Innovation and a focus on customers are keys to success

We have had a lot of growth in the food and beverage sector so expertise is developing in that area. Photo / Thinkstock

Manufacturing in New Zealand has its challenges but advantages too, writes Catherine Beard

Q: What is the argument for New Zealand businesses continuing to manufacture?

Those manufacturers that are proving to have a sustainable and competitive business have quite a few things in common. They need a product with an x factor, for a start, not a "me-too" product where price is their only competitive advantage. They are continuous innovators to keep ahead of the competition, keep close to their customers and not only exceed their expectations, but try to anticipate their future needs. Many of our successful manufacturers can tailor bespoke solutions for customers and they tend to be producing a quality product, rather than mass-produced ones. While manufacturing in New Zealand can be challenging, we do have some advantages over Australian manufacturers. We are about 30 per cent lower cost than Australian manufacturers due to lower overheads, lower wage rates and a competitive exchange rate against Australia.

Q: What are the main issues facing small manufacturers?

The challenge for SME manufacturers is to not only survive, but grow bigger in a small domestic market with flat demand. Everything becomes easier as businesses build up a bit of scale - systems improve, the talent you can attract to employ improves and there is more money for investment. Those manufacturers that are connected to the building industry are in for better times, we think, through a combination of the Christchurch rebuild and the pent-up demand for housing in Auckland.

Good quality labour can be hard to find and talent-led innovation is the key to staying competitive. For exporting manufacturers, the kiwi dollar could continue to stay quite high, which makes it hard to stay competitive internationally.

Q: How are you advising them to overcome these challenges?

To overcome the strong dollar, we are advising exporting manufacturers to hedge their currency so they have less volatility. We also encourage them to compete through innovation and quality, not on price alone, and to improve productivity through lean manufacturing. Australia has been a pretty stable market in terms of an exchange rate running in our favour, so if they are not exporting they could spread their risk in a bigger market - after first doing market research. In terms of attracting talent we think firms that are most successful are those that are prepared to be proactive. Strike up relationships with training providers, including secondary schools, tertiary industry training providers or universities. We would also like to see more investment in practical training such as through apprenticeships and we would like to see central and local government ensuring local firms get fair consideration for government tenders.

Q: In what industries are our manufacturers especially skilled?

We have a very diverse manufacturing sector and pockets of excellence so it is hard to pick a particular skill set. We have had a lot of growth in the food and beverage sector so expertise is developing in that area. We are moving more into high-technology manufacturing and increasingly manufacturers are selling services as well as goods.

• Catherine Beard is executive director of manufacturing at BusinessNZ.