*By Kim Campbell
Manufacturing in New Zealand has always been a vital, misunderstood and major component of our economy. Nothing seems about to change that.
While various sub sectors of manufacturing might come to be labeled ‘food and beverages,’ ‘biotech’ or ‘marine,’ the new names don’t alter the activities described, which international analysts, economists and statisticians refer to as manufacturing.
That’s no surprise; each of these sectors is involved in the transformation of goods to satisfy consumer and industry customer needs and they typically offer a range of back up professional consultancy and expertise to support their value proposition. For some, the value from the services they offer has overtaken sales of hardware.
Manufacturing in New Zealand traditionally faces powerful forces: the need to process our commodity goods for buyers that often, ironically, want to import raw and undifferentiated. Many countries want to use the raw materials of others to keep their own populations employed. But as producers of them we should understand our own resources better than anyone else, and we stand to win the most value from them, provided we keep on investing sufficiently in the R&D that leads to a deep understanding of them.
Besides the price earned from commodities is often volatile and fluctuates more than for highly transformed goods, hence contributing to our currency’s volatility.
The second big challenge is we’re a long way from markets. Our products spend a long time on the water, and this together with a strong currency threatens our competitiveness.
In responding to these challenges our manufacturers have adopted not one, but three routes to the future.
These are first, to automate processing and handling. This has led in particular to expertise in efficient stainless steel fabrication, drying, canning, refrigeration and some extraction technology.
The capability to produce a wide range of competitively priced foods and beverages is the result, a range that has been diversifying rapidly into an ever expanding variety of higher value added, branded products such as infant formula, dried yoghurt, ice creams, ethnic foods, and ingredients.
Some of our timber mills are also automating as are wool and hides processors. For these its either automate, or export their products as commodities since the returns from undifferentiated products will be the more competitive.
The second response has been to apply intense computing and communications technology. Compac, Rakon, Buckley Systems and Fisher & Paykel Healthcare are amongst many notable examples. The currency certainly doesn’t help, but their innovation and specialised markets allow them to manage the currency risk.
The third future is in our burgeoning understanding of hybrid business models inherent in new technology such as 3D printing, and in the use of high speed fibre optic communications. Products are designed, manufactured, and sold in three different countries. 3D printing can allow rapid prototyping, and cost competitive short runs, such as for orthotics where individual customisation is called for.
Examples of hybrid businesses include Jacob Kajavala’s Switch Kites designed in his Kawerau home town, made in China and sold in Europe and everywhere else. (https://www.switchkites.com)
Puma Darts high end, expensive products are designed and made for top exponents of the sport in Katikati with cheaper lines made in Asia. (https://www.pumadarts.com)
For companies like these the high currency represents the difference between the cost of labour here and that overseas, with the costs of marketing offshore offset by lower local costs overseas of raw materials and components.
The message here is simple. We will have a prosperous future if we innovate, re-invent and adapt.
If we look carefully at the companies which have remained competitive over the long term we find a familiar pattern – they innovate, retool, recapitalise, invest in automation, get close to their customers and add value where it is most competitive to do so.
And whatever they do, they never stay the same!
*-Kim Campbell is chief executive of the Employers and Manufacturers Association. Kim.email@example.com