Adam Sharman CEO LMAC-Group APAC

The New Zealand manufacturing sector has navigated a complex landscape in 2024, with significant headwinds such as persistent inflation and increased operational costs, local and global supply chain complexities and global economic uncertainty; factors which led many to adopt the mantra of ‘survive to ‘25’ in order to navigate sales uncertainty and low market and consumer confidence.

Whilst these realities are pervasive in the industry, economic indicators suggest a flat-lining of productivity rather than a significant decline and this year’s performance and the macro level is perhaps best understood through a detailed lens of economic indicators and sector-specific metrics.

According to Statistics New Zealand’s latest manufacturing sector survey [1], the industry’s overall output experienced a modest growth of 2.3% in the 2023-2024 financial year, following a challenging period of contraction in previous years.

This growth, while incremental, signals a gradual recovery and renewed resilience in the sector.

Key economic indicators revealed:

• Manufacturing sector contribution to GDP: 11.5% (up from 10.9% in 2023)
• Total manufacturing sector revenue: NZ$55.3 billion
• Productivity growth: 1.8% year-on-year
• Labour productivity improved by 2.1%, demonstrating increased efficiency through technological adoption

Export data from the Ministry of Foreign Affairs and Trade [2] painted a nuanced picture of New Zealand’s manufacturing capabilities:

• Total manufacturing exports: NZ$29.6 billion
• Top export sectors:
• Food and beverage manufacturing: NZ$12.4 billion (42% of manufacturing exports)
• Machinery and equipment: NZ$5.7 billion
• Chemical and associated products: NZ$3.9 billion

Notably, the food and beverage sector continued to be the main breadwinner for GDP, with dairy-related manufactured products accounting for approximately 25% of total manufacturing exports.

The sector saw a 3.5% increase in export value, driven by high-quality processing and global demand for New Zealand’s premium agricultural products.

Whilst there is potentially some cause for optimism in these numbers, despite ongoing advancements in digital tools and processes, productivity remained an ongoing struggle for many New Zealand manufacturers in 2024, and as a result, risks further inertia if investment in these areas is not addressed.

This issue is particularly significant in industries with complex, multi-layered product portfolios, where tracking everything from raw materials to finished goods in real time can be a logistical nightmare.

As global supply chains become more fragmented and the demand for personalised products increases, Kiwi manufacturers are increasingly looking for ways to gain better insights into their product lines, both internally and externally.

In 2024, manufacturers confronted persistent and complex workforce challenges that significantly impacted their operational capabilities.

Skills shortages emerged as a critical bottleneck, particularly in advanced manufacturing domains requiring expertise in emerging technologies like artificial intelligence, advanced robotics, and complex automation systems.

The technological evolution of manufacturing outpaced traditional workforce development strategies, creating a substantial skills gap that hindered productivity and innovation.

Many companies struggled to find workers with the technical proficiency needed to operate sophisticated manufacturing equipment and integrate cutting-edge technological solutions, leading to increased recruitment difficulties and higher training costs.

Workforce efficiency became a key focus for manufacturers seeking to address these challenges.

This represents a shift from 12 months ago where staffing numbers was the main issue. Organisations are no longer struggling for applicants, rather the struggle is to find a productive workforce.

To mitigate this, companies are increasingly investing in comprehensive training and development programs, leveraging digital learning platforms, to rapidly upskill their workforce.

Many manufacturers also explored hybrid workforce models that combined human expertise with advanced automation technologies, aiming to maximise productivity while mitigating the impact of skills shortages.

The struggle is rooted in several factors. For one, many manufacturers still rely on disparate systems, disconnected databases, making it difficult to access real-time product data across various departments.

Secondly, the growing complexity of product offerings—think customisation, configuration, and bundling—has only increased the need for greater visibility into how products are designed, produced, and delivered.

In 2024, many New Zealand manufacturers are embracing technology such as digital twins, IoT connectivity, and advanced analytics to improve visibility.

These technologies allow manufacturers to create a digital replica of their physical products and processes, enabling them to monitor everything from the production line to the end customer.

While these technologies are still in the early stages of widespread adoption, they are already proving valuable in providing greater transparency and improving decision-making.

Despite these advancements, the road to achieving full production visibility is still long and fraught with challenges.

Data silos, inconsistent reporting practices, and the inherent complexity of global supply chains all continue to impede progress.

Manufacturers will likely continue to invest in new technologies and strategies to address this issue in the coming years. In fact, the New Zealand Productivity Commission’s report [3] highlighted 2024 as a significant turning point in technological investment.

Manufacturers invested approximately NZ$780 million in digital transformation and advanced manufacturing technologies, representing a 15.6% increase from the previous year.

With this investment and a more favourable interest rate outlook, many organisations are now reporting an uptick in confidence with ‘green shoot’s appearing as the new year beckons.

However, whilst these factors may provide some relief in the short term, New Zealand’s manufacturers will need to maintain vigilance on productivity, innovation and agility as the themes of ongoing market and political uncertainty show no sign of diminishing in 2025.

 

References

[1] Statistics New Zealand. (2024). Annual Manufacturing Sector Survey 2023-2024.

[2] Ministry of Foreign Affairs and Trade. (2024). New Zealand Merchandise Trade Report 2024.

[3] New Zealand Productivity Commission. (2024). Digital Transformation in Manufacturing Sector Report.