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Getting away from cars: how to make diversification work

Manufacturing

THE difficult task of diversification is a must for hundreds of South Australian businesses in the automotive supply network. Brent Balinski spoke to one company that’s negotiated the leap early and successfully.

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Precise Advanced Manufacturing Group is in the middle of moving some of what it does into the new Tech Hub in the Thebarton Technology Precinct. The development of intellectual property – for itself and for others – will be the biggest contributor to its revenues by 2016 if its transformation strategy is successful.  

Yet a decade ago, almost all of Precise’s turnover was related to supplying the auto industry.

Grant Tinney is the CEO and owner of the 43-year-old business, at which he started as a 15-year-old apprentice in 1977.

“We are a traditional automotive supplier,” Tinney told Manufacturers’ Monthly.

“Predominantly moulds and dies for the industry. We were 90 per cent automotive-focussed from 1971 to 2004.”

The company has moved further and further away from its roots in mould and die manufacturing for automotive since 2004, and is well on the way to its goal of being predominantly a manufacturing solutions provider for a broad range of industries.

The aim when the process started was to be less than 50 per cent automotive-focussed by year 2008, and by the company’s figures, shrunk the contribution to the business by the car industry to 36 per cent. To mould and die it added precision machining – buying a machining business – and automation solutions.

It targeted industries that, unlike the car industry, were experiencing growth, such as mining, clean technology, defence and medical.

“We sought to diversify so we wouldn’t want to be more than 20 per cent hooked into one particular industry,” explained Tinney, whose company now serves a diverse customer base.  

The company’s transformation was accelerated further still after the global financial crisis hit, and a new business strategy emerged, adding the development of Precise’s own IP and assisting in the commercialisation of other companies IP. It aims to, by 2016, have the former contribute to 25 per cent and the latter contribute 50 per cent to total revenues.

“We had all the skills and all of the building blocks in place, predominantly, we had a few things, like we partnered with Ellex Medical in Adelaide so that we could bolster our regulatory approval side of the business, for gaining TGA and FDA approval for medical devices,” said Tinney.

“Partnering with them meant that we could achieve that. But we’ll be partnering with other companies in mining and defence realms over the coming year in order to better position our group of companies to commercialise products in those sectors.”

Precise currently employs 60, and plans to have grown this to 75 by early next year.

The group covers five divisions from cavity moulding, machining, medical device commercialisation (Precise Global: the division in its joint venture with Ellex Medical), products commercialisation and rapid prototyping/industrial design.

At the Tech Hub facility, Precise will host its product commercialisation centre, including its additive manufacturing machines, prototyping laser machines and industrial assets. There will also be a clean room facility operating for the production of electronic medical devices.

The goal is to be able to take any client’s idea from a drawing on the back of an envelope right through to a finished product out in the market. It believes with the expertise among its staff, its equipment and its facilities, it offers a solution to many businesses who have great ideas and who can benefit from a suite of offerings. It has been operating in this area for the last 18 months.

“We’re gaining a lot of momentum in that area and really being a one-stop shop for the commercialisation of product is definitely where we need to position our company and certainly it’s an area that Australia as a whole and South Australia need to do a lot better at: the commercialisation of products, and taking innovative products and taking them to market,” explained Tinney.

At the time of writing, Precise has, by its count, 17 commercialisation projects on the go. These include efforts in medical devices, defence, mining and a large renewable energy project.

The company has a big head start on many companies who have traditionally operated supplying the automotive industry, which employs roughly 45,000 according to recent ABS figures.

The decline of the Australian automotive industry has been noticeable for some time. In 2004 there were over 420,000 cars made in Australia. In 2013 – the year in which Holden and Ford announced they would end the assembly of their cars in Australia – around 118,000 Australian-made cars were sold here.

Tinney saw “the writing on the wall” a decade ago. Some suppliers, such as Futuris Automotive, have looked abroad to ensure their survival as the local market dwindled. Others have been able to identify and sell to different industries. But many have been slower to act.

According to tracking of the industry by the Department of Manufacturing, Innovation, Trade, Resources and Energy, in Tinney’s state there are 719 local companies involved in the supply chain, with 35 per cent of these suppliers. Most of the Tier 1 suppliers have not diversified.

“A lot of the companies out there will not change, will not adapt,” said Tinney. “There’s various reasons for that.”

He believes that with the limited time available to those with a hope of diversifying, it is only worth trying to assist those truly willing to have a go at the difficult task (and who have the skill sets and entrepreneurial drive to make that happen).

“I think all the government can do is add value,” he said.

Tinney, whose company was awarded an Automotive New Markets Program grant worth $600,000 in 2012 to assist in its diversifaction, believes that current government efforts at state and federal level are acceptable, and both tiers of government “are doing quite a lot”.

“The key thing [for diversification] is that you’ve got the management team that is very entrepreneurial and strategic in its forward thinking, in terms of it knows that it has a problem, it does the research and looks around to see what other global companies have done to transition and not reinvent the wheel, and have aimed for a niche area that is within their core competencies,” he said. “Whether it’s solar or medical or another industry.

“You need to obviously be working on that quickly, because there’s only a small window of opportunity.”

This article originally appeared at Manufacturing Monthly, by Brent Balinski.

This is a Creative Commons story from The Lead South Australia, a news service providing stories about innovation in South Australia. Please feel free to use the story in any form of media. The story sources are linked in with the copy and all contacts are willing to talk further about the story.

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