The ability of a manufacturer to innovate and adapt to its customers’ requirements is vital. Effective response to industry demands, solving design problems, improving efficiencies and producing quality products are indicators of manufacturing success and cannot be achieved without commitment to research and development (R&D).
The smile curve model demonstrates that the research and development phase of pre-production contributes the largest share of value adding to the manufacturing process.
R&D is defined as (in industry) work directed towards the innovation, introduction, and improvement of products and processes.
Whilst the R&D investment that individual companies make is primarily up to them, it is important that a landscape conducive to encouraging R&D is maintained by governing bodies. This can come from the provision of adequate incentives to innovate, or conversely, disincentivising the outsourcing or neglect of the R&D process.
Editor of AuManufacturing, Peter Roberts, recently shared an analysis of innovation and productivity in Australia following the findings from the March 2022 OECD Main Science and Technology Indicators report. He points out that Australia’s commitment to R&D has waned in the last decade after a strong trajectory since the 1990’s. Today, the data shows “we have even fallen out of the top 20, coming in as the 23rd biggest spender on R&D at 1.8% of GDP”, down from 2.4% in 2010.
Roberts goes on posit that during the 1990’s, policy allowed for a 150% tax deduction on research and development, ensuring businesses fully understood and appreciated the value of innovation to their business growth. Since then, we have seen a significant share of manufacturing capacity sent offshore in pursuit of profits, reliance on extractive industries increase, and subsequently, a decline in the supply of skilled talent in the STEM fields that are so crucial to innovation.
Understanding Research and Development’s Role in Manufacturing Success:
- To improve existing manufacturing processes that deliver substantial productivity, quality, or environmental benefits
- To develop new manufacturing processes, including new materials, coatings, methods, and practices associated with these processes
- To increase capacity through productivity improvements and cost reduction
- To improve and innovate functions crucial to manufacturing such as; quality systems, resource management, supply chain integration, and distribution, scheduling and tracking
- To gain knowledge on a targeted audience to enhance user experience
The research and/or development stage is often first in the development process and is typically not performed with the expectation of immediate profit. Instead, it is expected to contribute to the long-term profitability of a company.
The growth and stability of the manufacturing sector in Australia, relies to a large extent on embracing innovation which is essential for producing quality products at competitive prices.
By investing in research and development, manufacturers will strengthen their internal processes as well as strengthening the bond between suppliers, stakeholders and customers.
Investment in R&D delivers enormous gains in a company’s technological growth, employee satisfaction and capabilities. Improved processes, innovative products and quality service are reasons why it is so important for manufacturers in Australia and businesses providing manufacturing services to invest in Research and Development. Manufacturing success hinges on research and development.