By Jane Finlayson, Head of Advanced Manufacturing, EMA

As the backbone of New Zealand’s economy our manufacturing sector contributes approximately 10% to GDP and employs more than over 240,000 people.

Yet, despite its significance, the sector’s productivity has been stagnating, with labour productivity growing at a mere 0.92% annually over the past decade, well below the national average of 1.17%.

This stagnation is not due to a lack of effort or ambition. Instead, it reflects a critical gap: the sector’s slow and fragmented adoption of technology.

While many larger firms are beginning to modernise their operations, many small and medium-sized enterprises (SMEs) still rely on outdated systems, manual processes, and fragmented workflows. This digital inertia is limiting their global competitiveness and resilience.

At the Employers and Manufacturers Association (EMA), we see firsthand how these challenges play out. Through our series ‘ASB Manufacturers Workshop: The Impact of Industry 4.0 on Your Business’, manufacturers consistently share a mix of enthusiasm and uncertainty about the path forward.

While many are eager to innovate, they often feel overwhelmed by the scope of change and unclear about where to start.

One of the most urgent barriers is the widening digital skills gap. In PwC’s 27th Annual CEO Survey, released last year, 83% of local business leaders report they have a skills shortage within their organisation and 76% specify a lack of technical capabilities as a barrier to transformation.

This disconnect is deeply concerning, especially as technologies such as artificial intelligence (AI), collaborative robotics (cobots), the Internet of Things (IoT), and data analytics have moved from being future ambitions to current necessities.

Feedback from manufacturers who have attended the workshops confirms this.

There is growing demand for reskilling workers not only in technical areas, such as integrating Enterprise Resource Planning (ERP) with design tools, managing Supervisory Control and Data Acquisition (SCADA) systems or automating master batch records, but also in cultivating a digital mindset and adaptability.

Many manufacturers are grappling with how to train an ageing workforce to operate in increasingly automated and data-driven environments.

Others express concerns about the impact on team culture and morale as new technologies disrupt traditional workflows.

Companies are also looking for help with where to begin, particularly how to how to evaluate return on investment (ROI) on technology investments.

What tools are right for their unique production needs, especially those with bespoke, low-volume orders? How do they streamline stock management and process tracking without overwhelming their teams?

The complexity of digital transformation doesn’t end with skills. In our recent interactions with manufacturers at the ASB workshops, they have routinely cited a range of operational and strategic pain points:

• Lack of a clear roadmap and guidance on what to do next
• Difficulty demonstrating the financial benefits of digitisation
• Limited access to finance for technology upgrades
• Integration challenges between legacy systems and new digital platforms
• High costs and perceived risks of ERP and MES implementation
• Uncertainty about which software or automation solutions will yield the greatest return

Concerns around connectivity and process visibility are also common.

Manufacturers want to integrate IoT sensors for predictive maintenance, streamline production with intelligent machinery, improve inventory and stock control, and reduce waste.

However, the need to research and vet tools independently often leaves businesses feeling isolated and unsupported.

Some report feeling left behind, particularly in some regional areas, where access to technology and industry knowledge sharing lags behind international standards.

Many are only just beginning to explore lean manufacturing principles or consider AI integration. Meanwhile, competitors in countries like Singapore, Ireland, and Denmark move forward rapidly with government-backed transformation programmes.

The EMA is deeply committed to closing these gaps. In addition to our Industry 4.0 workshops, our NZQA-approved digital skills training programme is designed to equip staff at all levels with the competencies required for modern manufacturing – from data management and ERP integration to AI-driven automation.

We focus on real-world application, fostering problem-solving and systems thinking that empower businesses to take decisive, confident steps forward.

But training alone is not enough. Access to the right tools and financial support remains critical. ERP systems, MES, business intelligence tools, and real-time data platforms are essential for manufacturers to improve visibility, efficiency, and responsiveness.

However, SMEs continue to delay adoption due to cost and complexity, making them increasingly vulnerable in a globally competitive landscape.

The disestablishment of Callaghan Innovation has impacted government support, incentives and investment to accelerate digital transformation in the manufacturing sector.

Without this support, New Zealand risks falling further behind. Through our work with ASB, we’ve shown that the private sector and the investment community can come together to fill some of these gaps, but we believe the path forward demands coordinated action from businesses, industry associations, and government.

Manufacturers must recognise that digital transformation is not optional, it’s essential for survival and growth. The EMA is here to walk alongside them, offering practical resources, expert guidance, and a platform for shared learning.

By investing in both technology and people, we can unlock the sector’s true potential, driving innovation, productivity and prosperity.