Slipping competitiveness
Results in the IMD World Competitiveness Yearbook 2012 indicate that Australia needs to pay greater attention to issues around competition and efficiency. The survey shows Australia’s overall competitiveness ranking has slipped to 15, a drop of 10 places in two years, which reflects factors such as the high Australian dollar, skills shortages, industrial action and red tape. Hong Kong, the US and Switzerland topped the latest list. In specific ratings of business efficiency, Australia slotted in at number 13, trailing Asia-Pacific counterparts such as Hong Kong and Singapore, which filled the top two spots.
Business and industry groups warn that such rankings signal the need for less red tape in Australia and more investment in innovation. The Australian Productivity Council argues that the aim for companies must be to get more from less through initiatives ranging from process and plant redesigns to staff retraining, manufacturing overhauls and waste reduction.
Craig Milne, executive director of the Australian Productivity Council, says red tape is an insidious factor that is hard for business to combat.
“It’s a growing problem,” he says. “If you have dealings with government, whether it’s on taxation matters or regulatory matters, it’s like you’re dealing with people from a different culture. They just don’t get efficiency. They don’t understand that all this regulation is a dead hand that sits on all business.”
Such a regulation burden underlines how crucial it is for businesses to get their internal systems right, according to Milne, who believes the outlook for labour-intensive sectors, such as manufacturing and clothing and textiles, is not bright in Australia. He believes capital-intensive sectors, such as mining and agriculture – areas in which the nation has a comparative global advantage – are our best hope.
“We’re good at that stuff,” he says. “We can compete at that globally if we don’t kill it with too much tax and too much regulation.”
[breakoutbox][breakoutbox_title]10 ways to improve business efficiency[/breakoutbox_title][breakoutbox_excerpt]It is crucial for all businesses to review their operations and zero in on strategies to increase efficiency.[/breakoutbox_excerpt][breakoutbox_content]
Control inventory levels to reduce dead space and ensure popular products are available.
Choose appropriate rental space that is comfortable but affordable.
Keep wage hikes in check and reward the strongest performers.
Cut redundant employees and pay special attention to keeping the best talent.
Consider outsourcing critical tasks to cost-effective specialists.
Embrace systems that let the business measure, monitor and motivate certain behaviours.
Eliminate indulgent expenses, such as over-the-top corporate dinners or getaways.
Utilise relatively cheap marketing platforms available through social media.
Set strict payment terms and follow up quickly on any outstanding debts.
Maintain your key equipment and infrastructure to minimise downtime.
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Positive outlook
Despite tough conditions in recent years, business forecaster BIS Shrapnel is quite upbeat about the outlook for Australian industry. In its latest Long Term Forecast report, it predicts mining investment will continue to underpin activity over the next few years, while also noting that parts of the business and financial services market have benefited from strong mining-related investment.
BIS Shrapnel also suggests the health services sector is set for ongoing growth on the back of an ageing population, while the outlook for telecommunications and building appears positive for the next few years. Education investment is likely to stabilise.
Regardless of sector-by-sector trends, Knowles says it is crucial for all businesses to review their operations and zero in on strategies to increase efficiency. Attention to the aforementioned issue of inventory management is crucial.
“You really have to get into the detail,” he says. “You need to understand exactly what inventory you are carrying, how quickly it’s moving, where it’s coming from and therefore what the lead times are to replace it.”
While it is important to cut items that represent ‘dead money’, it is equally critical not to deplete stocks of popular items that are the staple of the business. “You might allow yourself to get out of stock on key items from time to time, which are sales you will never get back.”
With payment terms blowing out in business-to-business transactions since the GFC, Knowles says active and efficient management of debtor books is essential in the current climate “because what we’re seeing is more and more businesses are failing quickly”.
“So you’re not getting the warning that you used to get of people dragging out payments and making louder noises before they tip over.”
On the people side, Knowles believes the key is to carefully assess which employees should stay and which ones should go. In an environment where margins are low, more outsourcing to specialist suppliers may make sense rather than having a fixed commitment to full-time employees.
“Even casuals may be a smart option,” says Knowles. “It gives you the ability to ramp up and ramp down without having to carry an overhead through down times.”
