Typically New Zealanders do not think of themselves as living in a manufacturing economy. But New Zealand’s manufacturing industries make an important contribution to the national economy. In the year ended September 2015, the manufacturing sector output accounted for around 10% of real GDP and 11% of the labour force.
But this misperception can have a detrimental effect on the growth of NZ manufacturing and we as kiwi’s should be aware and proud of how important manufacturing is to our country.
If we do not have the skills, talent and training coming into the industry then this could undermine the potential for growth. It is not surprising that some high- growth manufacturing firms emphasise skill shortages and other constraints on talent- driven growth as being much more important than any effects of costs or exchange rates.
It’s interesting when you look at surveys that highlight the traits of NZ manufacturing firms. Typically these firms are:
Well, sometimes being a small country does have its advantages and the architecture of NZ firms can be seen as an advantage. By being local, privately owned companies we can be more specialised and therefore more focused on innovation rather than cost-minimisation.
A country of our size creates nimble companies that need to adapt to changes offshore, both political and economic. Take Donald Trump in the USA. Should we fear what’s happening in that market and how it will affect NZ manufacturing? I believe not. NZ companies are nimble enough to adapt – we’ve had to for years. We’ll either find a way to provide the USA with the solutions it wants or we’ll look to other markets like China, Europe, even the Commonwealth.
At Fero we feel we are small enough to care but big enough to deliver and we really stand by this. We are growing as a company but we do have very strong values and beliefs. We are always looking for ways to improve our processes and we are constantly building stronger ties with China. This relationship allows us to manage the processes and get some cost down but most importantly monitor quality and consistency.
2016 was a positive year for NZ manufacturing and saw consistent expansion throughout the year. Catherine Beard, Business NZ’s executive director for manufacturing, said that the results were encouraging.
The activity in the manufacturing sector over 2016 averaged out at 56.0. This showed an increase from 54.2 in 2015, but interestingly the same result as both 2014 and 2013. Overall, this shows how consistent and how positive the activity has been for the sector over the last few years.
There is also a very positive feeling around the manufacturing sector and positive comments stood at 70% for December, with seasonal factors (particularly Xmas) having a strong influence.
BNZ Senior Economist, Craig Ebert, said “the December result caps off a positive year for the manufacturing sector. Indeed, since the survey started in 2002, last year’s average has only been surpassed by 2004’s 57.5”.
So what can we expect for the new year?
The general consensus is that the NZ Manufacturing sector is in good shape and that 2017 will continue to expand at a steady rate. However, Economist Doug Steel does feel that there could be a few warning signs that should not be ignored.
In December PMI new orders fell to 52.6 in December, which still indicates growth but it is the lowest level of new orders for nearly two years. Therefore this is worth watching over the next quarter as an indicator of sale growth ahead. The industry’s new orders also slowed a bit in the QSBO (qrtly survey of business opinion).
Having said that it appears that manufacturers in the QSBO are more confident this year than last. A net 23% expect better economic conditions over the coming six months. This compares to a net 4% expecting improvement in the previous survey. It’s a decent lift and sets confidence well above long-term norms, of -6.
So, let’s continue doing what we are doing NZ and make our country proud of what we add to the economy and the manufacturing sector around the world.
No matter what industry you are in, no matter what products you make, the key to good business is to understand your customers.
Without these customers Fero would not have a business and that’s why we feel it is important once a year to get some honest feedback. Of course it’s always nice to hear the good stuff but what we find really important is the ‘other’ stuff. The ‘other’ stuff is not necessarily what you want to hear but it’s the stuff that will make us a better company in the long run.
This year our account managers contacted a range of customers and invited them to complete an online survey. (Thanks to all those that completed this!) We had a great response and are happy that the results received give a fair indication of how Fero is seen and what we need to improve on.
Last year we set ourselves some internal goals. These were:
How did we do??
Overall, I think that we can give ourselves a pat on the back and say well done as there were lots of positive comments coming from customers that were very satisfied with Fero’s service. Infact 90% of customers said that they would happily recommend Fero to a friend. This figure is great but it has dropped by 5% on last year so we will definitely be looking into why this has happened.
From what you said in the surveys, Fero is seen as a very professional company that is responsive, has good communication skills and adds value to a customer’s business. We are seen as friendly and helpful and good at what we do. Our quality of product is seen as better than most competitors and our price is seen as ‘about the same’.
We supply most of our customers with assembly/wire harnesses (90%) but component supply has also increased over the past year with us supplying this to 38% of customers. Awareness of our other services like pressure injection moulding and offshore manufacturing are still quite low so we will be speaking to you about these next year if it’s appropriate.
When asked what improvements customers would like to see Fero make, there were a few clear winners. There was a few comments on the need for more visibility when it comes to pricing and there is a need to review how we confirm orders etc. so we will be looking into our processes here with the admin team.
Another ongoing issue that we are aware of and it was indeed one of our goals for this year, was to improve the warehouse and dispatch area. The good news is that more of you are getting your orders on time every time (23%) and 67% of customers are ‘mostly’ getting them on time but the bad news is that you are still not that happy with the process. Therefore we will be reviewing this part of the business in the new year to see how we can make this more streamlined and get your orders to you in a more timely fashion, every time!
We also feel that the engineering team has a lot to offer your business whether it’s coming up with more cost effective solutions or even designing a new prototype. Therefore we will be reviewing how our engineers engage with your business and will be putting some target response times around when and how they come back to you.
So in summary.. We are happy with the results of the survey – from your feedback we can see that some of our service levels dropped slightly so we will work hard to maintain these better in 2017.
In 2016 we implemented a completely new production system – it was something we had to do, but it wasn’t easy to implement and there were a few frustrations. These appear to now be ironed out and the way is clear to focus on improvement, backed up with a more efficient system.
We would like to say thank you to our customers for taking the time to complete our survey. We certainly always learn from your comments and we will strive to keep your frustrations at bay and keep that smile on your face in 2017!
At Fero, we are not just about manufacturing.
It is important to us that we understand and help our partners grow within their business. A prime example of this is when PRO-FORM came to us with a request to add more functionality into their product.
PRO-FORM is a NZ family-run plastics moulding company that make bed liners, canopies and sports lids for a range of utes throughout the world. With the design of the new SLT sport lid came a request to modernise these products with an auto opening system which lifts the lid and activates a light. This was something our R&D team could certainly help with.
At Fero we are lucky enough to have an in-house design and development team who understand vehicle looms and who can create a prototype quickly. Having an open source environment has enabled the partnership between Fero and PRO-FORM to develop quickly and it’s this understanding that has enabled the whole design process to evolve. This evolution has given us the knowledge to develop ideas and come up with solutions that make the functionality of the product second to none.
The PRO-FORM team understand their product very well and because more and more farmers and tradesmen are using utes they recognised a need for this modernisation. There were 3 main requirements that we needed to build into the design:
By working together, our R&D team came up with a solution that met all requirements and has even given the PRO-FORM team the option of opening the lid by remote control or by touch button. The prototype was a big success and we started producing the looms and lights locally at our factory in Auckland.
Due to this success we have begun to look into options for taking some of the production to China. For many NZ companies this would not be a feasible option but because we have such strong relationships with our chinese partners we are able to benefit from the cost downs and pass these on. Currently we are getting samples approved so manufacturing and production can begin.
The product has really taken the market by storm and PRO-FORM are now selling this system all over the world, they are even exhibiting at the world’s leading auto trade fair ‘Automechanika’ in Frankfurt this month.
At Fero we like to think of ourselves as a company that can make things happen and we get excited about helping companies design and build a better product. It’s especially exciting when it’s a New Zealand owned, family run business like ourselves. We are proud that we can help put NZ on centre stage. We know that relationships are key and without such an open and honest environment with PRO-FORM we could never had developed something so quickly.
This is what Nick Smith from PRO-FORM had this to say about Fero:
“The whole team at Fero worked hard to develop this solution. They were great at simply listening, and then coming back with a sensible response, on budget, on spec and on time. That’s the beauty of working with a local NZ owned business that share the same goals as ourselves.”
So if you have an idea and would like some help bringing it to market then we would love to hear from you.
We always like to follow what is happening on the world stage when it comes to manufacturing and our PMI (Performance of Manufacturing Index). Since 2012 NZ manufacturing has been in continued expansion and although we saw a slower rate of expansion in March, according to the latest BNZ – BusinessNZ PMI of 54.7 it is still well above the 50.0 mark (which indicates a declining market).
BusinessNZ’s executive director for manufacturing Catherine Beard said that the dip in expansion for March was across all the sub-indices, with employment in slight contraction for the second month running.
On a three month average basis, NZ’s PMI still stands head and shoulders above similar indicators from major economies around the world. Until last month, NZ’s PMI has consistently out-paced Australia’s for several years. However, the 3.4 index point gap in March is the largest in Australia’s favour since mid-2010. Analysts say that this is not necessarily a bad thing.
Sam Fulton at Fero tends to agree and believes that this might well be a good thing for NZ if it indicates positive growth in the Australian economy as a whole.
He believes “There are many benefits from trans-Tasman trade for both countries. A growing Australian market offers many opportunities for NZ companies and solves a lot of problems for Australian businesses. We would love to see more customers from Australia in the near future”.
The manufacturing sector in NZ has once again shown a strong growth pattern for the start of 2016. According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI) the figure for January reached 57.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 0.9 points up from December, and the highest level of expansion since October 2014. The sector has now been in continued expansion since October 2012.
BusinessNZ’s executive director for manufacturing Catherine Beard said that the January result has started the new year off to a healthy start, with the key indicators of production (60.3) and new orders (59.8) showing strong growth. “Over two-thirds of manufacturers provided positive comments regarding their main influence on business activity, with increased sales both on a domestic and international basis. Other comments outlined the general positive sentiment occurring in the New Zealand economy.”
There is also is an indication that the manufacturing industry is steadily moving towards more innovative and specialised goods and services. Some of these specialized services earn higher export revenues and are becoming very important for the overall NZ economy.
“Over the last couple of months our business has certainly seen an increase in orders, and we are delighted to hear customers talk of a good start to the year. We’re proud to play our part in a strong NZ manufacturing sector”
Sam Fulton, Sales and Marketing Director
At Fero we pride ourselves on offering the best service and quality we can to our customers. But as with all things, how do we know if we are hitting the mark or not and what do our customers really think of us?
Last year we embarked on a journey of truths and asked our customers a series of survey questions. As many of you will know the results from this were very encouraging but also outlined key areas we needed to focus on in 2015. Some of these included:
So with this in mind we developed a strategy that would enable us to build our business and help us achieve results in the NZ manufacturing industry that we could be proud of.
This year has seen some big changes within Fero, with machines arriving that have enabled us to increase our capacity by 50% and with the implementation of our new MRP system. With changes come frustrations and we have certainly experienced a few ‘pull your hair’ out moments but these have now been ironed out and we know that in the long run this system will be invaluable. Thank you all for being patient with us as we’ve worked through this.
Given the success of the survey in 2014 we wanted to see if we had improved over the year. The results from this year’s survey has once again been encouraging. Not only have we seen some real improvements in what our clients think of Fero, we have also seen a positive attitude to growth in the manufacturing industry which has increased by 10% compared to last year.
Some of the highlights for us are in the overall figures, and we are delighted that 97.5% of customers are satisfied with Fero as a supplier to their business, an increase of 8.5% from last year. Our clients also said that 95% would happily recommend Fero to a friend, again an improvement of 9%. These numbers provide a great benchmark that we can maintain and build on year upon year.
Interestingly, when customers were asked about Fero’s capabilities they were still not fully aware of everything Fero offers especially in Moulding and Chinese partnerships. We feel it is important that customers are aware of all our capabilities so we can assist them in a broad number of ways. Customers also expressed an interest in sharing ideas with our engineering team and we will certainly continue to offer this service throughout 2016.
Another key area we wanted to improve was our relationships with businesses and finding ways that could begin to add value to our clients. Results indicate that our reps and the company as a whole have improved on this by around 10%. Our professionalism has increased by 14%, and 96% of clients believe that they have a good relationship with us (an increase of 8% from 2014). Understanding clients needs has also increased and we look forward to continuing this on a yearly basis.
We are happy that 50% of you thought we were ‘extremely responsive’ (an increase of 25% from 2014) and that 60% of customers believe that Fero’s service is better than our competitors but we would like to see these figures increase next year. We know that service and consistency is very important to the industry and our customers, and we will be making this one of our goals for 2016.
Along with service comes the issue of quality and some customers pointed out that our quality control could be better. We know that the MRP system has contributed to some of these issues but a review into lead-time, order notes and incorrect paperwork will be reviewed in the new year.
Many of our clients had read and found the newsletter content useful and informative so we look forward to continuing to send these out every quarter.
All in all the survey has once again given us some key indicators to follow up on, and provided insights into ways to improve our service and strengthen the NZ manufacturing sector as a whole.
Thank you once again to all those that completed the survey. We look forward to sharing our improvements with you next year.
At Fero we are passionate about making the the manufacturing sector in NZ great, so it’s fantastic to see how important this industry is and the contribution it provides to the national economy. In the year ended September 2014, the manufacturing sector output accounted for 11% of real GDP and the proportion of the labour force employed in manufacturing was around 12%. These figures are increasing throughout 2015 with employment up by 10% compared to this time last year.
According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI), the outlook is still remaining positive for the continued expansion of this sector for July.
BNZ reported that the seasonally adjusted PMI for July was 53.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was 1.6 points lower than June, it was still the second highest result for the last four months. The sector has now been in expansion for 34 consecutive months. The rate of progress has slowed a bit from last year, with the PMI averaging 53.5 in 2015 to date compared to the 56.0 average through 2014. But growth seems to be solidifying. July’s PMI result exactly matches the average in the first half of the year.
There are other influences that effect the industry, and for some manufacturers the recent fall in the NZ dollar has been seen as a positive, whilst the negative influences were mainly from the dairy sector. The recent crash on the Chinese stock market is definitely a concern for all of NZ and analysts are warning that we may see a slower rate of growth in NZ manufacturing due to the impact on consumer confidence and potential consumption. That said, China is still a massive consumer and I don’t see them going away.
Despite some of these negative influences the manufacturing industry is still very positive, and the fact the official figures show employment growth coming primarily from the manufacturing sector indicates that we are certainly holding our own. Buoyant production and the balance of new orders to inventory are encouraging signs for further expansion.
It should be an interesting second half of the year!
As part of the on-going LEAN work we’re carrying out here at Fero, and in answer to some of the feedback we received from customers in our survey, we’ve taken a good hard look at our customer service and made some significant changes. The aim is that the right people talk to each other on any given project that comes our way. It’s meant making more people available to our clients, throughout the company.
It is about putting the right people in to the right conversations. Our customers know a huge amount about what they are requiring and we must always provide expert advice and consultation.
In the old days we kept our engineers at arms length from our customers, preferring to let them get on with things and work hard in the back office. That’s all changed now. We need our engineers to be able to talk to customers’ engineers; talking the same language means a much quicker result. We now encourage our engineers to join us in meetings which might involve those more technical conversations. Plus they’re only a phone call away and more active, intrinsic players in project teams. The key is the Right Conversations with the Right People, resulting in getting the job done faster, issues resolved better and clients feeling happier.
Our account managers still are the key representative of our business to our customers and will head up project teams, ensuring that we are working constructively towards better solutions. Little has changed there, as most of you were happy with them, their professionalism and their understanding of your business. It’s this last aspect though that we want to develop, enabling them to get right inside their clients’ businesses and be proactive in suggesting improvements to manufacturing processes. They need to be adding value to your business and be seen as part of your team as well as ours. Over time, we’ve found that this partnership approach works best for all parties and it’s a relationship we’re trying to develop with all our customers.
We’ve created a number of roles that focus on customer service, taking responsibility for and answering those more general questions around deliveries, accounts, general logistics and timings. They work with the Account Managers to ensure projects run smoothly. They cover off some of the day-to-day project details allowing our Account Managers to spend more time out and about learning about your business and adding greater value.