this tendency. The more narrowly defined the job, the more likely it is that particular jobs will be destroyed or that 'polarisation' will occur between those jobs that are deskilled and those that require a greater degree of skill.

8.3.20 There is no published study of the relationship of new technology and

changing skills levels in the Australian metal trades. However, industry observers believe t h a t deskilling of shopfloor workers has generally been occurring over tim e. The tre n d to w ard s deskilling has p re ced e d th e in tro d u c tio n of new

technology - it has accompanied the greater fragmentation of work - but it has been reinforced by new technology. Observers point to the fa c t t h a t in many

in s ta n c e s, jobs which in earlier years were carried out by first class machinists now are being undertaken by third class machinists. However, usually it is the job r a t h e r than th e individual which is being deskilled. When the relatively

skilled worker moves from that particular job, he or she is replaced by someone less skilled. The general shortage of skilled tradesmen seeking jobs in what were traditionally tradesmen's occupations and the decline in a p p ren ticesh ip num bers

has facilitated this development in the face of some union objection.

8.3.21 Deskilling is not generally seen as an industrial relations issue per se.

As one o bserver n oted, 'in all my tim e in the metal trades I don't remember

one dispute about deskilling as opposed to co n c ern s about r a te s of pay'. This

does not mean that individual workers may not be concerned with skill atrophy. Rather, it may be that they do not know how to give e f fe c t to th e ir concerns

within th e c u r re n t in d u strial re la tio n s fram ew ork. There is also a wider

community concern about deskilling. A skilled workforce can make a contribution to th e success of an e n te r p r is e beyond simply the operation of machines; as

noted earlier, workers can be an im p o rta n t so urce of support and ideas. To

allow the skill base of th e m a n u fa ctu rin g s e c to r to erode would serve to

undermine the economy's human resources and th e e x te n t of job s a s tis f a c tio n which workers enjoy.

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8.3.22 The in tro d u c tio n of new technology can have the effect of deskilling

or it can be job enriching. The impact on skill levels is not simply d e te rm in e d

by the new technology. Whilst in the short-term gains from deskilling may be apparent to the firm there is evidence t h a t th e upgrading of th e skill of the

w ork fo rce c o n trib u te s s u b s ta n tia l wider b en e fits. Job design and work

organisation thus become a major challenge for em ployers, w orkers and th e ir representatives.

Occupational Health and Safety

8.3.23 At p re s e n t, A u s tra lia incurs an enormous cost from occupational

ill- h e a lth and lack of s a f e ty . There a re th e human c o s ts of loss of life,

physical disabilities, psychological traum a and disruption of family life, and there a re th e econom ic co sts of loss of p ro d u c tiv ity . The financial c o st is

c o n s e rv a tiv e ly e s t i m a t e d to be m ore than $6 billion per year [30]. In most

years more working days a re lost through indu strial a c c id e n ts than through

strikes [31].

8.3.24 H e a lth and s a f e t y problems have long been a feature of work but it

is only relatively recently that they have become a major issue. One reason why em ployers have become concerned is because occupational ill health and lack of safety contributes to non-wage costs through w o rk e rs' co m pensa tion insurance prem ium s and these costs have been escalating. Workers and unions have shown a greater concern as th e ir i n t e r e s t s in in d u s tria l d em o cracy and quality of

working life co n s id e ra tio n s have in c re a s e d . There is an increasing community view that it is no longer acceptable to have illnesses or d isa b ilitie s freq u en tly

associated with work.

8.3.25 The in tro d u c tio n of computer-related technologies into the workplace would appear to have both good and bad e f f e c t s on the s a f e ty and h e a lth of

workers. A United S ta t e s ' study has concluded t h a t , in g en e ral, the

introduction of computer-related technologies in manufacturing has resulted in a re d u c tio n in physical haz ard s in th e work environm e nt, although some new

physical hazards associated with the lack of worker control over system s may e m erg e. There is also co ncern about robot s a f e ty and uneasiness about the

possibility of health hazards for workers using screen-based equipment [32].

8.3.26 The m ajor new hazard associated with the use of robots is the work

envelope of the robot (the maximum volume that can be traced out by any p a rt o f th e robot arm ), because it in c re a s e s the com plexity of guarding

arrangements. Unpredictable action patterns, its ability to move in free space, and the possibility of re c o n fig u ra tio n all distinguish a robot from oth er

automated equipm ent [33]. G uidelines for th e s a fe use of robots have been

fo rm u la te d in a number of countries and the Standards Association is currently drawing up guidelines for their safe operation in Australia.

8.3.27 A number of potentially dangerous aspects of screen-based equipment have been identified. However, exactly how these problems a re caused and the ass e ss m e n t of th e ir e f f e c t s in the long term are m atters of dispute. Various

eye problem s, p a r tic u la rly eye s t r a i n , a re seen as th e main hazard [34].

Generally research has concluded that the emission levels of properly maintained equipment fall within current acceptable levels of radiation exposure [35]. The Australian Radiation Laboratory of the Commonwealth Department of Health has

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issued s t a t e m e n t s in d icatin g t h a t radiation emissions from visual display units pose no threat to the health of operators.

8.3.28 In A u s tra lia th e N atio n al H ealth and Medical R esea rch Council

(NH&MRC) has produced as one of its approved o c c u p atio n al h e a lth guides a guide on visual display u nits. The A C TU -V ictorian Trades Hall Council

Occupational Health and Safety Unit has also issued guidelines for o p e ratin g s c r e e n -b a s e d equ ip m en t. One c o m m e n ta to r notes t h a t as yet there has been

little effort by unions to introduce these standards into th e w orkplace, 'p a rtly

bec au se of a t r a d i t i o n a l re lia n ce on government legislation and partly because the level of awareness of health and s a f e t y issues varies considerably among

those unions which operate this equipment' [36].

8.3.29 The U nited S t a t e s ' study reports that the main psychological effects

likely to arise from the in tro d u c tio n of c o m p u t e r - r e l a te d tech n o lo g ies are

boredom and s tre s s . Boredom often results from the need for intervention by an alert and intelligent operator on machines when these machines can function for long periods of time without requiring such intervention. Thus highly skilled

operators may use their skills during only a fr a c tio n of th e ir working lives.

Boredom also re s u lts from th e way work is organised. For exam ple, by

removing programming from the shop floor th e most i n te re s tin g and c r e a tiv e part of NC machining work is taken out of the hands of the machinist.

8.3.30 The U nited States' study found that stress is a significant feature of

computer-automated workplaces and is e x p e rien ce d p a r tic u la rly by em ployees who have re sp o n sib ility for very com plex and expensive systems. Two major sources of a u to m a tio n -re la te d s tre s s were id e n tified : s tre s s as s o c ia te d with

working on very complicated, capital-intensive and highly integrated systems, and the lack of autonom y a t work, extending in some cases to co m p u te riz e d

m onitoring by m an ag e m en t. Where au to m a tio n is in those stages where the

operator is assisted by computers and maintains some control over its serv ic es, then work is enhanced. If, however, operator skills and knowledge are gradually taken over by the computer an im poverishm ent of work may re s u lt, with the

reintroduction of monotony, social isolation and lack of control [37].

8.3.31 O th ers see s tr e s s (and fa tig u e and increased susceptibility to injury

and disease) as being related to the social organisation of the workplace. These f a c t o r s include long or irre g u la r working hours; speed up or work overload;

incentive payment schemes; machine pacing; deskilled, monotonous and repetitive tasks; isolation from fellow workers; job insecurity; supervisory pressure and lack of promotional opportunities [38]. Shiftwork has also been d ire c tly asso c ia te d with sp e c ific h e a lth problem s [39]. Few of th ese, of course, a re uniquely

associated with computer-related technologies.

8.3.32 R e s e a rc h in a num ber of co u n trie s has id e n tifie d s tre s s as being

strongly related to job c o n te n t. S tre s s is usually a s s o c ia te d with having too

much to do and not enough tim e , but it can also arise when people find their

jobs too complex or difficult or from having too little to do, or where th e job

is r e p e t i t i v e and routine, with little variety. The combination of overload and under utilisation is said to be 'fairly common' in advanced production system s: th e re s p o n sib ility is often great but the job can use few of the workers' skills

and abilities. If job content is a major source of stress then the way work is

organised and job design can be im p o rta n t means of minimising its harmful

effects [40].

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8.3.33 R e c e n tly , t h e r e has been in cre asin g re co g n itio n that health issues

arising from work cannot be addressed simply by focusing on particular diseases or by c o n c e n tra tin g on equipment-related factors only. Some consider that the environmental, organisational and p ersonal c o n te x t in which new technologies o p e r a t e must also be ta k e n into a c c o u n t. A u s e r's re la tio n s h ip w ith new

technology encompasses not only the h a rd w are but also the s o ftw a re and the sy stem in t e r f a c e and th e s e in c o rp o r a te organisational principles. One of the most used principles, fragmentation or 'Taylorisation', of work, can have adverse e f f e c t s on h e a lth . The lack of control over work and the misfit that can arise

between the needs of the users and systems suppliers can be pow erful sources of s tre s s . This ap proach places emphasis on the importance of job design and

job organisation in the maintenance of health at work [41].

8.3.34 An a l t e r n a t i v e ap proach is to see ill- h e a lth as s o c ia te d w ith new

technologies in a broader context, for example:

F ears about new technology may be expressed as fears (of specific

illnesses) because they constitute the only l e g itim a te re asons in our so c ie ty to r e j e c t the technology. To take these at face value is to

ignore the, perhaps unspoken, doubts and a n x ie tie s about th e

technology deskilling or indeed replacing the job, inabilities to cope with new procedures, a generalised loss of co n tro l over ev e n ts and

circumstances in the technological world [42],

If this should be the case then th e s e deep co ncerns will not be resolved by

simply addressing the ergonomics of the systems.

8.3.35 The discussion so far focuses on identified sources of occupational ill health. However, because illnesses have not been reported is no indication th a t sym ptom s do not exist. Often illnesses are not recognised and labelled or are

not seen as being work-related by workers or medical p ra c titio n e rs . Som etim es sym ptom s a re a c tiv e ly hidden because of reluctance to admit an inability to

cope, because of concern about job security and because of the attitudes of the m edical profession, colleagues or management. Disabilities not severe enough to cause incapacity for work but enough to cause discomfort and in e ffic ie n c y are

said to be even m ore common. One view is that a 'vast iceberg of subsurface

symptomatology can readily be revealed if one is prepared to seek' [43]. If this should be th e case then increased attention should be given at the systems and job design stages to identify and eliminate potential sources of ill-health.

8.3.36 R e c e n tly th e Commonwealth Government accepted a recommendation of the Interim N ational O c cu p atio n al H e alth and S afe ty Commission th a t a

N a tio n al O ccupational Health and Safety Commission should be established. The Commission will a c t as an um b rella o rg a n isa tio n encom passing th e N ational O c cu p atio n H e alth and S afe ty O ffic e , its o p e ra tio n a l arm and a N ational

Institute of Occupational Health and Safety as its technical and s c ie n tific arm. The Commission will in te r alia develop and facilitate the implementation of a n a tio n a l o c c u p atio n h e a lth and s a f e t y policy to provide for a coherent and

comprehensive system of prevention of w ork-relate d d e a th , illness and injury. The I n s t i t u te will be concerned with research, the collection of information and training. We draw the Institute's attention to the importance of job design and job organisation in the maintenance of health at work.

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8.3.37 The R e p o rt of the Interim Commission recognised that a healthy and

safe workplace cannot be achieved solely by regulation. It considered t h a t the control and elimination of hazards will be significantly assisted by cooperation in the workplace through a p p r o p ria te p a r ti c ip a ti v e procedures. An A u stra lian com m entator expressed the view that the health of workers is influenced by the competing interests of employers and em ployees. The rig h t to a healthy and

safe working e n v iro n m e n t thus is an industrial not a welfare issue. Improved standards are la rg e ly ach ie v ed by in d u strial and p o litic a l bargaining in the

course of which t r a d e - o f f s can be made. We note, however, that incapacity

for work results in a direct economic loss to em ployers as do d is a b ilitie s not

s e v e re enough to result in incapacity for work which nevertheless may cause a reduction in efficiency.

8.3.38 S tate Governments, who have the primary responsibility for legislation in this area, can tighten up existing laws, but in an environment of consultation and developing industrial democracy the emphasis is likely to be that health and safety issues will incre asingly be m a t t e r s for n eg o tia tio n by em ployers and

em ployees and th e ir r e p r e s e n t a t i v e s a t th e workplace. Recently, the New

South Wales Government passed legislatio n to estab lish b i - p a r ti t e H ealth and S a fe ty C o m m itte e s in o rg a n is a tio n s where there are more than 20 employees [44]. In th e m e ta l t r a d e s industry, n early 70 per c e n t of all plants

(A u s tra lia-w id e) have fe w er than 20 employees, it is likely that they are not

often visited by inspectors and their workers may not be unionised to the same degree as in larger plants. Assuming there is an advantage in the establishment of health and safety committees, in unionisation and i n s p e c to r a te serv ic es for o cc u p a tio n a l h e a lth , th e s e ad v a n ta g e s would thus not be ava ila ble to the

majority of employees.

The Extension of Managerial Monitoring and Control

8.3.39 Reference has been made in the previous section to the monitoring of

workers (by supervisors and managers) as a source of s tre s s . We found in our

visits t h a t t h e r e was also some concern t h a t th e in tro d u c tio n of new

c o m p u t e r - r e l a te d te ch n o lo g ies and th e process of job fr a g m e n ta tio n th a t

g e n e ra lly p re c e d e s or ac co m p an ies it o ff e rs the o p p o rtu n ity for increased

control over workers.

8.3.40 The monitoring of worker performance is not a new issue on the shop

floor. Braverman commented a decade ago that:

M achinery o ff e rs to m an ag e m en t the o p p o rtu n ity to do by wholly

mechanized means that which it had previously a t t e m p t e d to do by

o rg a n iz a tio n and d isciplinary means. The fact that many machines may be paced and controlled according to c e n tr a liz e d decisions, and th a t th e s e co n tro ls may thus be in th e hands of the management,

removed from the site of production to the office - these te c h n ic a l

p o ssib ilities a re of just as great interest to management as the fact

that the machine multiplies the productivity of labour [44].

What is new is t h a t b ecause com puter-related technology allows the relatively easy incorporation of performance measuring d evices within the m achine, the new technology permits the more accurate monitoring of work effort (pace and output) and the comparatively easy assem bly of this in form ation. F u rth e r, it

p e rm its the exten sio n of clo ser worker m onitoring into higher levels of the

organisation's hierarchy, for exam ple, to w hite collar workers in the design

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o ff ic e . These workers are not likely to have had prior experience with worker monitoring to the extent that may a lre ad y be the c a se on the shop-floor and

they may have fewer mechanisms for coping with it.

8.3.41 We should em phasise t h a t a t p re s e n t w orker m onitoring does not

appear to be an important in d u s tria l re la tio n s issue but if it should becom e

m ore w idespread it will undoubtedly in c re a s e c o n f lic t b e tw e en workers and management.

8.4 Education and Training

8.4.1 There is a widespread view that the pace and scope of technological

change are such t h a t t h e re is a need for basic changes in g e n e ra l and

v o ca tio n a l e d u c a tio n , tra in in g and retraining and in education services such as career guidance and job counselling. M eeting th e needs of th e economy in a

period of technological and structural change and providing greater opportunities for d isad v an ta g ed groups have been id e n tifie d as th e C om m onw ealth

G o v e rn m e n t's main p riorities on education [46]. Yet technological change (and equity issues) are not the only forces reshaping the roles for, and the values

assigned to, e d u c atio n . At any tim e there are many demands being made on

the education system and th e r e f o r e a range of views on the role it should

p e rfo rm [47]. These various roles are not always compatible. Where they are, the level of competing demands for resources are such that usually they cannot be met at the same time.

8.4.2 E ducation has an im p o rtan t role to play in the technological change

process, in vocational term s and more broadly. From the the broader perspective th e ed u c atio n process is seen as an important means of equipping people with skills to deal better with the impact of technological change on society and its

in s titu tio n s . The new m icroelectronics-based technologies are likely to have a pervasive influence on people in th e ir d a y -to -d a y lives, w he th e r or not they

work with th e s e new technologies. P o litic a l issues will have an increasing

scientific and technological content.

8.4.3 The im age of the 't e c h n o p e a s a n t', 'th e person dom inated by

technology, with all humanity stripped away and all human c a p a c itie s dw arfed by th e c a p a c i t i e s of m achines and computers out of control', reveals another

worry about new technology from an ed u c atio n al p ers p e c tiv e : th a t m achines m ight com e to d efin e c u ltu re , to s p re ad a triv ia liz e d c u ltu re , to eliminate

human ac co m p lish m en ts of the past and even th e conception of how broad

human abilities can be [48]. We believe the education process should operate to allow people to develop their capacities to understand, make inform ed choices and act competently with the new technologies.

8.4.4 When te c h n o lo g ic a l change is rapid, should in cre ased emphasis be

given to fostering a widespread commitment to continuing, life-lo n g education? Should o cc u p a tio n a l p re p a ra tio n be broad-based, with an emphasis on acquiring generic skills, skills in problem solving and decision taking, better to o p e r a te in new or m odified work en vironm ents; or should attem pts be made to identify

future skill needs m ore pre cisely so t h a t jo b -sp ec ific skills train in g can be

tailored more effectively to meet these needs?

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8.4.5 For th o s e who see th e ed u c atio n and tra in in g system primarily in

vocational terms, as the provider of a skilled w orkforce , th e re are com peting

i n t e r e s t s . The m anufacturing sector and the metal trades industry is only one

of a number of work settings which are seen to require th e s erv ic es of skilled

people; m ic r o e le c tr o n ic s and c o m p u te r -re la te d technologies are only one of a number of new technologies to influence the types of new skills re q u ire m e n ts needed in th e fu tu re . From a n o th e r perspective there is the question whether

greater emphasis should be given to skills upgrading for the employed or skills p r e p a ra tio n for th e unem ployed. Many labour m a rk e t program s in operation currently are directed specifically towards the needs of those who are unable to

get a paid job.

8.4.6 Choices are still to be faced if attention is confined to education and

training in respect of computer-related technologies. New skills are required to develop, m a in tain , o p erate and manage these new machines and systems. This means some new entrants to the w orkplace must be equipped with th e s e new

skills; w orkers a lre a d y in the workplace may need periodically to upgrade and update their skills; other w orkers may need to r e tr a i n for new jobs because

th e ir old jobs are outcompeted by the new technologies. The choices relate to how best th e s e d iverse e d u c a tio n a l and tra in in g needs are to be m et when

te c h n o lo g ica l change is rapid; which levels and types of courses should be given particular emphasis; who should provide these courses; who should finance them.

8.4.7 From our visits we were able to make a number of observations

about education, training and re tra in in g issues in re la tio n to th e adoption of

c o m p u te r -re la te d technologies in the metal trades industry from the perspective of firms. First, at the current ra te of new technology adoption, we found th a t

firm s had no difficulty in finding people in their existing workplace who were able and willing to be re tr a in e d . G enerally, these were younger workers,

including apprentices. While many enjoyed that challenge, some were reluctant to be shifted to work on the new machines.

8.4.8 Secondly, we found that employers were concerned with how well the

school system prepared p o te n tia l e n t r a n t s to th e work force, p a r tic u la rly in

m a t h e m a t i c s and scie n c e . A num ber of em ployers a d m in is te re d th e ir own

selection tests because they were u n c e rta in about the validity of the school

system's peformance indicators.

8.4.9 Thirdly, a num ber of employers were unhappy about the quality and

the relevance of training given to a p p r e n tic e s by the T echnical and F u rth e r

E d u ca tio n (TAFE) s e c to r . Some ty p es of t r a d e training which employers felt should be provided were not available and they were unhappy that students were being trained on outdated equipment.

8.4.10 We a re conc ern e d th a t th e TAFE colleges generally are unable to

offer students training on technologically advanced equipm ent. Not only are s tu d e n ts less well prepared than they might otherwise be for working with new technologies, but it is also d i ffic u lt for te a c h in g s t a f f to keep a b re a s t with

d e v e lo p m e n ts and to convey this information to students when the appropriate equ ip m en t is u n available. The problem s a re the high c a p ita l cost of the

e q u ip m en t t o g e t h e r with its high rate of obsolescence and the fact that these

items need to be provided ac ro ss th e very la rg e netw ork of TAFE colleges

around Australia.

113

8.4.11 Some re co g n itio n has been given to this problem by the

Commonwealth Government when it in tro d u c e d , in 1983, a spec ia l equipm ent program s p e c if ic a lly to purchase technologically advanced equipment for TAPE colleges. $12 million is being made available for this program in 1984, and $14.2 million in 1985. The States also provide funds for equipment.

8.4.12 Some firm s allow s tu d e n ts a t th e ir local college to use th eir

equipm ent but g e n e ra lly firm s c a n n o t give high p rio rity to s tu d e n t a c cess

a g a in s t re g u la r production demands. However, with a view to students gaining increased access to industry facilities for training purposes, the G o v e rn m en t's Guidelines to the Commonwealth Tertiary Education Commission (CTEC) for 1984 asked the TAPE Council of CTEC to ta k e up with s t a t e a u th o r itie s the

possibility of a g r e e m e n ts being re a c h e d with relevant industries on a case by case basis. Some progress is being m ade in this reg ard . As p a r t of this

program th e C om m onw ealth has made available funds to the States to employ industrial liaison personnel to encourage firms to participate in this schem e. It is hoped that the States will shortly be able to fill these positions.

8.4.13 Many views put to us by firm s were based on their assessment of

skills needed simply to o p e r a te or s e rv ic e sp e c ific new item s of equipm ent

in s ta lle d or being c o n te m p la te d . However, few firm s appe are d to have

contemplated their skills requirements in th e long te rm . Yet re asonably long lead tim e s a re usually needed for th e formal education system to respond to

new needs when they are defined. Developers and suppliers of new equipm ent have a role here as a source of information of future skills requirements and, in marketing their equipment, to take some responsibility (as many do) in providing train in g . These developers will also take account of the availability of skilled

labour in adapting equipment to the skills of users.

8.4.14 Sim ilarly, we found t h a t few firm s had considered the stimulating

effect that the injection of better educated, professional and trades-people could have on firm s ' com petitiveness. The quality of firms' human resources can be an important source of competitive advantages through being a source of ideas and new pro fessio n al contacts. It is not unusual to find professional engineers working in various positions on th e shop-floor and o p e ra tin g production

equipm ent in Japanese factories. This offers the opportunity for feedback from the shopfloor to m an ag e m en t, a r t i c u l a t e d in a form which m anage m ent and

other technical personnel can respond to more effectively.

8.4.15 F ea rs t h a t th e lack of availability of skilled personel will inhibit the

adoption of new technologies and limit opportunities for industry develo p m e n t, underline some of the current concern about the system of education and skills training. We believe there is some ground for this co ncern although it should

be seen in p e r s p e c tiv e . We have n o ted th roughout this report that industry

competitiveness is a com plex issue and depends upon the in te rp la y of many

fa c to rs ; it is not simply an issue of the a v a ila b ility of skills. It is

questionable whether the prime issue is a shortage in the number of tec h n ic a lly tra in e d personnel. W hether th e widespread adoption of new technologies will necessitate a broad-based, general increase in skills levels rather than lead to a general deskilling is as yet unresolved.

8.4.16 We also note that the supply of many trained people varies largely in

re sponse to dem and conditions in th e ir r e s p e c tiv e labour m ark e ts, as the

e x p e rie n c e of engineering faculties has illustrated. There is a strong evidence that people will acquire needed skills if they are reasonably rewarded, in te rm s

114

of job opportunities and pay, for doing so. Further, many job skills are learned not in formal educational institutions but in th e w orkplace. Skilled workers in the firm , su ppliers of equipment and private training agencies are all parts of

the important informal education network. This network is flexible in the short t e r m , unlike th e formal education structures, and very specific in the types of

skills which it supplies. Provided people have a good g e n e ra l ed u c atio n and a c a p a c i t y to learn, on-the-job training can also be relied upon to provide a large proportion of skills required by normal levels of technological change. For this

re ason th e main educational issues relate to curricula, the quality of education, and the appropriateness of the training currently being offered, and whether the fo rm a l e d u c a tio n system has sufficient flexibility in its structure to meet the

changing demands for different types of training. We hold the view th a t th e re is scope for major improvements in the formal education system in these areas.

8.4.17 This report does not develop recommendations in relation to education and training. T here a re c u r re n tly a num ber of in v estig atio n s underway or

r e c e n t l y c o m p leted in th e g o v ern m e n t concerned with various a s p e c ts of

education and skills train in g r e la tin g d ire c tly or in d ire c tly to tech n o lo g ica l

change. The A u s tra lia n Education Council has established a task force 'to

develop options for a strategy of policy and program in itia tiv e s to a s sist and

encourage the education system from early childhood through to post-tertiary, in stimulating, anticipating, shaping and responding a d e q u ately to te c h n o lo g ica l change, and an increased level of technological innovation in Australia'. The task force will report in the second half of 1985. There is a C o m m itte e of Inquiry

into Labour M arket P rogram s: many labour m a rk e t programs are concerned with skills tra in in g . The Standing C o m m itte e on Training for Advanced

Technology has re c e n t l y handed a r e p o rt to the National Training Council on training for advanced technology concerning microelectronics and training needs. A D e p a rtm e n t of Labour Advisory C o m m itte e (DOLAC) Working P a rty has published a r e p o r t 'Supply and Demand of Skilled Labour - A F ram ew o rk '.

DOLAC will soon re le a s e a re p o rt ' A Review of th e Labour Market for the

Trades'. A Commonwealth-State Apprenticeship C o m m itte e Working P a rty has r e c e n t l y c o m p le te d a r e p o rt on 'In s titu tio n a l Trade T raining'. The

Commonwealth G overnm ent has also announced a new s t r a t e g y designed to re d u ce Australian reliance on skilled overseas workers. The primary objective of the Occupational Share System is to change the balance of contribution betw een d o m e s tic and o v erseas so u rc es of skilled labour supply. However, a closely

related objective is to improve the planning process for th e supply of skills to

th e labour m a rk e t as the basis for a better co-ordination of education, training and immigration policies, as well as industry's training efforts.

8.4.18 We a r e concerned that certain problems raised in this report can act

as barriers to the implementation of progressive education and tra in in g policies contained in these investigations. Issues such as multiskilling, the acceptance of new classifications into the Award system and the alignment of new skills with th e e x istin g structure of trade-based unions are recognised as m atters requiring

thoughtful a t t e n t i o n in th e c o n te x t of exam ining changes to th e education

system.

115

References

[1] Phillip R. H arris, 'F u t u r e T echnological Work C u ltu r e ', P a rt 1

Leadership and Organisational Development Journal, January 1983.

[2] The econom ic and p o litic a l conditions prevailing when new

technologies are introduced can also determine the critical conditions arising from te c h n o lo g ic a l change. C u rre n tly there are two main

political and economic factors: the recent recession and th e Prices and Incom es Accord. The re cession has led to redundancy and

retrenchment becoming major issues. The Accord has widened the ra nge of in dustrial relations issues for discussion and bargaining, and has r e s u lte d in th e C om m onw ealth G overnm ent becoming more

d ir e c tly involved in th e p rocess of distribution of the benefits and

costs of change. For example, in return for wage r e s t r a i n t , unions

have bargained for tax c u ts and im provem ents in superannuation

arrangements. The Government's commitment to improved health and safety at work also arose out of the Accord.

[3] Decision of A u stra lian C oncilia tio n and A r b itra tio n Commission;

Termination, Change and Redundancy Case, Print - F6230.

[4] Phillip R. H arris, op. c i t and Ian N icholas, Malcom Warner, Gert

Hartmann and Arndt Sorge, 'Automating the shop floor: applica tio n s o f CNC in m a n u fa c tu rin g in G re a t B ritain and West G erm any',

Journal of General Management Vol. 8 No. 3 Spring 1983.

[5] Ian Nicholas, et. al., op. cit.

[6] Barry Wilkinson, 'The Shopfloor, P o litics of New T echnology',

Heinemann Educational Books, London 1983.

[7] A c o u n try 's indu strial re la tio n s system com prises the institutional

a r ra n g e m e n ts , legal re g u la tio n s , and p ro c ed u ra l and su b s ta n tiv e

a g r e e m e n ts which d e te r m in e th e 'network of rules' that govern the

workplace. In relation to the introduction of new technologies, the in d u strial re la tio n s system defines the opportunities for management and workers in the use and exploitation of new technologies and can d e te r m in e th e approach that firms can adopt to new technology in a changing environment. The industrial relations system also desc ribes

the pro c ed u re s for settling conflicts which can arise over the distri­ bution of costs and b e n e fits arising from the intro d u ctio n of new

tech n o lo g ies. Beat H otz, 'P r o d u c tiv ity d iffe re n c e s and industrial relations structures, Engineering com panies in the United Kingdom and the Federal Republic of Germany', Labour and Society Vol 7, No. 4, October-December 1982.

[8] A special issue of the B ulletin of C o m p a ra tiv e Labour Relations

re p o rts th e proceedings of an in te rn a tio n a l c o n fe re n c e which

examined industrial relations and technological change in 11 countries. See also Beat Hotz, op. cit. and Ian Nicholas et. al, op. cit.

116

[9] R ussell Lansbury and Edward Davis, 'T echnological Change and

Industrial Relations in A u stra lia: an In tro d u c tio n ', in 'Technology, Work and Industrial Relations', Longmans (forthcoming).

[10] T. S heridan, 'Mindful Militants: The Amalgamated Engineering Union in Australia 1920-1972', Cambridge University Press 1975.

[11] Both Telecom and th e Government Aircraft Factory have negotiated

technological change agreements.

[12] The D ra ft O rders re la tin g to th e T erm ination, Change and

Redundancy Case defines 'significant e ffe c ts ' to include te rm in a tio n of em ploym ent; major changes in the composition, operation and size of the employers' workforce or in the skills required; the elim in a tio n or dim inution of job o p p o rtu n itie s , promotional opportunities or job

tenure; the alteration of hours of work; the need for re tr a in in g or

t r a n s f e r of em ployees to o th e r work or locatio n s; and the

restructuring of jobs.

[13] The NLAC G uidelines a re set out in 'T echnological C hange in

Australia', the Report of the Committee of Inquiry into Technological C hange in A u s tra lia 1980, (The CITCA Report) paragraph 5.224 et. seq.

[14] Russell Lansbury and Edward Davis, op. cit.

[15] High C o u rt of A u s tra lia , decision handed down on 20 August 1984,

F e d e r a te d C le rk 's Union of A u stra lia and Anor (a ppellants) V

Victorian Employers' Federation and Ors (respondents).

[16] The CITCA Report, Recommendation 2.

[17] The CITCA Report, Recommendation 26.

[18] R ich ard S w eet, 'A u s tra lia n Trends in Job Skill R e q u irem e n ts: A

C ritiq u e of th e C u rre n t O rthodoxy', paper p re s e n te d to the

U S -A ustralian J o i n t Sem inar, 'The F uture Impact of Technology on Work and Education', Monash University, September 1984.

[19] Ibid.

[20] Henry M. Levin and Russell R. R um berger, 'The E ducational

Im p licatio n s of High T ec hnology', In s t i t u te for R esea rch on

Educational Finance and Governance, Stanford University, 1983.

[21] Ronald E. K u tsch e r, 'C hanging Employment Structure of the United

States - Factors Contributing to These Changes', paper p re s e n te d to U S -A u stra lia J o in t Sem inar, 'The F u tu re Im pact of Technology on Work anbd Education', Monash University, September 1984. K utscher

noted t h a t the single most important factor determining employment numbers in any one occupation is the overall growth of the economy.

[22] H arry B raverm an, 'Labour and Monopoly C a p ita l', Monthly Review

Press, New York, 1974.

117

[23] Levin and Rumberger, op. cit.

[24] H. J. Warneke, H. J. Bullinger and H. Metzger, 'Work Structuring', in

R. Wild (Ed.), 'Management and Production Readings', Penguin Books, 1981.

[25] G e rt H a rtm a n n , Ian N icholas, A rndt Sorge and Malcom Warner

'C o m p u te riz e d M achine-Tools, Manpower C onsequences and Skill U ltiliz a tio n : A study of B ritish and West G erm an M anufacturing

F irm s', B ritish J o u rn a l of Industrial Relations, Vol. XXI, No. 2, July 1983.

[26] Bryn Jones, 'D e s tru c tio n or redistribution of engineering skills? The

case of n u m e ric a l c o n t r o l ' in S. Wood (ed), 'The D e g rad atio n of

Work', Hutchinson, 1983. [27] Em ployers do not have unlimited freedom in the range of tasks they

can combine in the one job or the extent to which these tasks might

be a llo c a te d to m achines. As we have noted, industrial tradition,

educational s y stem s, labour m a rk e t conditions and the indu strial

relations system can also influence the way jobs are organised.

[28] 'Computerized Manufacturing Automation: Employment Education and the Workplace', (Washington DC, US Congress, O ffice of Technology Assessment-OTA-CIT- 2335, April 1984), Chapter 5.

[29] Ibid.

[30] Interim National Occupational Health and Safety Commission Report, Australian Government Publishing Service, Canberra, 1984.

[31] Neil C unningham , 'S a feg u ard in g th e W orker', Law Book Company,

Sydney, 1984.

[32] 'Computerized Manufacturing Automation: Employment Education and the Workplace',

[33] 'S afeguarding Industrial Robots: Part I, Basic Principles', a Report of

the Machine Tool Trades Association, London, 1982.

[34] Bengt G. Knave, 'The Visual Display Unit' in 'Ergonomic Principles in

Office Automation', Ericsson Info rm atio n S ystem s A B, Stockholm, Sweden, 1983.

[35] M ichael Quinlan (Ed), 'T echnological Innovation and Occupational

Health', in Lansbury and Davis, op. cit.

[36] Ibid.

[37] L. Levi, 'S tre s s in Industry: C auses, E ffects and Prevention', ILO

Occupational Safety and Health Series, No. 51.

[38] Michael Quinlan, op. cit.

118

[39] George Singer, 'Q u a lity of Life in S hiftw ork', in Meredith Wallace

(ed.), 'S hiftw o rk in A u s tra lia ', proceedings of Sem inars held at

LaTrobe U niversity, May 1983 and Macquarie University, July 1983, Brain Behaviour Research In s titu te , LaTrobe U niversity, Symposium Series, No. 4.

[40] Lynn T acy, 'Stress - not a Management Monopoly', Work and People,

Vol. 8 No. 2, 1982, D e p a rtm e n t of Em ploym ent and Industrial

Relations, Canberra.

[41] A hm et C akir, 'A re VDT's a H e a lth H a z a r d ? ', Ergonomic Institute,

Berlin, (undated).

[42] L eela D am odoran, C h a irm a n 's in tro d u c tio n to one day conference

'H e a lth H azards of VDU 's?', The HUSAT R esea rch Group,

Loughborough University of Technology, Loughborough, UK.

[43] David Ferguson, 'The New Industrial Experience', The Medical Journal of A u s t r a l i a , M arch 17, 1984. P ro fe sso r F erg u so n 's a r ti c le is

co n c e rn e d p rim arily with r e p e t i ti v e stra in injuries but the views

expressed in the paper may be extended to occupational ill-h e a lth in general.

[44] New South Wales, Occupational Health and Safety Act, 1983, No. 20.

[45] Harry Braverman, op. cit. pl95.

[46] G erald Burke, 'The S tr u c tu re and Finance of E d u ca tio n ', paper

presented to the US-Australia Joint Seminar, 'The F u tu re Im pact of Technology on Work and E d u ca tio n ', Monash University, September 1984.

[47] Dean Ashendon and Ray Costello, 'Shaping Participation in Education', D e p a rtm e n t of Education and Youth A ffairs, Discussion P aper,

C a n b e rra 1984. Ashendon and Costello identify five sets of demands made of the education system:

(1) Economic demands of five kinds: . for general increases in education levels;

. for stimulus of economic activity;

. for p a r ti c u la r skills and capabilities for the reduction of

labour supply; . for the reduction of unemployment; and

. for selection and allocation.

(2) Demands t h a t ed u c atio n serve as the site of c o m p etitio n

between individuals and groups. (3) Social w e lfa re dem ands, including the reductiton of inequality, and catering to the unemployed. (4) Demands of cultural formation of the young, and of the life of

the society as a whole. (5) Demands of education.

119

[48] W. N orton Grubb, 'R esponding to the C onstancy of Change: New

Technologies and Future Demands on US Education', paper p re s e n te d to the US-Australia Joint Seminar.

120

APPENDIX

ACTIVITIES OF THE WORKING PARTY ON COMPUTER-RELATED TECHNOLOGIES IN THE METAL TRADES INDUSTRY

1. The T echnological C hange C o m m itte e (TCC) of ASTEC appointed a

Working Party in July 1983 to re p o r t on the adoption of new technologies in

th e m a n u fa c tu rin g s e c to r . The Working P a rty recom m ended t h a t th e study

be confined to c o m p u t e r - r e l a te d tech n o lo g ies in th e m etal t ra d e s industry.

The members of the Working Party were:

. Professor G. Rigby (convenor) P ro fe sso r of E l e c tr ic a l Engineering, U niversity of New South

Wales (Chairman of the Technological Change Committee)

. Mr T. Johnson

Assistant National Secretary, Electrical Trades Union

. Mr P. Laver

General Manager, Operations, Steel Division, BHP (on leave from September 1983)

. Dr S. Richardson

Senior Lecturer, Economics Department University of Adelaide

Ms Jo y Selby Smith of the ASTEC S e c r e t a r i a t a c te d as S e c r e ta ry to the

Working Party.

2. The Working Party met with the following:

. Metal Trades Industry Association of Australia (MTIA)

- Mr C. A. Evans, National Director and Chief Executive

- National Construction Council

- Mr R. P. Boland, Director - National Industrial Relations

. Mr L. N. C arm ic h a e l, A ssistan t N ational S e c r e ta ry , A m algam ated

Metals' Funding and Shipwrights Union

. Mr W. A. Grieg, N ational S e c r e ta ry , A ssociation of D raughting,

Supervisory and Technical Employees.

. Mr J. G. C a e s a r, N ational P re s id e n t, F e d e r a te d Ironw orkers'

Association of Australia

. Technology Transfer Council

121

. CSIRO Division of Manufacturing Technology

. A.S.E.A. Industries Pty Ltd

. Brownbuilt Limited

. Ebsray Pumps Pty Ltd

. James N. Kirby Pty Ltd

. Johns Perry Industries Pty Ltd, Bernard Smith Division

. Laser Lab Australia Pty Ltd

. Machine Dynamics Pty Ltd

. Transfield (NSW) Pty Ltd

. Vickers Ruwolt

. Wessex Engineering

. Zenford-Ziegler Pty Ltd

3. These m eetin g s were in add itio n to th e in terv iew s conducted as part of

the survey. The names of the particpants in the survey are not disclosed.

122