Manufacturing and Engineering 2011 Skills Needs Review (ISNR).
The exerpt reproduced below is for Manufacturing and Engineering and is taken from the total review for all Victorian Industry Training Boards. The review was undertaken by Deloitte Access Economics.
Coverage for Manufacturing and Engineering
Aerospace, Engineering (Fabrication trades), Engineering(Mechanical trades), Engineering (Other), Mining, Shared – Metals andEngineering, Automotive components, Chemical, Hydrocarbon and Oils, Nonmetallic Mineral Products, Plastics, Rubber and Cables.
Specific industry and business cycle drivers:
Carbon trading schemes in Australia and worldwide, the exchange rate, oil prices, raw material prices.
Recent relative sectoral performance rating: Average
Expected relative sectoral performance rating: Low
Summary of ITAB advice and consultation:-
The Manufacturing and Engineering Skills Advisory Board (MESAB) has advised that the key
change drivers for its relevant industries in 2011 include:
· New investments and research and development expenditure (demand side)
· New technologies and materials (demand side)
· Enhanced communication technologies (demand side)
· High Australian dollar (demand side)
· Resurgent mining boom attracting workers away from Victoria (supply side)
In addition, MESAB expressed significant concern regarding labour supply issues in manufacturing and engineering industries. Consultations between MESAB and industry operators revealed considerable anecdotal evidence among small businesses of a strong desire to take on young staff, particularly apprentices. This latent demand has not translated into a corresponding increase in apprentice numbers for a variety of reasons.
MESAB cited the absence of engineering pre-apprenticeship programs running in the VET sector, resulting in a small number of suitable applicants available to employers. Other aspects of the existing VET system were also cited as contributing to these supply side issues.
Specifically, a lack of numbers has resulted in some providers ceasing to offer relevant engineering qualifications, the way in which some providers are implementing competency based apprenticeship completions is undermining employer support for the system, and the unavailability of an at the job training service are all playing a role.
A range of other factors are also likely to be affecting the supply of young people into manufacturing and engineering industries, including competition from other more attractive industries and a poor perception of the nature of manufacturing work.
CiM Project.
To try to address some of these issues MESAB has been operating the Careers in Manufacturing program across Victorian schools. Between 2008 and 2010, the program delivered almost 600 career activities for over 12,000 secondary school students, including tours and presentations by Young Industry Ambassadors. The program has built a resource of more than 100 ambassadors representing a wide variety of manufacturing occupations and stemming from both vocational and higher education pathways, and is supported by more than 70 employers. The success of the program depends on the transition of students into pre-apprenticeships (and other pathways), and is therefore reliant on funding of pre-apprenticeship places in order to link relevant schools and regions with successful careers.
Key change drivers.
Regarding the key change drivers, MESAB has advised that new investments and research and development expenditure are progressively upgrading the level of technology used in the sector. In turn, demand for workers with advanced skills such as in computer aided design and related functions have increased. The automotive sector is an important driver of technological change, and is at the forefront of new tooling. These technologies can often take around five years to flow through to small and medium enterprises.
There is a need for training packages to keep up with industry practices and the outcomes of research and development in order to provide skills which are relevant to businesses operating in a modern environment.
A related change driver is the emergence of new technologies and materials. Across many manufacturing and engineering sectors, the skill impact of these technologies and materials is one of up-skilling. Some of the specific technical skills related to new technologies are relatively niche, and up-skilling can generally be provided through the supplier of equipment, but the VET system will need to be continually updated to reflect changing technologies in order to meet the industry’s future skills needs.
An important element of this change driver is the need to utilise new processes. Lean manufacturing continues to emerge as a preferred method of business operation, particularly when it incorporates components of sustainability as well as efficiency. Lean manufacturing also aids productivity and can assist domestic producers trying to complete in international markets. There is a growing industry desire for employees with skills and knowledge in lean manufacturing to ensure lean innovations can emanate from all levels of the workforce. However, these skills are not currently included in the training service offered by publicly funded VET providers.
More generally, there is a view that VET students studying trades and technical courses should also be exposed to more generalist business skills including project planning and monitoring, cost benefit analysis and basic financial management to enable employees to link lean initiatives with cost and income consequences.
Communications technologies.
Enhanced communication technologies have enabled new and smaller firms to compete in manufacturing industries, including at the international level. By facilitating the transfer of designs and data, enhanced communication technologies allow tasks such as digital prototyping to be performed by firms anywhere in the world.
MESAB also noted that the elevated Australian dollar is expected to be an important factor affecting Victorian manufacturing and engineering firms in 2011. The exchange rate is eroding the competitive position of firms, and inducing businesses to invest in increasingly sophisticated technologies and production techniques as a means to stave off competition from abroad.
The use of lean manufacturing was cited as a means of adapting to the increased competition associated with the high Australian dollar. The high dollar, rising gold price and uncertain financial market has also contributed to a growing attractiveness of gold (and jewellery) as an investment. In turn this is adding to demand for jewellers.
Mining boom.
The resurgent mining boom in States such as Western Australia and Queensland is again attracting workers away from Victoria. This problem is particularly acute across engineering-related occupations such as metal fitters and turners, fabrication tradespersons, metal machinists and sheetmetal trades workers.
Although tighter margins typically mean that funds for general training are cut by firms, the increased use of technology and more efficient production processes can also give rise to additional training requirements. These training needs are increasingly being met through on the job training or training provided by equipment and technology suppliers.
The skill issues in the industry are generally being felt more acutely across regional areas. However there has been a significant increase in the number of providers contracted by Skills Victoria to offer training in regional areas in recent years, which may assist to meet demand.
Foundation skills.
Other relevant skill issues include a lack of foundation skills such as language, literacy and numeracy across some sections of the industry. Deficiency in these fundamental capabilities can exclude individuals from the VET system and prevent them from successfully engaging in relevant training programs. Funding for training in foundation skills does exist under the VTG, which could potentially help to alleviate this barrier to wider training.
Many of the new technologies, methods and materials being used in this sector add to the sustainability of business practices and underpin a growing need for green skills. For example, knowledge of lean manufacturing processes is required to improve the sustainability of business operations. More specifically, areas including renewable energy (such as wind power) will underpin a green skill need. That said, many of the required skills in these emerging areas align closely with existing technical skills possessed by workers in the industry.
Industry outlook
The medium term trend for the manufacturing and engineering industry points tocontraction in many of its sectors. Some possible exceptions include pharmaceuticals and biotechnology given the large investment in research and development relevant there. The renewed resources boom will put pressure on interest rates and wages, driving up input prices. The high value of the $A will also make conditions difficult for the industry as the export market becomes tougher and imports become more competitive. This is compounded by a longer term trend of stronger competition from the manufacturing sectors of emerging economies.
Mining
The mining sector is one important element of this industry that is likely to have an above average performance over the short term. Deloitte Access Economics expects the volume of Australian resource exports to rise significantly over the medium term. The mining industry in Victoria is small, especially in comparison to its counterparts in Western Australia and Queensland. However it does provide opportunities in areas such as coal, oil and gas, and base metals and minerals.
Developments in the energy sector will be important for Victorian mining. The waters between Victoria and Tasmania, including the Otway and Gippsland basins, contain 80% of eastern Australia’s gas reserves and, potentially, a significant amount of undiscovered reserves.
Victoria will also benefit from the production of gas from Tasmanian administered waters through Victorian facilities. Additionally, the Victorian government’s Energy for the Regions program will extend the natural gas network to East Gippsland, and Central and Northern Victoria. As the demand for gas and the associated distribution network expands, the Victorian mining and engineering industry should also benefit.
Victoria is also home to significant deposits of brown coal. However, production of brown coal is riskier over the longer term as developments in future climate change policy are likely to lead to a higher carbon price making brown coal a less attractive source of energy.
Metal manufacturing.
The metal manufacturing sector, the upstream component to the Australian mining industry, likewise has healthy medium term prospects relative to other manufacturing and engineering sectors. This sector tends to follow the global demand cycle and, as such, should see an upswing as domestic and global demand recovers in the short to medium term. Victoria in particular, with its deposits of nickel and copper, among other base metals, will benefit from a healthy appetite in Asian economies for these resources as inputs to their own manufacturing industries. As production returns to operational capacity with renewed demand, the sector is likely to see a commensurate recovery in employment numbers.
Plastics and chemicals.
The outlook for the plastics and chemicals sector is not as strong. The sector has been on the decline for several years now as it competes with a strong Asian sector and a legacy of underinvestment in Australian plants. The added competitive pressures of a high $A over the short term will add to these difficulties. Stronger agricultural production following a wet spring this year may also see an increase in demand for chemical fertilisers.
Overall employment in the manufacturing and engineering industry is forecast to decline modestly over the next few years. This is largely the result of increased competition from overseas markets and is compounded by the current strong $A. However, some elements will be supported by the renewed resources boom and likely see increased employment numbers.
Chart 12.2 in the report shows trends in skilled vacancies across three manufacturing and engineering occupations, along with Victoria as a whole. The chart shows that in comparison to the mid-1980s and mid-1990s, there are relatively few skilled vacancies in the industry at present. In part, that is a reflection of economic conditions, but it is also due to a consolidation of the industry over that time. Indeed, there may have been fewer vacancies for toolmakers in 2010 compared to in 1987, but there are also likely to be fewer toolmakers working in Victoria overall.
Occupations in demand and critical skills shortages
The table in the report summarises advice provided by MESAB on occupations which it expects will be in high demand in 2011 and those which will experience critical skill shortages. Occupations in demand and experiencing critical skill shortages
Occupations in demand
Civil Engineering Draftsperson
Electrical Engineering Draftsperson
Electronic Engineering Draftsperson
Metallurgical or Materials Technician
Sheetmetal trades workers
Aircraft Maintenance Engineers (licensed and unlicensed)
Metal machinists
Locksmith
Air conditioning and refrigeration mechanic
Jeweller
Fabrication tradesperson
Metal fitters and turners
Occupations experiencing a critical skills shortage
Sheetmetal trades workers
Aircraft Maintenance Engineers (licensed and unlicensed)
Metal machinists
Locksmith
Air conditioning and refrigeration mechanic
Jeweller
Fabrication tradesperson
Metal fitters and turners