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Creating an enduring industrial base for Defence projects is one of the most critical challenges Australia is facing in its bid to future-proof military capability. While efforts to improve domestic supply chains have helped make inroads, the nation’s relatively high manufacturing costs limit the efficacy of this approach.
Tim Pickford and Millie Keating of defence contractor Hanwha advocate an alternative method: bolstering global supply chains through mutually beneficial partnerships. Marrying a manufacturer in Korea with a systems integrator in Australia, Hanwha has built a sustainable and cost-effective supply of automatic fire suppression systems, whilst enhancing the supply chains in both nations.
Under this partnership, the Australian systems integrator sources 30 percent of its componentry from Australian suppliers and 70 percent from the Korean partner. The system can then be assembled, tested and fully supported by each partner in their home nation, or in any location globally where Hanwha’s platforms are sold.
Mr Pickford believes this hybrid manufacturing approach is more sustainable than a purely domestic one, and sets a precedent for future defence industry contracts.
“If you build a purely local industrial base that caters to only a few hundred vehicles in Australia, once that operation stops, the industry comes crashing down and there are no more opportunities. If components are already in the global supply chain, then you can export them, and participate in a wider and more diverse marketplace,” he said ahead of the ADM Congress.
Three elements to success
The first element of this hybrid approach is to identify countries that have natural synergies with Australia.
“Australia and Korea complement each other in many ways, including their manufacturing strengths,” Mr Pickford said. “In Australia, because we don’t have the large domestic and global supply chains like a lot of manufacturing nations do, we have become incredibly cost-efficient when producing highly complex items in small quantities. Meanwhile, Korean industry is excellent at producing other, more general, items at scale. By involving both nations in our projects, and facilitating teaming in unique ways, we are naturally playing to each other’s’ strengths and achieving great outcomes.”
The next element is to highlight the reciprocal benefits to prospective partner nations.
“By finding those synergies in our cross-country supply chains, partners can open up export opportunities in Korea, Australia, and other Five Eyes nations,” said Ms Keating. “These strategies are both enduring and mutually beneficially in terms of trade. Likewise, if Hanwha is investing in a program to uplift or reskill our people, we can bring our industrial network with us on that journey, facilitate broader opportunities to learn and share those learnings. Highlighting the advantages of collaborations has helped us strike deals with countries that previously ruled out Australia as an export market.”
The third element is to build loyalty and trust with partners through transparency and honesty.
“Trust is everything in our relationships with industry partners,” Ms Keating said. “Three years ago, Hanwha was unknown to the Australian market, and it is through trust that we have built ourselves up.”
To cultivate trust, Hanwha is upfront about its priorities and the capabilities it seeks from industry partners before entering into contracts. “We don’t make promises we can’t keep, even if that means foregoing a new supply relationship because we aren’t ready yet, or we have further learning to do. It is important that we deliver consistently on our commitments and maintain an ethical approach,” Ms Keating said.
Extending the model
Hanwha’s hybrid manufacturing – and broader industry engagement – approach is being used as a blueprint for future business endeavours. The company’s Industrial Development Unit (IDU) is currently prospecting countries and organisations that will naturally synergise with upcoming projects in terms of shared strategic objectives. It is also developing relationships with prospective partners, among other efforts to enhance sustainability in its supply chain.
“We are getting companies ready to work with us in the future. Not necessarily to produce a particular system today or tomorrow, but to become part of our fabric once we are a mature company. It’s all about seeing where scale and alignment is possible,” Ms Keating said.
Cross-sector synergies
Hanwha’s approach is not limited to inter-country collaboration, with the company also looking to exploit synergies with adjacent sectors.
“Sectors that align well with defence can share resources and work towards common objectives,” Ms Keating said. “A great example is apprenticeships. On its own, Hanwha could keep two or three apprentices meaningfully occupied for a particular project, but if the apprentices were shared with another company in another sector, we could have five or six. The apprentice would also benefit from having cross-industry experience,” she said.
The company sees strong alignment with sectors such as Mining, Agriculture, Heavy plant and vehicle manufacturing and, to a lesser degree, financial services.
“Mining and Defence professions both involve rugged electronics and heavy grade steels. AgTech and Defence both use drones to collect data and monitor large landscapes,” Ms Keating said. “Meanwhile, banking is a seasoned user of artificial intelligence, and we have a lot to learn from the commercial sector about this technology.”
Tim Pickford and Millie Keating will talk more about their approach to industry engagement and their plans to extend the Korean-Australian partnerships at the ADM Congress, due to take place 22 June 2022. This year’s event will be held virtually and in-person at the Hyatt Hotel Canberra.
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