Sharing suggestions for NZ’s manufacturing future

The Prime Minister recently dropped in for a visit to United Machinists in Dunedin with her party of some 30 media, entourage and diplomatic police.

We can confirm it is not an act — Jacinda Ardern in person is the real deal, a people person that puts you at ease immediately and is truly interested.

Thoughtful, curious and obviously read-up before her visit, she was eager to discuss the operations of our workshop and our views on the contract manufacturing industry with questions like: How difficult is it to find skilled staff? What can be done to help push apprenticeships? What can schools be doing to draw attention to careers in engineering? Why is it important for NZ to retain manufacturing? What can the Government do to help push this?

We told her our vision was to bring sexy back into manufacturing. She had a good laugh at that.

We said it is the time for a renaissance of hi-tech manufacturing in New Zealand, the time to redefine what manufacturing looks like.

It is not a dirty old mill or lathe, with "you’ll get it when it’s good and ready" service. Our facility is the Machine Shop of the Future — a state-of-the-art, temperature-controlled facility making highly intricate parts for industries such as medical, cinematography, marine and aerospace. It utilises the very latest in CNC, robotic and software technology available.

But, investments into machine capacity will come to nought if we do not have the highly skilled people to run them.

Of the seven qualified CNC machinists we have hired in the past 18 months, six are from overseas.

"Go hard and go early", a motto often used by the Prime Minister, can be applied here.

We really need to look at developing interest in the trade at school. Let’s get kids excited about how stuff gets made.

Our apprenticeship and university training simply is not fit for purpose for the trades careers of the future.

Apprentices lack experience with new technology, and University graduates are not designing to optimise for manufacturability, especially for New Zealand capabilities.

As technology becomes more integrated and the digital factory twin evolves, workshop roles are becoming a hybrid with our CNC machinists upskilling to mechatronics, automation design, LEAN management concepts, programming and software for scheduling and production planning.

Enough with the obsession that to have a real career you need to go to university.

We have got guys in their mid-to-late 20s in management roles earning over $35 an hour ... instead of paying off student loans, they are buying their first homes already.

But building this workforce of the future is going to take at least a decade if we are starting from grassroots at school. And even with this future workforce, relying on labour alone is not going to lift production and improve our competitiveness.

It is critical for businesses like United Machinists to invest in automation to lift productivity. Not to replace jobs, but to increase machine utilisation to 24/7 and optimise production from the labour and asset base that we have.

Let the robots do the midnight shift and the low value work that is not sufficient in volume or margin to hire for.

This will allow for staff to focus on higher-value work like prototyping, R&D and process improvement. Automation for us has never been a move to replace staff, but rather to allow staff to flourish to their fullest potential while increasing productivity, team skills and ultimately profits.

And if we lift our productivity, then we can absolutely compete internationally.

New Zealand is well positioned for niche hi-tech manufacturing on a global scale. With about 80% of United’s work destined for export markets, at a unit price ranging from $15,000 to $1million, we do not need to be high volume to create a high value and extremely productive industry. We simply need to ensure we are building a supply chain to suit the high mix, low volume, high-value precision work that our industry requires.

Add to this the opportunity we were presented with New Zealand’s global reputation post-Covid; the "Made in New Zealand" brand value is only going to grow. In the med-tech industry in the last few months for example, we have secured several new production projects for prosthetics and pathology companies who are actively on-shoring their production back to New Zealand.

On the flip-side we have heard that low-volume NZ products have very little negotiating power with a global supply chain where they may get a better price, but they are going to have little wiggle room on batch sizes and lead times. And if something does not go to plan, well that’s often catastrophic.

But for NZ to compete on a global scale we need to back up our technical expertise with business savvy to provide a reliable and comprehensive supply chain. We often hear that the difference in offshore manufacturers like China and Malaysia is not only in pricing, but also because they simply provide a better all-around consistent service to their clients and customers. They collaborate with other manufacturers to provide an end-to-end solution. Plus they are ISO9001 accredited, provide immediate responsiveness to inquiries, and are pretty good at sticking to a schedule.

Given the fragmented SME nature of our industry, these are often skills and outlooks that are not within our companies.

At United we are on this path of continual improvement — putting our capital investment aside, most of the work has actually been behind the scenes on systems, processes and organisational design. It has been into software that gives us the capability to feed live data to our customers, and team and culture development to systematically remove bottlenecks. Not to mention a huge amount of time developing SOPs (standard operating procedures) as we move towards ISO9001 compliance. We are not there yet, but we are pretty proud of how far we have come.

And as to what Government can do? There is a step change that needs to take place for our contract manufacturing industry to raise the bar. In the last decade we’ve had significant incentives to invest in R&D through Callaghan Innovation, and to de-risk developing export markets through NZTE and the NZ Export Office. The strategy is to lift productivity through focusing on the development and export of IP. We believe this could gut the workforce, and while you will have a few on higher salaries, you are also sacrificing the manufacturing backbone that underpins our communities — especially our regions.

We need incentives that recognise the importance of contract manufacturing in NZ’s hi-tech eco-system that make it easier to hire apprentices, provide education and support to manufacturers undergoing digital transformations, incentivise capital investment into productivity and incentivise government procurement locally.

So just a few things; we do not have the answers. But we did thank Jacinda for helping us buy our new Mazak Integrex through the Provincial Growth Fund Grant. PGF was a pretty blunt instrument, but it was a step in the right direction for funding growth in the regions. And is it so different from Callaghan providing companies a 40% grant of up to $15million in R&D funding? What does Labour’s PGF 2.0 look like?

Sarah Ramsay is the chief executive at United Machinists and sits on the steering committee of the Southern Otago Regional Engineering Collective.