Why manufacturing is so important to NZ

Sam Fulton

February 19, 2017

Why manufacturing is so important to NZ

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.

Manufacturing NZ

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.

Skills

 

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:

 

  • Largely export oriented

 

  • Predominantly locally owned

 

  • Mostly privately held

 

  • Vertically integrated in the domestic market and in offshore markets where they have a large presence.

 

  • Still manufacturing in New Zealand where it makes sense for the entire or part of the production process to do so, and engaging in research, design and the provision of services.

 

So what makes us competitive?

 

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.  

 

Sam Fulton

February 8, 2017

2016 was a positive year – how will 2017 fair?

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.

NZ Manufacturing Index

 

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.

Sam Fulton

December 5, 2016

Fero gets the thumbs up from customers.

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:

 

  • To maintain customer satisfaction
  • To improve our delivery and despatch
  • To inform customers of all Fero’s offering

 

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.

How are fero?

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!

Orders Fero

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.

Fero thumbs upIn 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.

 

Thanks
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!

 

Sam Fulton

September 13, 2016

Changes at Fero

As business evolves so does the workforce around us and we feel very blessed to have such a great team of people at Fero. Often people see change as something to worry about but at Fero we see it as an opportunity to gain new skills and knowledge from others  – which in turn will help us get where we want to be.   

 

Some of you maybe aware that we have recently experienced a few changes to our staffing structure, so we wanted to introduce some of the new faces of Fero.

 

Cata Goran is our new Engineering Manager who brings with him a wealth of knowledge.  Cata has been in NZ for a couple of years now but originally hails from Romania where he has spent a large part of his career working for Alpha Romania.  This automotive background and training in Quality Management Systems, Engineering, Mechatronics and Lean will add an incredible amount of value going forward.

 

Agnus Yin has come into the business as Financial Controller.  Already she is showing that she was the right choice for this role and is adding huge value to us.  Agnes went to school and trained as an accountant in NZ.  She worked in NZ in a couple of roles before moving back to China to take up a number of senior financial and operational roles.  She has now moved back to NZ with her family and is excited to join the team at Fero.

 

Robert Lin joins our accountant management team from Taiwan.  Robert was also educated in NZ before returning to Taiwan where he has been in a number of roles.  Most recently he was a sales manager for an electronics manufacturing company and has some great experience in our industry.

 

Jerry Wu is our new component sourcing engineer.  He has extensive knowledge of sourcing and manufacturing in China.  As our main point of contact between engineering and our Chinese suppliers he is filling a critical role at Fero.

 

It is always tough to see people move on to other challenges and they do leave some gaps in the team for a while.  However in a fast growing and developing company such as Fero we see some real benefits that new people bring the team with some much needed skills and knowledge to take us to the next level.

 

We now have a very knowledgeable, experienced and professional management team that gives us some real depth.

 

There’s exciting times ahead and we have an awesome team to take us there.

 

New faces at Fero

New faces at Fero: Jerry Wu, Agnes Yin, Cata Goran, Robert Lin (from left to right)

 

Sam Fulton

September 12, 2016

PRO-FORM : From Prototype to Production.

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.

 

Prototype with Fero

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:

 

  1. A lid that automatically opens
  2. An automatic light which comes on when the lid is opened
  3. A central locking system that included the lid of the ute

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.

Pro-form tray and lid with Fero

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:

 

Fero and Pro-form

“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.

Sam Fulton

September 8, 2016

Manufacturing Snapshot

It really is so good to see how the manufacturing industry in NZ is still positive. For the past 4 years the sector has seen constant expansion with the PMI (Performance Manufacturing Index) rising to 57.6 in June 2016. Although we have seen a slight drop in July the NZ PMI remains solid – especially in the global context.

 

Fero Global Markets

 

The BNZ Report also showed a slight increase in positive comments from the industry in July, up a percent to 63.8%. A number of these comments were centered on business as usual, with continued growth in customer orders. BNZ Senior Economist, Craig Ebert, said “The only weak looking constituent of July’s PMI was around the stocks of finished products. Yet it’s hard to see this as a genuine negative. Not with new orders, as a demand indicator, still relatively strong at a seasonally adjusted 58.1”.

 

Fero has certainly seen the benefits of this positivity and are currently working with some major NZ companies manufacturing both here in NZ and offshore in China. This increase in NZ manufacturing means that nearly 80% of Fero’s outputs are now being exported and many clients have seen some cost down savings too.

 

The good news is the growth of the sector is set to continue especially as some of the growth is being supported by the hefty construction cycle currently being witnessed all over NZ.

Sam Fulton

May 3, 2016

NZ still stands out on the economic stage

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.

international results _ BMIFero - Industry update

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”.

Sam Fulton

May 2, 2016

Escea expands international supply chain into China

We have been lucky enough to work with Escea for a number of years and have witnessed their company grow and develop over this time. Escea has become a well-established industry leader in the design, manufacture and export of leading-edge indoor and outdoor gas and wood fireplaces.

 

Fero works with Escea in China

 

Fero supplies the electronic components and wiring looms that go into the fires, enabling them to function – we like to call it the stuff where the magic happens! Historically we have always kept Escea’s production within NZ, until recently when we took the joint decision to migrate some of this work to China. It’s a reflection of the growth in their business and of the relationship we have with our Chinese partners that we are able to switch sourcing. It’s also an indication of the quality of our relationship with this client that they allowed us to look at alternative supply, and help them to reduce their costs.

 

Unfortunately it’s not as simple as stopping production in NZ and then starting production in China. We have a detailed process that ensures material, quality, and form are exactly the same as we deliver from our local plant. Drawing approval, alternate material specification approval, and sample check and sign off are all required before we place orders on China. Once this process has been approved, then production can start. It may seem a long and lengthy process (and it is) but for Escea we were able to provide a cost down for them of up to 35% in some cases. We have maintained the quality, and maintained the lead time guarantees, whilst reducing the cost – a win win situation for this client.

 

Fero partnerships in China

 

As well as the cost savings that Escea have realised in offshore production, they also have the security to do short runs here in NZ if they have spikes in demand. This not only provides them with a security blanket it also enables us to free up some capacity in our manufacturing plant in NZ for other lines.

 

So with a cost saving of 35% why aren’t more companies doing this?

 

Well, China is not a place you can just walk into and expect quality and lead times straight away. You have to build relationships with factories and suppliers and be able to vouch for the quality. This is where Fero’s knowledge of the market and our strong ties with our suppliers is imperative to a company’s success. We are more than happy to let valued companies such as Escea piggy-back on our efforts in China because without the knowledge and trust that we have built up over the years they would never be able to reap these rewards.

 

Here’s what Steve, Procurement at Escea had to say about working with us:

 

Escea and Fero partnership“Fero has been a valued partner of ours for a number of years now and instrumental in creating a cost down of around 35%. I have no doubt that had we approached Chinese factories direct, we would have been unable to guarantee quality, on-time supply, or provide the volume of work that is required for a reputable Chinese manufacture to deal with us. Using Fero has reduced the risk of off-shore production for us, whilst still delivering all the benefits. And we can relax knowing that there’s always a fall-back of producing through them in Auckland, at a moment’s notice and shorter runs”

Sam Fulton

March 21, 2016

Labour costs in China on the rise

We only have to look at the back of your new TV or on your child’s pair of pyjama’s and you will see the undeniable “Made in China” stamped on the label. Over the past 10 years we have come to expect that a large proportion of our goods are manufactured in China.

 

Fero - Made in China

 

Why? Because the production costs and labour force in China are one of the cheapest in the world.

 

However, since 2011, when the current Five-Year Plan came into effect, wages have risen in 16 of the 31 provinces in China, according to data in CBX Software’s Q2 Retail Sourcing Report, and the average wage in China was expected to increase by around 10% in 2015.

 

Gone are the days when you could look at the minimum monthly wage in China and see it as one of the lowest. It now ranges from approx US$137-639. Other countries such as Vietnam ($101-142) and Indonesia ($71-230) are definitely more competitive. Here in NZ our average minimum monthly wage is US$1627

Fero - China wages

 

So how does this affect the western world?

 

If labour costs increase then obviously manufacturing costs rise which in turn can lead to:

 

  1. High volume manufacturers look for alternative sourcing destinations
  2. Manufacturers continue to support China but look to different provinces with lower minimum wage
  3. Consumer prices increase
  4. Low manufacturing cost no longer out weigh negatives of high MOQ, long lead time, inflexibility of product change and manufacturers bring production back offshore.

Many factory owners are moving production away from the coast to the west of China in search of low skilled labour and lower production costs. Others have migrated from China to Vietnam as production costs in that nation are estimated to be third of China’s. This makes a huge difference to the bottom line for many companies and that is why we are seeing a move in production for some of the large sports companies who are now using Vietnam as the preferred sourcing destination.

 

Fero - Made in China

 

As a manufacturing company based in NZ we value our Chinese partnerships greatly and have built these up over a number of years. We visit China regularly and have Chinese speaking staff who deal directly with the factories in China on a day to day basis. However, over the past few years we have definitely seen an increase in price and it is our belief that in the next 10 years the Chinese market will not be as attractive to some companies as it is now.

 

At Fero, we try to take an agnostic view on behalf of our customers, looking at their production flexibility and budget before suggesting a supply chain solution that combines on shore and offshore sourcing. Along with many companies we’re investigating the options outside China too and will report on this in coming months.

 

Source: joc.com
Sam Fulton

March 10, 2016

Economic Update for NZ Manufacturing

New Zealand’s manufactured exports make up around 85% of all merchandise exports from this country.

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.”

 

Fero - NZ Manufacturing

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