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News From The World of Manufacturing
•First, the good news, and it really is good news: both major parties have made policies related to vocational education and training a prominent part of their policy announcements for the upcoming election. First, it was the National Party with increased support for the Trades Academies. Now the Labour Party has followed with announcing significantly more support under the Apprenticeship Boost programme. What sits behind both announcements is the realisation that in future vocational careers may well provide higher levels of job security – and possibly, also job satisfaction and remuneration – than (some) professional or academic careers.
Neither announcement, however, will fix a fundamental problem many New Zealand manufacturers are facing – the fact that there aren’t any formal vocational training programmes that would prepare learners for tasks and jobs that are dominating operations in many of our factories – general assembly and machine operations. Among the currently 140-odd qualifications in the areas of Engineering and Manufacturing managed by the Manufacturing and Engineering Industry Skills Board, there are numerous qualifications that provide quite specialised skills in a narrow field. There are nine qualifications under the category of Fire Systems, for example. When it comes to generic manufacturing qualifications, we essentially have four certificates in General Manufacturing (Levels 2 to 5) and 3 certificates plus 3 diplomas (Levels 3 to 5) in Competitive Systems and Practices and Operational Excellence, most of the latter heavily focused on Lean manufacturing practices. No dedicated offers for training machine operators, for example, except for a Level 3 Micro-credential (Mechanical Engineering CNC Operator) and another one, Digital Skills in Manufacturing, neither of which are delivered in large numbers due to insufficient TEC funding support.
What is worse, when it comes to the Apprenticeship Boost programme, as it stands, it only covers Level-4 qualifications, and does not include any of the General Manufacturing or Competitive Systems and Processes qualifications. Whether that would change under the policy change announced by the Labour Party remains unclear.
Unless and until the fundamental changes in VET we need are made and implemented, manufacturers will be left with in-house training or, in most cases, employing migrants with the requisite skills.
•In last week’s edition, we talked about the importance of the integrity of a country’s manufacturing ecosystem – its intricate network of input supply chains – and the consequences of key suppliers dropping out.
One reason for the latter happening is a combination of owners exiting due to advanced age or ill health, and no succession arrangements in place.
That has always been the case.
Though, that may not, necessarily, be the case. A recent study by McKinsey & Co on the US economy shows that – across all industries, and for small businesses (up to 500 employees) – the over-representation of people (owners) at age 55-plus looks a lot worse than for the general population:
That is – in parts – not surprising. Unless by direct inheritance and outside the wider IT sector, the path to business ownership takes time in life. However, as this is data across all sectors of the economy and includes hospitality businesses, for example, 52% of all SME business owners being 55 years of age or older is a cause for concern.
On the basis of “every crisis is an opportunity”, the report then looks at the estimated total value of businesses that will need to be transitioned to new ownership (lest they be shut down) across different industries:
It won’t come as a surprise to many that manufacturing as a capital-intensive industry is part of the ‘capital-intensive core.
Based on historical data, McKinsey also have had a go at predicting who will most likely acquire these firms, with institutional investors focusing on the bigger objects:
This is all based on US data, but it is reasonable to assume that the situation in New Zealand is not fundamentally different.
Other news of interest to manufacturers
•Europe has just emerged from a major heatwave moving across the continent:
This is definitely bad news for people particularly vulnerable to heat exposure:
But it’s not good news for manufacturers, either. It can create disruptions in the supply of electricity and reduce the capacity of transport systems like road and rail.
Apart from this indirect impact, excessive heat can also lead to problems with production, productivity, and quality in manufacturing operations themselves. Workers at the Stellantis assembly plant in Mulhouse (Alsace) went on strike last Tuesday, quoting temperatures in parts of the factory of 40degrees C.
Most EU governments do not impose strict rules on manufacturers when it comes to the management of extreme heat events; rather this is addressed under the obligation of employers to ensure a safe working environment.
Extreme heat can also have an impact on product quality, especially in metal manufacturing and where tight tolerances apply.
In terms of productivity, an across-industries study in 35 countries revealed that each additional degree of heat beyond a threshold of 30 degrees C reduces output per hour by approximately USD1.30 (constant PPP), representing 3% of average output per hour in our sample between 2014 and 2024.
A corresponding study on a large multi-year data set from Chinese manufacturing operations reported a daily drop in multi-factor productivity of 0.56% when temperatures rise above 32 degrees C, compared to a 16 degrees C baseline.
The most comprehensive study was published by the OECD in 2024. It is based on detailed weather and financial information for more than 2.7 million firms across 23 countries between 2000 and 2021. Again, there are clear indications of proportional reductions in – in this case – labour productivity with rising temperatures:
Further findings from the report were:
- Duration: reductions in labour productivity more than double between 2 day and seven days
- Repeats: The depression in labour productivity more or less doubles after each heatwave if there is more than one event in a given year
- Humidity: not surprisingly, reductions in labour productivity rise with higher levels of humidity. There is a significant step change at 50%, however, with a lower progression beyond that level. n.b., it is well established that in terms of human health and well-being, and the ability to perform physical tasks in particular, what matter is the so-called wet-bulb temperature. The Wet-Bulb Temperature is a nominal value, expressed in degrees C, that uses conventional air temperature (Dry-Bulb) and relative humidity as inputs to calculate a value that reflects the combined impact of air temperature and relative humidity on human physiology. The conventional assumption is (was) that wet-bulb temperatures at 35 degrees and above are injurious to human health. However, recent studies (here and here, for example) have lowered that threshold and found increased risk of blood inflammatory responses at wet-bulb temperatures as low as 29 degrees.
- Wet bulb temperatures in Paris last week reached values between 28- and 31-degrees C.
- Industry and company size: Manufacturing showed the second-highest levels of reduction and the heat impact on companies across all industries is inversely proportional to their size:
New Zealand, being a thin slither in a vast ocean, is fortunate in having a lower risk of prolonged periods of extreme temperatures. Using three consecutive days at or above 35 deg. C as a criterion, we’ve only had one event and one near miss in the last 50 years, both in Central Otago (Alexandra), which typically records very low humidity, meaning wet bulb temperatures staying well out of the danger zone.
However, New Zealand manufacturers have connections to – and in some cases operations in – Australia and northern hemisphere countries where the risk is demonstrably much higher.
Fun Facts (some of them not so funny)
•A couple of interesting observations from inside the (Anthropic) tent here … https://youtu.be/aBUniZHgCnE – if it’s not a well-crafted fake. Interesting woman, too, and at least she appears to be definitely real.
•Clouds on the horizon:
•Prices for dairy commodities at recent Global Dairy Trade auctions have trended downwards, and there are reports over production levels increasingly exceeding demand, leading to a negative outlook on dairy commodity prices for the foreseeable future.
| Country | Increase |
| Australia | 4.1% |
| Europe (EU) | 4.2% |
| New Zealand | 6.9 |
| Uruguay | 9.7 |
| USA | 2.7 |
April 2026 increases (year-on-year) in dairy production for key producers.
Given the many connections between dairy farmers, dairy processors, and New Zealand manufacturers, this cannot be good news for the country, nor for its manufacturers.
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