The Global Supply Chain Issue

All of the major international defence companies operating in Australia have a common complaint - that what they are doing on the ground working with small Australian suppliers often goes unrecognised. Similarly, most Australian small to medium enterprises (SMEs) feel much the same way – that their achievements and their needs are often overlooked, ignored or misunderstood.

The July / August 2010 edition of Asia Pacific Defence Reporter – the ‘Global Supply Chain’ issue - will address all of these concerns.

In the 1980s, international players were encouraged to place large subcontracts with Australian firms to achieve particular local content targets - in some cases as high as 70% (the case for the Collins Class submarines and also the ANZAC Frigates). In the 1990s for a variety of complex reasons, many unrelated to defence, the mood in Government changed and overseas companies were then encouraged to place work in Australia emphasising "quality" over "quantity" and the idea of setting particular targets for local content was quietly dropped. Nobody since then has been able to satisfactorily calculate how to measure quality.

In the early 2000s the language had changed again, and international companies were encouraged where possible to use Australian firms as part of much larger global supply chains rather than limit them to Australian-specific contracts. This fresh approach had its genesis in projects like the Joint Strike Fighter, where the chance for relatively few local companies to be involved in the construction of more than 4,000 airframes represents a great commercial opportunity.

Additionally the Australian defence industrial landscape has continued to evolve and is now dominated by multinational prime contractors. Australian-owned companies are all in the SME category, and some of them are 2 orders of magnitude smaller than the large offshore primes.

To raise the profile of what is now taking place in industry, APDR will invite all of the major international players to submit a 2 page summary of what they are doing for Australian industry, with particular emphasis on their inclusion in global supply chains.

It is anticipated that around 14 multinational companies will be invited to make their contribution for publication, though APDR will not exclude any organizations with a good case to present.

In parallel, APDR will investigate methods for raising the awareness level of the capabilities of SMEs in addition to the information that will be provided by prime contractors. It is anticipated that APDR will work closely with the Defence Materiel Organisation and industry bodies such as the AIG and AIDN to maximize the exposure of Australian capabilities and talents.

It is confidently anticipated that the July / August edition of the magazine will become the annual report into the state of play for Australian defence industry.