South Australian wool supplier and Adelaide institution Michell Wool reinvents for new-age markets MICHELL Wool has reinvented itself to define world's best practice in taking wool from the sheep's back and preparing it for the world's woollen trade. It has achieved its world's best practice title since fifth generation directors Peter and David Michell decided to take over the old family business from 38 cousins in 2004. They hope their move to stay in the industry because "it's what we know," will pay off in the decades ahead as the Australian wool industry consolidates and expands. "We have reinvented ourselves in the past five years - we've cut our water and energy use in half," Peter Michell said. Our cost of production was at least four and maybe five times higher a decade ago. The 143-year-old Adelaide institution has highlighted its new-found efficiency by carbonising wool for within 10 per cent of the cost of its heavily subsidised Chinese competitors, despite far higher costs in Australia. Carbonising is the chemical process used to remove vegetable matter such as grass seeds, burrs and other waste material from wool. It follows a traditional wool scouring process and consists of acidification, drying, baking, mechanical crushing and dusting, neutralisation and final drying. "We are trying to be innovative in everything we do," David Michell said. It has included starting a wool broking arm to ensure supply of about 2000 bales a week of wool at this stage to keep our Salisbury factory running at peak capacity. Mr Michell said manufacturing is alive and well and while the process looks simple, the techniques used by the company to drive efficiencies are highly advanced. Achieving its improved performance involved investing heavily in research and development, and adopting advanced manufacturing techniques to cut costs by 80 per cent from a decade ago. "Michell is one of the only non-Chinese wool processors to survive a decade of structural change in the global wool industry and we're determined to continue to lead from the front," Peter Michell said. Early stage processing is a fundamental requirement for the wool industry. Wool production is here to stay, and wool consumption is on the rise, so to specialise in this area makes strong business sense. We have spent time, energy and money in making our plant probably the world's most efficient washer of wool and that has had a payback. Survival. The benefits from its efficiency have also been significant for the environment as the Salisbury plant has significantly cut electricity, detergent and water consumption. "There's a balance required there," he said. Recently we pushed our water conservation too far and our quality suffered, so we have to be acutely aware of balancing highest efficiency with customer needs. Michell's carding wool products are used for the production of woollen yarn for fashion knitwear and heavy woollen woven fabrics, quilts, pillows and underlays and felt products for industrial uses. The wool industry was the first Australian rural sector to achieve major success in China and exports totalled $2.319 billion in 2011-12 from total overseas sales worth $3.06 billion. China buys 80 per cent of Australia's wool and is home to the majority of the world's early stage wool processing factories, while processing in Australia has dropped from more than 20 plants to just three in recent years. The success of Michell Wool has helped turnover reach about $100 million a year, a 30 per cent decline from its peak carbonising production, but an improvement on the industry's overall decline of more than 65 per cent since the late 1990s. Michell is easily the largest company of its type in the world when its carbonising and scouring of fleece wool for large international spinning customers are added together. It employs close to 250 people full-time at Salisbury and Suzhou in China and is responsible for 20 pr cent of the global wool carbonising market, divided equally between the two locations. Its survival against the odds has depended on it reinventing the wool carbonising business, the world's largest, while undergoing a "one-in-100-year firestorm." The firestorm included the Global Financial Crisis in 2008 and the massive millennium drought when the Australian sheep flock crashed to a 100-year low of only 68 million in 2009. After a tough decade, the company is leaner and leveraged to take advantage of an upswing in global demand for Australian wool, Peter Michell said. He said the company decided to "focus on what we do very well," and expanded its carbonising business, establishing a plant in Suzhou, China, six years ago, one of the first wholly-owned foreign enterprises in the country. The aim was to increase Michell's access to China's booming domestic market because more than 80 per cent of wool processed at Suzhou stays in China. The Michell brothers have shown a flexibility and willingness to move quickly to take advantage of opportunities. Last September, they sold their Malaysian wool processing business Michell Nankai because the price offered by a Japanese company was too good to refuse. Throughout the sector's ups and downs, Michell Wool has continued to play an invaluable role in the world wool industry by advising customers on important technical aspects of using the natural fibre. Their confidence in the future is based on wool being in fashion around the world and the efforts of Australian sheep breeders in re-engineering the national flock to grow significantly finer wool.