Catherine Lye interviewed AMA Board Member Glenn Hansen – Group CFO, Vortex Engineering Group

 

FACT:  Manufacturing currently generates 10% of NZ GDP, employs 10% of the workforce and contributes to 60% of New Zealand’s exports. It supports a further 30% of the economy (agriculture, forestry, fishing, mining, electricity/gas/water, construction, retail & wholesale trades, transportation) (NZ Stats: National Accounts Year ended 31 March 2020). 

 

Yet, there is a myth promulgated in New Zealand that manufacturing is dying?

This is laughably false but also a dangerous myth.  Manufacturing is not what you think.  The manufacturing sector is the secret sauce that supports an economy, in ways that tourism, film production and horse racing never can. 

·       Manufacturers take raw food ingredients and transform them into value-add products for consumption. Examples are Fonterra, Silver Fern Farms, Champion Flour, Breadcraft, The Griffins Food Company.

·       NZ manufacturers fabricate the agricultural machinery – McIntosh Farm Machinery, fencing - Gallagher Group, dairy shed components – Waikato Milking Systems, animal tracking devices - Halter, and solar devices - Solagri that enable NZ farming.

·       Local manufacturing enables the construction and maintenance of structures and infrastructure. Roadways, rail, bridges, airports, ports, residential & commercial buildings, energy generation & distribution – these are all reliant on a local sector with the capability to fabricate, install and maintain a wide range of products – Glidepath, Cullen Engineering, D&H Steel Construction etc.

·       If we stand in any room of our homes, we will be surrounded by products manufactured locally: furniture - Sleepyhead, appliances - Rheem, electrical fittings – Vynco, Switch Lighting, paper - Cottonsoft, glass – APL Window Solutions, plastic objects - ESPlastics, plasterboard – Winstone Wallboards, timber – Red Stag Timber and steel – NZ Steel. Locally manufactured objects are so ubiquitous in our daily lives, we don’t see them.

·       NZ manufactured products are sold globally in a wide range of industries and product groups, earning foreign exchange for NZers that subsidises our healthcare, infrastructure, education.

 

There is another myth that the robots are coming and snatching jobs? 

AI is indeed transforming the employment landscape, but it's far from apocalyptic. For every job that's automated, there's a bright-eyed entrepreneur, creating new, previously inconceivable roles in New Zealand’s tech ecosystem.

Manufacturing provides a broad range of career options and pathways for people. Many repetitive tasks are now performed by machinery, creating more meaningful roles as varied as warehousing, fabrication, computer programming, procurement, accounting, engineering, and management. Many roles offer opportunity for people to produce product they can be truly proud of.

 

COVID certainly put a spotlight on the importance of the manufacturing sector to New Zealand, didn’t it?

Absolutely!    What became clear was the need – not for a chiropractic quick-fix – but for a long-term plan to strengthen the sector. One that could drive further development particularly as it came to address other challenges beyond the pandemic, such as the effects of climate change, decarbonisation, Industry 4.0, and the need to develop new export markets.

New Zealand is distant from most export markets and the sources of most imports. This creates a risk.   The more capability we retain locally, providing import substitution options, the more we have mitigated these risks.  It is unlikely we can replace all imports, but we can mitigate the risk. Local manufacture is core to achieving this.   NZ already provides a wide range of products, and technological advances such as additive manufacturing offering opportunities to broaden that range further. Such technologies aid in reducing reliance on imported goods if necessary.

New Zealand has a strong manufacturing sector.    A Christchurch CEO previously worked in England for a large multinational. The company imported components from around the world to assemble each piece of equipment. He expressed some wonder when, after working in Christchurch for a few months, he came to the realisation that almost anything his new employer needed could be fabricated within this one small city.

We don’t know what we make ourselves. If we don’t know, how can we tell the world?  Currently this is done piecemeal, by each company, inefficiently.

 

It seems there is a missing link in the manufacturing process.  Community, co-ordination, and a culture of continuous learning and improvement, or “KIWI Kaizen”…what do you think?

What springs to mind for me is the traditional national sport, rugby union. It is a team sport. All New Zealanders inherently know from watching rugby that the sum can be greater than the parts, and that a well-coached, coordinated team will out-perform a team of individuals. We should apply that knowledge to our economy.   Our manufacturing & tech sectors have many great individual players, but we lack the coordination necessary to realise their potential. This is coordination within the sector, but also across sectors (eg: manufacturing & tech).

There is opportunity for enhanced production through improving coordination and awareness across manufacturing, tech, agritech, aerospace, and energy. Silos develop naturally, but management theory tells us that silos inhibit innovation, production, and efficiency.

New Zealand manufacturers partner with the local technology sector to create innovative new products and industrial solutions that are having a profoundly positive effect on lowering carbon emissions and reducing waste. Much more could be realised from such partnerships if local companies and their capabilities are more widely known and better promoted. There is a huge untapped resource at our fingertips.

A small amount of government funding to finance marketing, awareness and coordination activities at the regional level will pay considerable dividends.

 

What would you say is holding back NZ Manufacturing?

If you ask that question of five manufacturers, you may well get five different answers. But to my mind, the number 1 impediment is public perception. If young people believe manufacturing is dying, or is physically dirty, or is unskilled and offers no career development, will they see work in that space as a desirable future for them?

The reality is of course very different, as we have discussed. Imagine contributing to the aerospace industry (Rocketlab, Dawn Aerospace), applied robotics, the circular economy, or protection of our environment? 

Similarly, a poor perception of the sector, or just a low public profile (as we undoubtedly have) does not encourage the capital investment needed to enable many excellent operators to scale up and realise their export market potential. Many of our successful exporters are family owned businesses that have had to self-fund their growth. Imagine what could be achieved with additional financial support, probably linked with managerial or governance expertise to fill knowledge gaps?  

We need to change New Zealanders perception of our manufacturing sector, to open their eyes to the impressive reality of what we make today, the exciting possibilities of tomorrow, and the many ways in which they can be a key part of that.