A MAJORITY of manufacturing businesses that invest in new technology do so to boost productivity. The question is, do these technologies result in real productivity gains, and if so, by how much?
[Image, right: Coca-Cola Amatil group managing director Terry Davis (right), at the opening of the company's new Eastern Creek facility last year.]
Over 70% of manufacturing, service and construction businesses that invested in new technology over the last three years did so to improve productivity, found an Australian Industry Group (Ai Group) and Deloitte survey of 540 chief executive officers. Of the businesses surveyed, new technologies accounted for 16% of the productivity gains achieved.
Speaking at the National CEO Survey launch, Deloitte technology, media and telecommunications leader, Damien Tampling, said half of those technologies purchased externally were adapted to the specific needs of the business.
Around one-quarter of technology investments were done so in conjunction with internal R&D, including robotics, automation and control equipment, electronics/systems integration, and instrumentation.
Beverage giant Coca-Cola Amatil (CCA) for example has used automation to boost its productivity, spending $450 to roll-out a new technology designed specifically for its polyethylene terephthalate (PET) bottles.
The "blow fill" project represents the single largest investment by CCA in the last decade. It began in 2010 and is due for completion by 2015, and includes the company's new $57 million Eastern Creek facility, which makes the PET resin moulds (pre-forms) used to manufacture plastic bottles.
The project is a large component of CCA's Project Zero, a capital works and supply chain program which has seen the company invest in an end-to-end, order-to-cash technology platform, as well as fully-automated distribution centres (DCs) in Australia and New Zealand.
To put this in perspective, in 2001 CCA's Return on Capital was 7.6%, and today the company generates more than 25% return before tax, a CCA spokesperson told Manufacturers' Monthly. At least half that gain has come from efficiency gain through capital investment in technology and supply chain capability.
The largest enabler of investment in new technology, according to the National CEO Survey, was the knowledge and skills of a company's workforce, followed by the fact that competitors were adopting new technologies. The third factor was rising labour costs.
Ai Group chief executive Heather Ridout said the report is very timely, as "the immense pressure of the multi-speed economy is bringing up a whole lot of tradable sectors in the Australian economy."
"Everyone is saying that manufacturing is going to be 'in the gun' for this change, but we have structured change occurring all over the place - in retail, in tourism - it's quite a broad-spread problem," she explained.
Ridout said companies across the board are "hand-wringing, thinking and strategising" over what to do about the issue.
"What comes through in this report is one of the things they are doing is investing in new technology," she said.