Modern Manufacturing and the Smile Curve

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When we discuss manufacturing in Australia, many make the mistake of talking only about production and fail to recognise all the steps that comprise the manufacturing value chain. This ‘traditional view’ of manufacturing in Australia does a disservice to the perception of the contribution the industry makes to our economy. This is why the concept of the Smile Curve (or smiley curve) is vitally important to understand. 

More than just Making It.

The Smile Curve was developed by former CEO of Acer Inc, Stan Shih, to clearly demonstrate the seven steps across the manufacturing value chain. The multiple steps through the pre-and post-production phases offer manufacturers a range of opportunities to add considerable value to their existing products and business methods. The curve demonstrates that some of the greatest value across a production cycle is derived from early stage R&D, design, and post production activities such as distribution, sales and after-market service activities. When we talk about end-to-end fabrication at Black Lab Design, it means we are consistently endeavouring to increase value along each of these seven significant steps.

“by discovering a clear value proposition through R&D and delivering your value proposition through marketing, sales and customer service, you provide more value for customers and generate a robust and defensible service offering for your business.”

Manufacturing in Australia has been on the decline since the 1970s. That’s the widely accepted view among many who have seen the closure of the Holden and Ford factories or the collapse of Arrium in the not-so-distant past. However, the small and medium sized modern manufacturers in this country have instead focussed their energy and investment on the value-adding processes outside of production, or along the edges of the smile curve. So today, when measured against the smile curve, manufacturing employs more than 10 per cent of Australia’s workforce – and this share is growing. These manufacturing businesses contribute more than $100 billion a year to our economy and directly, and indirectly, employ more than 1.27 million people.

Our recent article delved into the shift towards onshoring of Australian manufacturing being partly influenced by the pandemic and resulting disruptions to global supply chains. Viewing this change through the lens of the smile curve allows us to better identify the contribution local manufacturing makes to our economy. We saw companies pivot into delivering essential products protecting the Australian public like divider screens, sanitiser units, PPE and medical equipment. The detailed R&D, considered design, vigilant logistics and rapid distribution achieved by Australian manufacturers filled the gap left by floundering global supply chains.

Production will always be important but greater value can be gained from activities both pre-and post production. It is activities like R&D, design, logistics, sales and services that better play to our strengths.

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