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Manufacturing Matters- Tuesday Top-Up 82

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What’s Been Happening in our MAKE│NZ Community

Last week at EMEX we hosted Keeping Up – Are You Hitting Your Limiter, our fourth annual industry conference. A huge thank you to those who spoke, attended, and helped organize the event!
If you missed out, we’re going over some key points, but if they leave you wanting more, then that’s just a sign to keep an eye out for our next conference…

News From The World of Manufacturing

•Our Manufacturing Industry Conference last week saw an impressive line-up of speakers. First-up were Dr Jan Polzer from The University of Auckland and Scott Adams from Argon&Co, updating us on recent developments in the deployment of digital technologies in New Zealand manufacturing operations.

Jan showed us what time savings and productivity improvements have been achieved with the help of student projects at a technologically advanced sawmill in the Bay of Plenty. Delays in bin-sorting of pieces of timber, which the mill produces in a large range of sizes, have been reduced. In the yard the storage and retrieval of packets of timber ready for dispatch has been streamlined by creating a digital map of the yard which forklift drivers then can use to more quickly set down and pick up timber in / from the right place. These solutions may not appear to be leading-edge in terms of the application of digital technologies, including AI. But that’s not the point. They were inexpensive to implement, thanks not least to the fact that they were run as student projects, and they delivered tangible operational and financial benefits with a short timeframe.

You can find more information on a low-cost entry to some simple Industry 4.0 technologies in your company here. That initiative has now also attracted government funding support for the next three years.

Scott Adams’ presentation provided an overview of current and likely future developments in the use of AI in manufacturing operations. He emphasised that a lot of the future benefits will be delivered by AI agents in processes like supply chain management, for example. This picks up on the McKinsey study we quoted in our edition two weeks ago, which predicted that about 70% of the future value creation from the use of AI in manufacturing in Europe will come from the use of AI agents to automate processes that do not involve physical capabilities.

This will require a change in thinking for many in manufacturing. When an engineer thinks about automation, in most cases the focus will move on the automation of physical processes, using some form of a physical robot. But even in manufacturing operations a lot of value-creating processes do not require physical action – supply chain management, production planning, staff rostering – and thus ‘automation’ won’t involve robots, just computers of some sort. Of course, we’ve had software to manage these processes for a long time. But this conventional software is reactive and rules-based: it follows rigid, pre-programmed math and “if-then” logic. AI agents are proactive and goal-directed: they perceive changing shop-floor conditions, reason through multi-step problems, and autonomously execute decisions to meet a specific outcome.

If we take production planning as an example:

  • With a conventional APS system, if a critical CNC machine breaks down or a supplier delays a shipment of steel, a traditional APS system will require a human planner to manually input new parameters and trigger a reload of the schedule. An AI agent, capable of self-learning, recognises the anomaly in real time. It evaluates the constraint, looks at alternative routing options across the factory, checks the availability of cross-trained labour, and dynamically re-optimises the production schedule on the fly.
  • Conventional Software relies strictly on clean, structured data (such as exact bills of materials, fixed lead times, and precise routing codes). AI agents can use both structured and unstructured data as input; they can read an urgent email from a customer requesting an order change, look at the historical actual cycle times (rather than the static “standard” times in the ERP), and use that contextual nuance to plan, for example.
  • Conventional Software acts strictly as a calculator or a static dashboard. It presents data to the human planner, who must then manually intervene to send purchase orders, re-route jobs, or alert the warehouse. AI agents possess “agency.” You give the agent a goal (e.g., “Minimize changeover times for the next 48 hours while guaranteeing a 98% on-time delivery for Customer X”). The agent uses an ‘orchestrator loop’ — Perceive, Reason, Act, Learn — to not only devise the schedule but also use APIs to autonomously update the MES, reallocate tools, and draft supplier emails for human sign-off.

•The second part of the conference dealt with the challenges of ensuring that today, and in five or even ten years, manufacturers have the workforce they need to ‘do the job’. Three ‘practitioners of the art’ shared their experience with and their plans to meet this challenge: Nathan Hay (Argus Manutech), Kayne Mulcahy (Mulcahy Engineering) and Dion Orbell (Buckley Systems).

To start with, Dion Orbell asked the audience a simple question: What is the biggest concern for the future of New Zealand Manufacturing?

The setting may have provided an ‘input bias’, but the audience response clearly demonstrated how much of a concern the availability of enough workers with the right skills was to the manufacturers present.

The answer to the question of what these ‘right skills’ was presented in the following table:

What Every Worker Must Be Able to Do:

  • SUPERVISE MACHINES Configure, monitor, troubleshoot and improve automated cells — not just operate one machine. Human-machine collaboration is the new baseline.
  • READ AND ACT ON DATA Production dashboards, quality sensors, predictive maintenance alerts — all workers need to interpret and respond to live data, not wait for a manager.
  • COMMIT TO CONTINUOUS LEARNING A one-time qualification is no longer enough. Reskilling is a recurring expectation, not an exception. Adaptability is the job skill.
  • APPLY HUMAN JUDGMENT Critical thinking, cross-cultural communication, ethical reasoning — skills automation cannot replicate. These become premium, not optional.

If you think about your current workforce, you’ll be able to judge for yourself whether there is a gap between where your workers are now, and the above.

How do we get there? Again, we were presented with some interesting suggestions:

Five Things That Actually Matter

  • 01 Map your skills gap now — not in 2029. Know what roles exist today that won’t exist in 5 years, and what roles don’t exist yet that will.
  • 02 Make digital literacy non-negotiable. For all new hires and a priority for all existing staff — not just the IT team.
  • 03 Capture knowledge before it walks out. Your retiring workforce holds institutional gold. Document it, mentor it, systematise it — now.
  • 04 Reframe manufacturing careers. For schools and communities. The modern factory floor is tech-rich, high-skilled, and purpose-driven.
  • 05 Treat continuous learning as a business system. Not an HR initiative. Build time, funding, and culture for it — year-round, every year.

The biggest risk isn’t automation taking all the jobs — it’s the skills transformation happening faster than the workforce can adapt.

On the issue of loss of skills and knowledge when workers retire, which they will do at an accelerated rate over the next few years, here is an example of how one of the companies is dealing with this. They are mapping the ‘residual shelf life’ of each of their employees against the individuals’ skills sets and experience and are thus creating a map of the expected ‘erosion’ of intellectual property from their workforce. That map can then be used to take proactive measures, like encouraging workers to stay on for a couple of years – not as workers, but as trainers and coaches for the next generation.

•We’ll report on the last part of the conference proceedings in our next newsletter on June 9th.

Other news of interest to manufacturers

•What’s in the Budget announced last Thursday that will benefit manufacturers?

Nothing, as far as we can see, by way of directly providing targeted support for the manufacturing sector.

However, additional funding for the Trades Academy programme is intended to provide more opportunities for final-year (11-13) secondary school students to explore vocational education (trades training) as a next step in their vocational pathway.

The Trades Academy programme sits alongside the Gateway programme and is meant to “provide a broad range of learning opportunities for senior secondary students who are motivated by a trades or industry-related career. … A Trades Academy programme is full time (25–30 hours per week) for students already enrolled at school and consists of learning in both secondary and tertiary settings. Appropriate work experience may also be part of the relevant secondary or tertiary programme. …Most commonly students will undertake one or two days of tertiary/trades and industry-based learning each week, with the remainder of the programme delivered at their secondary school.” and further “Trades Academies are based on partnerships between schools, tertiary education organisations and employers. Tertiary education organisations include Institutes of Technology and Polytechnics (ITPs), Private Training Establishments (PTEs) and other work-based training organisations.”

Just as an aside, ending the Final-Year Fees Free Scheme will save the government $1,039.372m over the same period. As the budget document states “A portion of the savings is used to fund ‘Vocational Training Opportunities for Secondary School Students’ initiative in Vote Education.” – at 6.6% a rather modest portion, one might add …

•Energy is a key input for manufacturing. The availability of it, and cost, are key determinants of the competitive positioning for many manufacturers. It’s fairly obvious then, that many manufacturers will be interested in the reassurance of their government having a long-term plan for their country’s energy sector. Australia has got such a plan, so does the UK government, the Irish government, the government of Finland … we could go on.

New Zealand had a 10-year energy plan that expired in 2021 and since then there have been various initiatives to update that plan, or develop a new one, initiated by one government, then changed – or stopped in its tracks – by the next government. MBIE’s website still claims that it’s working on a New Zealand Energy Strategy, to be “be published by the end of 2024.”

Now the current government has put us out of our misery, declaring that the development of a comprehensive energy strategy for New Zealand was not a priority for the current government.

Fun Facts (some of them not so funny)

•As always, the latest Monetary Policy Statement [MPS] from the Reserve Bank [RBNZ] makes for interesting reading. At a high level, it shows that New Zealand’s economy still is underperforming, while at the same time the RBNZ feels compelled to signal future increases in the Official Cash Rate [OCR].

Production GDP (which measures the total monetary value of all goods and services produced in New Zealand) is projected to grow at pre-COVID-19 rates (almost), but that projection has now been scaled back slightly, compared to the previous (pre-Iran War) MPS.

Likewise, the Output Gap remains negative, meaning New Zealand’s productive sector is not running at full capacity. The outlook is for this gap to shrink, albeit after a significant dip not foreseen in the February MPS:

What this means is that – unlike the post-COVID-19 inflation, which was clearly driven by factors in the domestic economy, as demonstrated in the graphs above – this time we have an increase in inflation while the productive economy is running below capacity. The explanation is relatively simple. The on-going war in the Middle East is driving up fossil fuel prices and – downstream – the prices of everything using fossil fuels as an input. Literally, we are dealing with ‘imported inflation’.

•What does it mean if one country holds a 71% share globally in the manufacture of a product that is critical for the functioning of the world’s economy? This is how orders for all types of commercial vessels with a Deadweight Tonnage of more than 3,000 tons developed over the past four years:

•Words and language are powerful tools. Words can be used to make things bigger or reduce them to something hardly worth noticing. During the latest ground test of Blue Origin’s New Glenn rocket, its third first stage booster exploded rather spectacularly while it was undergoing a static fire test. Blue Origin described the explosion as “an anomaly”, which the Cambridge Dictionary describe s as “a person or thing that is different from what is usual, or not in agreement with something else and therefore not satisfactory” … PS: the booster in question had its own name – it was called “No, It’s Necessary” …

… or Chevron CEO Mike Wirth referring to attacks on ships in the Persian Gulf as “kinetic events” in a recent Bloomberg interview. Again, the Cambridge Dictionary defines kinetic as “involving or producing movement”.

We could go on, but …

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