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1 a Study of Efficiency in the Australian Timber Industry

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1 a Study of Efficiency in the Australian Timber Industry A Study of Efficiency in the Australian Timber Industry Efficiency factors in the economic survival in the Australian timber and manufacturing industry and possible industrial design solutions. 1 Karl Vaupel student number 11024736 University of Technology, Sydney Major Project research report 84902 Research and Conceptualisation Student Number: 11024736 Abstract The timber industry is one of few continuingly viable manufacturing industries in Australia, however it too is threatened by the increasing pressure from the international market. This report explores the major factors affecting the industry and problems which can be solved by a product developed as a one year industrial design project. Based on the designer’s available resources and commercial viability, a device which aids the movement and storage of stock has been found to be most likely to aid the industry and employee wellbeing. 2 Table of Contents 1. Abstract 2. Table of Contents 3. Introduction 3.1. Personal Experience 3.2. Funding 4. Research Background 4.1. Threats to Australian Manufacturing 4.1.1. Australian Labour Costs 4.1.2. Shipping and geographic location 4.1.3. Relocating Australian Manufacturing 4.2. The importance of Australia’s manufacturing industry: 4.2.1. Employment 4.2.2. Resulting Research 4.3. Australia’s Economic Structure 4.4. Focus on the timber industry: 4.4.1. The Importance of Timber 4.4.2. In need of design 5. Investigative and literature review of the Australian Timber Industry 5.1. Research Objective: 5.2. Research Methodology 5.3. Foundations of Sawmilling 5.3.1. Forestry Subsystem 5.3.2. Timber Processing Subsystem Domestic Trade 5.4. Local Product 5.5. Local Market 5.6. International Market 5.7. Labor intensity 5.8. Rural Corporate Culture 5.9. Flexibility 5.10. Occupational Health and Safety 5.11. Wellbeing 3 5.12. sustainability 5.13. Vic’s Timber case study 5.13.1. Overview 5.13.2. Production Line Stages 5.13.3. Waste 5.13.4. Human Resources 5.13.5. Adapting to changing markets 5.13.6. Power Consumption 5.13.6.1. Literature review: 5.13.7. Conclusion: 5.13.7.1. Worker motivation / well being 5.13.7.2. Pack Movement 5.14. Ecquality Timber case study: 5.14.1. Increasing Cost of labour 5.14.2. Kaizen 5.14.3. worker motivation 6. Issue of Greatest Need 6.1. Motivation and wellbeing 6.2. Power Generation 6.3. Pack Movement 7. Pack Movement Further Analysis 7.1. Walker Brothers Pack movement study 7.2. North Wyong Saw Mill Pack movement study: 7.2.1. Conclusion 7.3. Market analysis 7.3.1. Custom Fabrication 7.3.2. Existing products 8. References 9. Dolly Brief 9.1. Aim: 9.2. Market: 9.3. Product objective: 9.4. Requirements: 9.5. Manufacturing 10. Design Research 10.1. Manufacture 4 10.2. Component Options: 10.2.1. Footprint 10.2.2. Power 10.2.3. Lifting Mechanism Options: 10.2.4. Access to rear timber 10.2.5. Movement 10.2.6. Control 10.2.7. Fixing 10.2.8. Achieving minimum height 10.3. Embodiment 11. Business viability and setup 11.1. Company Tasks 11.1.1. Investment and Profits 11.1.2. Intellectual Property 11.1.3. Marketing Strategy 11.1.4. Management and external consultants 11.1.5. International Markets 12. Appendix 12.1. Email conversation with May Su 12.2. Email Conversation with Terry Newman 5 Introduction The decline of manufacturing is well documented in Australia (Conlon 1985) which has a large impact on industrial design practice locally (Bohemia 2003). I seek to directly impact this negative trend by selling a product which aids local manufacture. To have maximum impact with my given resources this report focus on the timber industry where the author has existing connections and will be able to achieve the most relevant research and realisation. Personal Experience Between December 30th 2013 and February 22nd 2014 I was employed on contract at a timber processing factory in China, owned by an Australian national, Terry Newman. I was employed to make the factory more efficient in a range of areas including dust extraction, production line layout, waste management, storage, and stock movement. Most solutions were very specific to that facility (and often culturally specific to china). Newman initially wanted to open the factory in Australia but a cost made China the more viable option, even though major factors such as ideology, language, bureaucracy, and quality of life opposed this conclusion. He is now facing some issues common to Australia with rising labour costs in China compared to competing labour markets such as vietnam. (Newman 2014, pers.comm.) (statistical analysis in section 5) Funding Manual handling of timber between machines was identified by Newman as the biggest labor inefficiency in his facility, prompting him to offer me funding to develop a solution. Newmans supplier in Australia (Vic Gersekowski) had shown interest in the same need, which if proven viable will be the basis of mass producing and distributing the same product in Australia, funded and facilitated by Mr. Newman. (Newman 2014, pers.comm.) This opportunity makes timber the market in which this project is most likely to have a tangible benefit to manufacturing in australia. 6 Research Background Threats to Australian Manufacturing Australian Labour Costs Manufacturing is a labour intensive industry with low to medium skilled employees making up the majority of the work force. Because of this countries with lower (minimum) wages are able to train and employ workers with minimal expense, negating disadvantages such as infrastructure and shipping to produce good at much lower prices than countries with higher wages. Fig. 1 Minimum wages around the world (ConvergEx Group 2012) 7 Shipping and geographic location The relative proximity to labour markets with much lower wages is a major factor in the economic pressure exerted on the industry. With increasingly efficient container transport world wide due to computerized ports, While the export of large amounts of minerals from the mining industry results in many empty ships traveling to Australia from asia, the are usually oil tankers or coal and gas specific vessels unable to import containerized goods. The high import quantity of containerized manufactured goods to Australia aids the national manufacturing industry as well as harming it. The increased competition locally reduces prices however the returning ships must carry the same number of containers as on the inbound journey. This results in a much higher supply than demand for container freight from Australia to Asia creating lower shipping prices for exports than imports. (Newman 2014, pers.comm.). As international containerized shipping prices are dependant mostly on volume, smaller and high value items are less affected by the added expense compared to local goods. This results in products such as raw materials and agriculture remaining competitive well after electronics and auto manufacture are not. During the global financial crisis of 2007-2008 ‘slow steaming’ shipping became popular to offset the steep increase in fuel costs (ca. 90%) as well as the lower demand for transport. The term refers to operating transoceanic cargo ships, especially container ships, at Reduced speeds (from 22-24 knots to 18 knots) An analyst at National Ports and Waterways Institute stated in 2010 that nearly all global shipping lines were using slow steaming to save money on fuel. (White 2010). The large container ship Emma Maersk can save 4,000 metric tons of fuel oil on a Europe-Singapore voyage by slow steaming. At a typical USD 600-700 per tonne, this works out to USD 2.4-2.8 million fuel savings on a typical one-way voyage. (Jorgensen 2010) 8 Relocating Australian Manufacturing As Australian manufacturing faces increasing international pressure, a factory can either increase efficiency, close down or move offshore. Global companies have steadily been moving labour intensive processing offshore. (Fickling et. al. 2013) For independant local manufacturers however the decision is not as simple as moving production from one plant to another. Owner-operators often do not have experience in setting up, relocating or operating a business offshore. Barriers such as language, regulations, industry knowledge and the personal adjustment of moving internationally is a strong incentive for small business to stay in australia. As the demand for international production increases however, assistive technologies and services are becoming more available. Websites such as alibaba.com, expat manufacturing communities, translation services and english speaking account managers in supply factories, along with the ever growing availability of business information and services online, make the process of starting a factory offshore easier than ever. ( Newman 2014, pers.comm.). 9 The importance of Australia’s manufacturing industry: Employment Despite many job losses, the manufacturing sector still employs around 8% of the total workforce. It also makes a substantial contribution to Australian living standards because its productivity, measured in terms of output per worker, is significantly above average (ABS Australian Industry 2011-12). Concurrently, it provides typically middle skill, middle wage, and full time employment. Retaining these jobs, and seeking areas for potential growth, therefore plays an important role in offsetting the dominant trend towards economic inequality. Fig. 2. Australian Manufacturing Employment decile (Macrobusiness 2013) “manufacturing is the critical part of all successful economies, so we cannot afford not to have it”. - Professor Roos, Chairman of South Australia’s Advanced Manufacturing Council. 10 Resulting Research Manufacturing directly employs one in every five engineers and many more indirectly as consultants (according to the Institution of Engineers Australia, 2011) and is the basis for employment of industrial designers. Australian manufacturing businesses allocate $4.5 billion each year to research and development expenditure, which is approximately one quarter of total private sector expenditure.
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