Stop the rollercoaster, we feel sick.

Sam Fulton

March 10, 2019

Stop the rollercoaster, we feel sick.

What a rollercoaster ride the last few months have been with our new Labour government. We’ve seen quite a bit of upheaval and discussion. Discussion is good, but it can also be unsettling and creates nervousness in the marketplace. Businesses like to know what’s around the corner as it helps them plan for the future. If doubt sets in then plans go out the window and economic development risks being put on the backburner. We’ve seen several new policies and changes come into effect that have impacted the manufacturing industry.

 

Fero - labour relations

 

Employment Relations in NZ
Perhaps the most significant change of the past few months, even years, is to employment relations. We’ve seen unprecedented industrial actions from several unions and industries, not least teachers and nurses. There are no signs that this will ease, in fact we can predict that it will increase as unions become increasingly empowered through Multi Employer Collective Agreements.

 

The increasing NZ Minimum Wage
The hard facts are that this government will increase the minimum wage by 28% within its first term, and so what about its second term? We only have to look across the Tasman to Australia to see the devastating effects of increased costs and increased legislation on the manufacturing industry.

 

Such a high leap in the minimum wage not only causes increases through all wage levels, but brings with it an inevitable compacting of wage levels from top to bottom. That leaves the more highly skilled and experienced worker feeling that there is less value placed on their abilities versus the non-skilled worker who is earning only a little less.

 

The reality for Fero
At Fero, we are significantly affected by government changes to labour relations and minimum wages. It places undue pressure on our ability to compete in the global market. This aside the changes proposed by government have forced us to think differently and a little more ‘outside the box’.

 

Luckily we saw the writing on the wall a couple of years ago and we put a great deal of effort into finding ways to absorb and mitigate these skyrocketing costs.

 

“The next 14 months alone is going to see a 15% wage increase for us. For many businesses that could mean the beginning of the end, but we’re confident we can overcome it through innovation, a unique offering and experience”
Sam Fulton, MD Fero

 

The future for Fero
We are working very hard to improve our sourcing and supply chain to remove cost through better purchasing and more effective partnerships with suppliers and or customers. Our engineering and purchasing teams have been focusing on each of our accounts and looking at ways to optimise their production and not pass on cost increases.

 

We are very pleased with our decision to establish a production plant in Samoa. This has allowed us to maintain a lot of our prices into the market, whilst at the same time providing a future for the business and some much needed jobs in Samoa. We’re proud of our involvement in Samoa and we believe strongly that it will make a significant difference to our future.

 

We have been very impressed with the speed at which our plant has been able to deliver to market and the ongoing productivity and quality that we are able to enjoy. It is a perfect synergy with our plant in NZ and together we are proud to be able to support and deliver to our international customer base.

 

Fero Samoa Production

Sam Fulton

June 20, 2015

Is China the most cost-effective option for NZ companies?

Businesses are returning from China to benefit local manufacturers.

You may have seen Fero hitting the news recently, with articles published in The Herald, The Sunday Star Times, NZ Manufacturing and most recently on Radio New Zealand. As you probably realise, we’re passionate about NZ manufacturing and are excited to see businesses actually coming back from China, wanting to place their business locally. So, we’ve been shouting from the roof tops over the last 3 months, explaining how sourcing products in China isn’t necessarily the cheapest option in the long-run.

 

“It is  easy to be beguiled by what on the surface appears to be a low price, but buying at the cheapest price always comes at a cost”

You get what you pay for in China so if the price too good to be true, then it is.  Many Chinese manufacturers reduce costs by compromising the quality of the raw materials in their product.  For example, copper wire costs are reduced by using recycled copper, which does not perform to specified standards.  This can result in quality problems and high mitigation costs once the component is in use.

It’s a very different way of doing business to New Zealand, so it is easy for local manufacturers to get stung.  That is why it is important to shift one’s thinking from unit-based to taking into account the overall cost of doing business.

 

Although its manufacturing is still cheap by New Zealand standards, rising labour and other costs are seeing China become more expensive to do business with.  Its manufacturers are off-setting these costs through economies of scale.  As a result, minimum run sizes are increasing beyond the reach of many New Zealand manufacturers.

 

“Even large manufacturers by New Zealand standards can be shocked to find that an order they consider huge by local standards is only a fraction of the Chinese manufacturer’s minimum”

 

Sourcing resource materials in China is also harder than most Kiwi businesses anticipate because Chinese regulations make it surprisingly difficult to access many manufacturing materials from within that country. Export and manufacturing licence constraints mean Chinese manufacturers are often unable to source raw materials that are readily available in other parts of the world.  This causes problems for New Zealand businesses that specify product materials that their Chinese manufacturer is not able to purchase, even though the material may be made literally down the road.  The New Zealand business then has to go to the hassle and expense of specifying and validating alternative parts.

Fero gets around this issue by importing the required resources itself, then re-exporting to its manufacturers in China. It has set up a dual New Zealand / China manufacturing option so that it can deliver what its customers need – no matter what the timeframe, quantity or specification.  By integrating Chinese supply with local manufacturing, its able to provide a stronger supply chain and a more comprehensive service.

 

“We have been doing business in China for the past 12 years and have learnt what works.  Rather than using an agent, we have Chinese employees here in New Zealand, who are invaluable for helping us to manage the relationship with manufacturers in China”

This business model means that Fero uses its Chinese partners for its New Zealand manufacturer customers who need high volume, high labour input looms and harnesses.  Alternatively, Fero manufactures at its Auckland facilities – often at a very competitive price, and a cheaper overall cost, than could be done in China.  Where possible it has automated its operations, enabling it to keep labour costs down.

Providing a local manufacturing option is proving to be increasingly popular with New Zealand manufacturers because it enables them to be more responsive and turn changes around far faster.

 

“Long lead times and distance mean that specification changes to Chinese-manufactured goods can take many months to flow through the supply chain.  This makes it difficult for the manufacturer to respond quickly to their own customers’ needs”

For example, if an appliance manufacturer wants to change a function such as adding a button to turn off the timer alarm, then the wiring loom will need to be updated.  It can take five or six months from the time that change is notified, until the new stock arrives in New Zealand and then subsequently replaces the old stock ahead of it in the supply chain.

Although there remain many advantages to getting goods manufactured in China, it is vital to do a lot of due diligence and spend a lot of time building relationships and understanding Chinese business culture before embarking on a business arrangement.

Design_Capabilities

It’s a high-risk game and there are no shortcuts.  Many New Zealand companies are finding out the hard way just how difficult it is to resolve issues from the other side of the world, and how hard it is to prevent intellectual property and other rip-offs.  This presents a lot of opportunities for Fero and other local businesses because we manage the difficulties and navigate the minefields of doing business with China, enabling our customers to benefit from the best of both worlds.

 

“Anyone trying to do this themselves without prior experience is essentially playing Russian roulette with their business”

Sam Fulton

December 2, 2014

Hi Tech Manufacturing solutions in China

“Helping our clients to source offshore when the time is right, is a key part of our future. We’re working closely with our partners abroad to ensure we deliver successful offshore manufacturing solutions.”

 

Map of ChinaManufacturing in China to cut costsIt has been a few weeks now and time in the office seems to fly by, however the trip to China in October is still fresh in our minds, as is the way forward for us in a very dynamic market.

 

Greg, Grant, George and myself were in China for two weeks and we were working flat out.  There seems to be no other way in China, as the energy and drive is apparent everywhere.  China is a place where things get done and a sense of urgency really prevails.  Unfortunately if you are not there and giving face-to-face time, that sense of urgency seems to slip.  You become a second priority and it can be hard to get action.

 

Traditionally manufacturing in China is seen as a way to cut costs and increase profitability.  This can certainly be achieved but it is a long, hard road.  Management overheads, quality assurance, communication, shipping, MOQs, engineering turn around, and lead times are all a mine field of hidden costs and can absorb resource faster than anything.

 

Relationships are key in doing business in China.  What, at the time, is a lot of long meetings, dinners and copious toasts, does lead to the personal relationships that can help to smooth some of the difficulties of dealing with this massive powerhouse of production and often will help to give our relatively small NZ demand a great leg up.  It requires a big investment and I am pleased to say that the relationships that Fero has had in China stretch back over a decade. It is very obvious that this gives us a real advantage when dealing with our Chinese partners, and ensures our success in achieving Hi Tech manufacturing solutions in China.

 

I think it is time that Fero used these relationships to contribute more to our Vision of contributing to sustainable local manufacture and helping NZ manufacturers to be leaders on the world stage.  We have very strong relationships in China and we need  to be the conduit between the low cost manufacturing model and the niche market that is Hi Tech Manufacturing in NZ.

 

Building relationships is key to doing business in ChinaOur relationships and experience allow us to greatly reduce the hidden cost of having product manufactured in China, however we can still greatly improve this.  During our visit I realized that if we were to treat out customers the same way we treat our suppliers we wouldn’t have anyone dealing with us.  Supplier relationships are vitally important to the success of any business and we must remember this and ensure that we are nurturing our relationships in China.  It is not enough to visit annually and expect that we are going to get the highest level of service and quality with a few emails.  We need to be spending time at all levels of the business, from the Managing Director to the process worker on the floor, they all need to know what drives us and our customers.

 

How can we expect immediate action and focus on our projects, when we are a small fish in a huge pond?  As usual we Kiwis need to think of other ways to get the results we want, and can not rely on our purchasing power…

 

Workers in a Chinese Hi Tech Manufacturing plant

2015 will see us contributing more resource to building our relationships and in turn developing our capabilities to satisfy the manufacturing market back home with increased service out of China.  It is very hard for New Zealand  manufacturers to go to China and receive the kind of DIFOTIS that we require and expect for our businesses, without the benefit of long term relationships and extensive experience of a company that is dedicated to linking both these markets.

 

Don’t worry…. We are in no way going to be taking the eye off the ball at home, and in fact this trip just confirms how important it is to have reliable onshore manufacturing capabilities close to our customers.  We have big things coming up in the new year and some very exciting investments that are going to hugely increase our capacity and capabilities on shore and ensure that we are providing an even better and more comprehensive service to our customers.  WATCH THIS SPACE…I look forward to telling you all about it soon!

Sam Fulton

September 22, 2014

Believing in Hi Tech Manufacturing.

Making NZ attractive to the best global talentI was recently going through old emails and came across a video of the late Sir Paul Callaghan speaking about what we can do to grow a better NZ for future generations, and what common myths there are out there that are holding us back from this. I watched it again, twice!

I felt that, even though this is about 3 years old, it is still very relevant to us today and even more so after such a tumultuous election. With all the hype and distraction from people more focused on trying to propound conspiracy theory and their own agendas, than what is working for NZ and what needs working on, we missed a lot of rhetoric about what we need to do to make a better NZ. Hopefully the ‘cusp of something great’ that John Key describes will have a lot to do with the development of niche technology manufacturing, of which NZ is so good at and which is so good for NZ, and the retention of good talent to our shores.

With all that we hear from the media these days on the importance of different industry sectors to our economy, it is very important that we understand the contribution that hi- tech manufacturing makes to the economy and the huge potential there is in this sector.

“Manufacturing is our biggest industry and probably the only one that can be grown sustainably and significantly.”

We are a country of innovators, inventors and entrepreneurs. We punch well above our weight on a world scale in all that we do. Hi Tech Manufacturing fits the New Zealand culture, it is what we have always been good at and what will drive our economy forward, making this the place that everyone wants to live in.

Attracting talent to New Zealand must be a focus of our industry. The flow of talent off shore has been stemmed but we must keep attracting more. If New Zealand’s mission statement is ‘to be a place that talent wants to live’ then the manufacturing sector must lead this.

attracting talent to NZAt Fero, we are always looking to attract talent. We know that we are only as good as our team. In the last 18 months we have gone through significant growth and as we grow our team to meet this demand, we are always asking how do we get the most talented people on board?
Recently we have relaunched our website and have put our core beliefs out there for all to see. More than just a mission statement, our core beliefs are why we get out of bed in the morning, what makes us feel that we are working towards a higher purpose than just producing high quality, cost effective wiring technology solutions. We feel we are here because ‘ we believe that sustainable local manufacture should thrive and NZ manufacturers should be leaders on the world stage’

A lot of the top technology manufacturers in NZ are customers of Fero. We want more, and to do that we have to work with our customers to help get them there. We need to attract talent to our company so that we can deliver the service and products that our customers need to be ‘leaders on the world stage’.

We know this is going to create a better New Zealand, which is great because this is where we live and play.
We know this is going to create a more prosperous New Zealand. More jobs is not enough, we need better jobs, and Hi Tech Manufacturing provides this

Callaghan lays down a challenge to us: To be leaders in growing New Zealand and making it a better place to live, more sustainably. Hi Tech Manufacturing has the ability to lead NZ and contribute above all others in making New Zealand the place where we all want to live.

Watch the video