Manufacturing must adapt

By FIONA ROTHERHAM

Next-generation manufacturers - New Zealand has too few, needs more and Government incentives to help them "go after the world," says consultant Tom Clark.

Otherwise New Zealand's fragmented manufacturing sector would erode further, he said.

Since manufacturing was New Zealand's second-largest income producer at 20 per cent of total industry and the largest employer, this would have a severe economic impact.

Mr Clark, a PA Consulting associate partner, said New Zealand companies that measured up as next-generation manufacturers included Fisher & Paykel and the Dairy Board. Yet even they had room to improve.

What is next-generation manufacturing?

Successful companies of the next decade will be those that are most responsive and flexible.

Mr Clark, a manufacturing specialist and consultant to a number of leading Australasian companies, took part in a North American study of the top 50 global manufacturing firms to define the characteristics of the next-generation manufacturer.

This study produced a bundle of key characteristics:

* Global responsiveness. To be successful, a company cannot restrict itself to a small, regional base or it becomes vulnerable to global competitors coming on to its turf.

The local example is the dairy, meat and food industries competing with companies boasting turnovers bigger than New Zealand's total gross national product.

* Customer responsiveness. Customer will no longer tolerate supply dates "some time next week." If you do not deliver instant gratification, someone else in the world will.

* Flexible physical assets. Modern manufacturing operations can be shifted or expanded easily. The equipment can also be reconfigured or modified for new requirements.

* Highly responsive human resources. Motorola, a world leader in this area, spends more than 5 per cent of revenue on staff training and development.

"A competitor can buy equipment, plant or information technology. It can't buy the minds of a company's people if the company deals with its people in a way that they want to stay - and that's not just an issue of money," Mr Clark said.

To retain the human resource base, companies must offer incentive share schemes to all staff, not just upper management.

* Responsive business practises and culture.

This revolves around the company's ability to deal with change and respond rapidly to new opportunities.

Mr Clark said New Zealand must continue to rationalise to boost numbers of next-generation manufacturers. Instead of 14 manufacturing sectors it should focus investment in about five sectors with the greatest opportunity, such as meat and dairy products and other food manufacturing.

New Zealand manufacturers could foot it in the global market, he said, but the Government must match capital gains and research and development incentives offered to their competitors.

"Why would BMW or Mercedes select to build world-class manufacturing plants in North or South Carolina? Because there is a very prominent university system which supports research and development and the knowledge base and there is a significant incentive scheme in terms of the tax structure."