Analysis

Free trade with Korea a boon for Kiwi exporters

– Jack Stenhouse, NZTE Trade Commissioner for South Korea. The eleventh largest economy in the world, the Republic of Korea, is home to some technology and manufacturing giants – names we all recognise, like Samsung, Hyundai, LG and Daewoo. Korea’s economic success is founded on access to world markets, and that’s great news for New Zealand exporters. While it’s still early days, the Korea-New Zealand Free Trade Agreement signed in 2015 looks to be delivering on its promise to boost business and strengthen ties between our two countries. This relationship has been reinforced by President Moon Jae-In’s visit to New Zealand this week. J-Nomics and the rise of consumer spending Korea is our fifth largest goods export market, and two-way trade recently surpassed NZ$4 billion in value. Since the New Zealand-Korea Free Trade Agreement (FTA) came into force three years ago, two-thirds of our exports now enter Korea duty free, a figure that will eventually reach 98 percent. This softening of Korea’s traditionally protective trade policies translates to further opportunities for Kiwi exporters, and Korea’s focus on lifting wages and creating jobs brings more good news. President Moon Jae-In’s economic reforms, dubbed ‘J-Nomics’ aim to raise wages among lower and middle income earners, and increase domestic consumer spending. This, combined with a solid growth outlook, means Korea remains a reliable market for New Zealand businesses. While forestry products account for a decent amount of our exports to Korea (to the tune of almost NZ$500 million), it’s an even more attractive and significant market for our food and beverage exporters, where the FTA has seen trade in the F&B sector increase by 35 percent to top NZ$700 million. We’re winning because Korean consumers value our reputation for safe, reliable and premium products, but there’s definitely room for ongoing marketing investment to increase […]

Why the circular economy must link up the whole supply chain

The long-discussed concept of the circular economy (CE) seems ready for takeoff. New information technologies like the internet of things (IoT), big data analytics or blockchain are the powerful means everybody is waiting for. The real door-opener is still to be found in the analog world: It’s about trustful collaboration. But only when all actors along the product life cycle find profitable ways to take resource scarcity into account, and only if they share both costs and benefits, will CE be able to unfold its full potential. So trustful collaboration is asking for a lot. It needs to convince decision-makers of the business opportunities they get once they trade their silo-oriented optimization rationale for a holistic-management approach that addresses the entire life cycle of the products and the materials involved. Making use of circular economy to prosper and differentiate products and services is suitable for business-to-business heavyweights, too. For example, ocean carrier Maersk created a digital twin of their latest container ships down to the smallest bolt. Through this, the company will ultimately know how much and what material is being used in their fleet. During routine overhauls or at the final disassembly, Maersk has a clear systemic view on which parts and materials can be reused, remanufactured, upcycled or continue to stay in the circular flow of shipbuilding. Executing supply chain power It’s not by chance that most CE case studies are when economically strong asset owners and service providers such as Caterpillar and Maersk are in the driving seat. The same applies to powerful vendors, for instance tech giants such as HP and Dell who have established highly efficient return systems for used products. Why is it that CE pioneers are often found among these kind of companies? The two most obvious reasons: on one hand, these players have […]

People, not technology, shape the future of manufacturing

These are exciting times for manufacturing. A plethora of recent technological developments creates radically new opportunities for how we develop, manufacture, and deliver products globally. The headlines proclaim that “the robots are coming”, “jobs will be automated”, and “digitalisation is revolutionising production”. Many managers are excited, baffled, or both. Many jobseekers are worried. Three decades ago, leadership expert Warren Bennis envisioned that “the factory of the future will have only two employees: a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.” While this vision is witty, the idea of the fully automated “lights-out” factory still lingers. But there’s a different vision for the future of manufacturing, where people take centre stage. A vision where people make use of new technology to enable sustainable, socially responsible, and efficient manufacturing. In this context, putting people first may seem surprising. After all, have we not been told that robotics and digitalisation will complete processes more effectively and efficiently than humans? That machine learning is training machines to train machines? That artificial intelligence is even entering company boardrooms? While this may hold true for some tasks, the vast amount of other tasks will in fact remain largely unaffected in the near term. To debunk a myth: robots are automating processes, not jobs. What’s more, we think that these technological developments are good, not bad, for workers. Increased productivity frees up human resources to do tasks where humans are superior to machines. One example of such a task is the development of new technologies in the first place. Another equally important task is to figure out how to best apply them. People must map production processes, identify the nodes where technology is needed, and reskill the persons […]

Smarter manufacturing in the age of convergence

-Joseph Sousa, President, Asia Pacific, Rockwell Automation Sometimes I wish I was ten years younger. Not out of vanity but because of what’s about to unfold in the manufacturing industry. We’ve arrived at a genuine inflection point in how we go about business. There’s an opportunity to produce more high-quality goods for more people while reducing costs and environmental impact. This opportunity is being driven in part by a significant increase in consumer wealth. We’re witnessing the most significant expansion of the middle class that we’ve ever seen. Forecasted in 2016, 160 million people will join the ranks during the next five years. More than 3.2 billion people already enjoy this status. We’ve also seen a shift from manual production to mass production, customised mass production and now personalised mass production. We’ve improved our capacity to measure what people want and our ability to link this knowledge with production resources to meet those demands. This is information is critical in an age where consumers are demanding more personalised products. Today, Millennials, in particular, place a high value on adding their personality to what they buy. More than half of consumers would prefer to shape the products and services they buy. This type of personalised mass production requires a lot of flexibility in manufacturing processes. In the modern factory, set-up time is a key variable determining the ability to tap into short-term opportunities. Merely being able to see a chance isn’t enough. Global business opportunities mean global competition, increasing the imperative to act quickly. Whereas this global competition, once reserved for large international enterprises, most businesses now have potential rivals in other countries. The convergence of information technology (IT) and operational technology (OT) offers a smarter way to convert the business into opportunity. Data is helping many manufacturers to unleash the […]

Manufacturing the future: The next era of global growth and innovation

By James Manyika, Jeff Sinclair, Richard Dobbs, Gernot Strube, Louis Rassey, Jan Mischke, Jaana Remes, Charles Roxburgh, Katy George, David O’Halloran, and Sreenivas Ramaswamy. The global manufacturing sector has undergone a tumultuous decade: large developing economies leaped into the first tier of manufacturing nations, a severe recession choked off demand, and manufacturing employment fell at an accelerated rate in advanced economies. Still, manufacturing remains critically important to both the developing and the advanced world. In the former, it continues to provide a pathway from subsistence agriculture to rising incomes and living standards. In the latter, it remains a vital source of innovation and competitiveness, making outsized contributions to research and development, exports, and productivity growth. But the manufacturing sector has changed—bringing both opportunities and challenges—and neither business leaders nor policy makers can rely on old responses in the new manufacturing environment. • Manufacturing’s role is changing. The way it contributes to the economy shifts as nations mature: in today’s advanced economies, manufacturing promotes innovation, productivity, and trade more than growth and employment. In these countries, manufacturing also has begun to consume more services and to rely more heavily on them to operate. • Manufacturing is not monolithic. It is a diverse sector with five distinct groups of industries, each with specific drivers of success. • Manufacturing is entering a dynamic new phase. As a new global consuming class emerges in developing nations, and innovations spark additional demand, global manufacturers will have substantial new opportunities—but in a much more uncertain environment. Manufacturing’s role is changing Globally, manufacturing continues to grow. It now accounts for approximately 16 percent of global GDP and 14 percent of employment. But the manufacturing sector’s relative size in an economy varies with its stage of development. We find that when economies industrialize, manufacturing employment and output both […]

Managing Skills Shortages – The Construction Sector Example

-Dieter Adam, Chief Executive, The Manufacturers Network Skills shortages remain one of the key areas holding back manufacturers from further growth – this challenge is not new and is likely to need continued efforts into the future, both to address current shortages in experienced trades workers as well as the changing skills requirements due to rapidly changing technology. Today, however, I want to talk about the Government’s recently announced plan to address skills shortages in the construction sector, in particular, looking at measures around government procurement. The Construction Skills Action Plan covers six specific areas: expanding skills for industry, leveraging government procurement, establishing additional jobs and skills hubs, growing construction careers and credentials, Mana in Mahi – Strength in Work, and further changes to immigration settings. The Mana in Mahi – Strength in Work programme will provide support payment equivalent to the person’s benefit to employers taking on apprentices aged 18 to 24 years who have been on a benefit for six or more months. This policy has some potential to help somewhat, but we will need to see how the initial implementation works and wait for the policy to widen to include the manufacturing sector. The ‘leveraging government procurement’ element is an area in which construction and manufacturing often intersect, and manufacturers frequently face many of the same issues in trying to be part of the supply chain of government projects. Procurement is an issue we have been actively engaging with Government on recently, arguing that procurement policy needs to give more consideration to local suppliers, who in turn employ local workers, contribute to the local economy and critically, build a skills base by training their staff through apprenticeships. While some parts of the current policy state that such benefits of using local suppliers should be considered, this principle […]

R&D tax credit policy finalised – How does it look for manufacturers?

-Dieter Adam, Chief Executive, The Manufacturers’ Network After consultation with the public and businesses, the Government released the final details of its R&D tax credit policy. The policy is not perfect, with areas in which we are going to push the Government further, but they did listen to some of our concerns and made adjustments to the policy and we are happy that a number of these issues we at least partially addressed in the final policy. In The Manufacturers’ Network submission, we pushed for the initially-proposed rate of 12.5% to be increased to 20% to start with. This would bring our innovation support closer to what is offered in many of the countries our manufacturers are competing with, both in export markets and through import competition. While the Government did not raise it that high, they did increase the rate to 15%. This is a definite improvement, but we will continue to push the Government to raise this higher over time – this is something they need to do if they are serious about reaching their target of improving New Zealand’s R&D expenditure to 2% of GDP by 2020. The slightly higher rate will make this a bit more worth the effort for smaller companies and align the system with growth grants for the larger companies who were receiving them. The second major issue we outlined in our submission was the proposed threshold for eligibility – requiring a minimum of $100,000 of eligible R&D expenditure to receive the tax credit is too high. We pushed for this to be significantly lower to make sure small companies have the opportunity to benefit and put them on a path for growth and even more R&D expenditure in the future. Again, while the new threshold is not as low was we would […]

Transformation delivers priorities

On 1 October, Engineering New Zealand celebrated their first birthday. However, the pedigree stretches back far more than a year: previously known as IPENZ, there is a proud 100-year history representing engineers. Several years ago, members were asked what they wanted from their professional body, and they said greater recognition, influence, credibility and connection. So, transformation took place to deliver these priorities. Recognition means appreciating the value that engineers bring. It’s not about fame or boosterism – it’s about our society genuinely recognising engineers for the work that they do and the genuine difference they make to everyone’s lives and to New Zealand. Credibility for Engineering New Zealand means doing the right thing, doing what you said you’d do, and doing the best job possible. For Engineering New Zealand credibility means standing up for quality, raising the bar for engineering professionals and making sure everyone is accountable. It also means having robust processes and systems, so that everyone knows where they stand. Connection means creating networks together to be more powerful – networks across industries, with like professions and between members. Networks fill in blind spots and help create movements for change. Influence means leverage: leverage to affect decision and policy in the areas engineers’ care about or think are important to New Zealand. This means not just central and local government but other spheres of decision making as well. As part of the new strategy, based on these four pillars, on 1 October 2017 there was the name change and a new, more inclusive Membership Pathway. This new pathway creates a professional home for engineers previously unrecognised by membership classes, including chief executives and other leaders who’ve stepped away from day-to-day technical work. It makes space for academics, and it genuinely recognises technicians and technologists, as well as engineering […]

Skills Shift – Research and Pilot Programme

-Dieter Adam, Chief Executive, The Manufacturers Network Skill shortages continue to be one of the top problems facing manufacturing businesses, holding them back from growing and reaching their potential. Not only this, but with changing and increasingly accessible digital technologies such as automation, AI and networked manufacturing, the skills required in manufacturing are likely to change into the future – this is the Skills Shift. While the topic of changing skills needs has been widely discussed, we do not yet have any concrete answers as to what it may mean for our sector and how we can best make sure training institutions can effectively respond and we make the necessary changes to our own practices. The Skills Shift represents a challenge for all sectors of New Zealand and all parts of our economy and society – how can people obtain the skills they need to succeed and get or keep well-paying, productive jobs? How can people gain both the soft and specialist technical skills that set them up to adapt to any change? How can companies, education providers and Government work together create a system where these skills challenges are address? And, in particular, how can employers and employees work together to train and up-skill while remaining employed, and with minimal impact on productive time? To answer these questions, The Manufacturers’ Network has put together a pilot programme and associated research projects focused on the Skills Shift in manufacturing. This programme has been endorsed by the Future of Work Tripartite Forum, and we will seek funding support to undertake the work. What we want to do is provide quality research into the Skills Shift in New Zealand so that manufacturers and tertiary and training providers understand what the Skills Shifts will look like and mean for them, and what measures […]

Microplastics: Small plastics, big problem

This glimpse of the future was crafted by Paul Stephenson Almost everything we own and buy contains plastics. Look around. If it’s not the chair you’re sitting on, or that part of a pen in your drawer, that bottle in your refrigerator, it may be this thing you’re holding ‒ your smartphone, or a keyboard, or a tablet. They are everywhere. But before you blame plastic water bottles and candy wrappers solely for climate change or marine plastic pollution, think again. It turns out, as with many other relationships, sometimes it’s the small things that create the biggest impacts. And in this case, it’s the plastics that we don’t see, the microplastics, that are about to damage the world we are living in. We have to wake up, before it’s too late. It’s not just ‘small’ stuff… The United Nation’s Environmental Programme (UNEP) identified microplastics as one of the alarming issues that we should keep an eye on as plastic pollution remains the biggest threat to marine biodiversity today. But are we already many years too late? Based on current rates of plastic pollution, the World Economic Forum predicts that by 2050 there will be more plastic than fish in our oceans. Microplastics, whilst tiny, pack a big punch. They have been around for more than five decades as microbeads and microfibres ranging in size from 0.5 to 5mm in length. And we have unknowingly let them into our homes and closets, as they have replaced the natural ingredients of our personal care products, and cosmetics such as toothpaste, facial and body scrubs, and have been manufactured into some of the clothes we love to wear. However, it’s not actually the products that directly harm us, but rather what happens to them after they go down the drain. These synthetic […]

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