New Zealand’s manufacturing industry plays a pivotal role in the improvement of the economy as a whole. Manufacturing in the construction industry and the dairy and meat sector perform particularly well, with research demonstrating promising growth in each sector.
Aside from contributing to overall GDP growth, the manufacturing industry also contributes to the employment of thousands of New Zealanders every year, and it earns billions in export revenue annually. This article explores the current state of the manufacturing industry in New Zealand, highlighting its key characteristics and prospects.
A Stable and Growing Industry
A common misconception about New Zealand’s manufacturing industry is that it is in a state of decline. This may be because prior to the early 1980s, the industry was heavily protected against competition by tariffs and import regulations. Because of this, the industry may have appeared to be particularly strong, but this was an artificial dominance.
In today’s significantly less regulated market, manufacturing’s share has reached a stable 11 per cent, like many other developed nations. The sector employs around a quarter of a million New Zealanders, contributing around $12 billion in wages.
According to the Purchasing Managers’ Indexes, which measures manufacturing sectors around the world, New Zealand’s manufacturing sector has had and almost unbroken run of expansion since the global financial crisis of 2007-2008.
The industry has also done well to take advantage of the globalisation process, and many companies opt to outsource production processes overseas. Doing this has enabled companies to reduce costs associated with employment, raw materials, ordering costs and much more.
New Zealand’s manufacturing industry is largely dominated by companies who specialise in the manufacturing of food products. Our unique climate and abundant natural resources makes the country the ideal place to manufacture processed foods, which form a large contribution to our exports.
This does not mean, however, that New Zealand’s manufacturing industry does not excel in “hard” manufacturing – machinery, equipment, cars, metal-based products, etc. They do, but they have a special knack for “soft” manufacturing – bio-based, chemical, nutraceutical, and food and beverages- which earns them billions of dollars every year.
New Zealand manufacturing companies are also increasingly reducing expenses associated with things such as employment costs, ordering costs and more, by outsourcing production processes overseas. This means that many food products are processed in different countries, reducing costs and improving productivity.
A Globalised Process
New Zealand’s manufacturing industry is increasingly taking advantage of the effects of globalisation. Nowadays, many companies are opting to outsource the manufacturing of their products due to reduced costs and efficiency. This has helped manufacturing companies excel in what they do and it continues to provide new sources of revenue for the economy, by cutting down the costs of domestic manufacturing processes.
By outsourcing the production of products, New Zealand’s manufacturing companies are able to reduce expenses that come with things like ordering costs, machinery costs and employment costs.
New Zealand manufacturing companies are also increasingly opting to take part in global supply chains. By doing this, these companies can contribute components towards finished products that may be made up of components from all over the world. The globalised nature of our manufacturing industry has helped it become more efficient and more productive than ever.
The Threat of the Service Industry
In today’s world, the demand for services such as information, entertainment, and financial services is growing. Some have suggested that this increased demand for service technology will begin to supplant the demand for manufactured products.
However, what we are seeing in New Zealand is a strategic morphing of the two industries. For example, high-level services such as legal, financial, accounting, marketing, and computing services are inevitably a part of the makeup of sophisticated manufactured products. This will see the manufacturing industry become inextricable from the services industry, a promising partnership for both.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.