Page 148 - Australian Defence Magazine Sep-Oct 2022

148 SUPPLY CHAIN MANAGEMENT
RESILIENCE
SEPTEMBER-OCTOBER 2022 | WWW.AUSTRALIANDEFENCE.COM.AU
It is also in the right position diplomatically. Australia is subject to the same power shifts in the Indo-Pacific, is seeking deeper cooperation with Asian powers to balance against a rising China, and is under pressure to develop its own sovereign military industrial capability. A burgeoning defence industrial relationship with South Korea (already our third largest export market) is a vector to deeper mili- tary and diplomatic ties. In other words, there is plenty in this for Canberra too.
Hence the South Korean government has sent its top- level leadership to Australia alongside industry figures from Hanwha and Hyundai Rotem. A senior
trade delegation arrived in February after a
LEFT: An Australian Army Officer from Joint Logistics Unit – South Queensland oversees fitting of armoured plating to the first of fourteen M113AS4 Armoured Personnel Carriers bound for Ukraine
RIGHT: The Commonwealth is looking to create a resilient defence industry supply chain
industry already does itself. For example, hull structures for both of our vehicles could have been shipped in from Korea, where we have multiple manufacturing lines.
“Instead, in the spirit of a secondary supply chain and re- inforcing the Koreans if they need us in a conflict, we looked for a local source and have invested in companies like TEI Services in Townsville and Elphinstone in Tasmania. Be- tween those two locations, we are getting a hull structure.”
Defence, of course, acquires hardware in bursts, then spends years – sometimes decades – planning the next ac- quisition. The Army rolled out new M1A1 tanks in the late
2000s; an upgraded M1A2 version is expect- ed just over 15 years later in 2025.
This means another consideration for ma- jor industry players looking to build a resil- ient supply chain is to make sure the com- panies in that supply chain can survive the valley between major purchase orders.
“A resilient supply chain requires us to make sure we are working with companies who are not in a silo,” Keating said. “They need to be diversified too. They need to be
presidential visit in December 2021, and the head of South Korea’s Defence Acquisition Program Administration (DAPA, its pow- erful military procurement agency) visited Canberra in late July to meet with CASG.
“HANWHA LOOKED AROUND THE WORLD AND THOUGHT ABOUT WHERE A SECONDARY SUPPLY BASE COULD BE SET UP”
While the strategic rationale to build
more resilient supply chains is there for both
Seoul and Canberra, supply chains them-
selves mainly come together through the ef-
forts of industry – although Keating acknowledged that the government-government connections are a major facilitator.
learning from other customers in other markets.
“This means it’s no good for us to screw someone down on a price to get a short-term saving. We need our suppliers to be profitable and able to compete, so that when we stop ordering and disappear for a few years, we know the sup- plier will still be there when we come back to order another
round of vehicles.”
Interestingly, Hanwha and Hyundai – traditional rivals in
South Korea – are actually cooperating on a shared supply chain in Australia, perhaps a reflection of the importance the South Korean government has placed on expanding trade relations with Australia. It’s worth noting here that Hyundai is bidding on a major rail program in Queensland.
To this end, Hanwha has positioned itself as a prime systems integrator in Australia rather than a more tradi- tional ‘prime’. This means less focus on its own in-house manufacturing capability and more on the capabilities of its suppliers.
“Major systems for our vehicles come from our suppliers,” Keating explained. “Those systems are their proprietary products. If they’re not available, the vehicle is not available.
“A manufacturing capability does not shore up a supply chain. The decision that was made, and that we continue to follow, is that we will not build in-house what Australian
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