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- Fun Facts
Upcoming Events
Thanks to those who turned out to our first ever Calibrate Event! It was great to have a mix of familiar and new faces, and it’s a good thing we’ve made this a series of events because clearly there’s a lot to discuss when it comes to finding apprentices and how to best develop them to support themselves and your business.
Not to worry – if you missed out last week, as we’ve said, this is a series of events. You may have missed the site visit, but you don’t have to miss the topic. You can still join the conversation – find out here.
The Canterbury Manufacturers Trust and MAKE│NZ are pleased to present an opportunity for young leaders within Manufacturing.
A relaxed, networking evening for the next generation of Canterbury manufacturing leaders &
future leaders — Chatham House Rule applies.
No sales pitches. No bosses. Just your peers — talking shop, comparing notes, and learning from
each other.
This will take place on Thursday the 17th of September, 5:30pm to 7:30pm at Little Mex Bar, 131 Victoria Street. Any emerging leaders in manufacturing, aged 25-35, are welcome! Come as you are and we’ll see you there. To RSVP and find out more information, check the pdf below
News From The World of Manufacturing
•At last night’s Fireside Chat, we heard a fascinating account from Roland Somer, who took on the role as Manufacturing Manager for SPS Automation seven months ago. Roland took us through what it takes to turn a workshop, building prototypes of some fairly advanced pieces of machinery, into a factory, aiming to produce – in the near future – one to two complete units per month:
One of the key ‘things that needed changing’ Roland mentioned was the requirement to transfer “knowledge that sits in peoples’ heads” into “knowledge that is embedded in processes”. That rang a bell. Having walked many factory floors over the years, one thing appeared to be a common feature: at a certain size in terms of staff numbers, maybe around 30, it becomes necessary to move from tacit knowledge to explicit or codified knowledge.
Tacit knowledge is often described as the “feel” an operator has for a machine or the intuitive “know-how” to fix a jam. While highly valuable, it is inconsistent. Scaling requires producing the same output reliably, which necessitates turning that “feel” into Standard Operating Procedures (SOPs), equipment specifications, and measurable tolerances.
These are not new insights. Larry Greiner, an American economist and Professor of Management and Organizations at the USC Marshall School of Business, as early as 1972 proposed a growth model for businesses that very much has a manufacturing business in mind:
In a 1994 revision, Greiner lists as part of the Creativity Phase: “The company’s founders are usually technically or entrepreneurially oriented, and they disdain management activities; their physical and mental energies are absorbed entirely in making and selling a new product. Communication among employees is frequent and informal.” However: “As the company grows, larger production runs require knowledge about the efficiencies of manufacturing. Increased numbers of employees cannot be managed exclusively through informal communication; new employees are not motivated by an intense dedication to the product or organization. … Thus the founders find themselves burdened with unwanted management responsibilities. So they long for the “good old days”‘ still trying to act as they did in the past. … At this point a crisis of leadership occurs, which is the onset of the first revolution. Who is to lead the company out of confusion and solve the managerial problems confronting it? Quite obviously, a strong manager is needed who has the necessary knowledge and skill to introduce new business techniques. But this is easier said than done. The founders often hate to step aside even though they are probably temperamentally unsuited to be managers.”
I’ve come across several examples over the years where founders/owners weren’t prepared to abandon the ‘good old days’ and decided instead to limit operations to a size where they could still do what they enjoyed most – being in the middle of it on the factory floor every day. Not to mention one rather large Auckland manufacturer where the founder – now in his 80s – still can be found on the factory floor every day …
Sounds familiar?
Beyond the leadership aspect and at a technical level, the transition from tacit person-to-person knowledge transfer to explicit and codified knowledge usually – and, arguably, necessarily – occurs when the founder or owner is no longer involved as the key driver of factory floor operations, being able to provide technical input when problems arise. Other reasons to codify are external triggers such as compliance, customer demands, or key-employee departures.
As Paul Adler, another influential USC researcher on the topic, pointed out in a 1996 essay, the standardisation that comes with codification makes processes more amenable to improvement— exactly the conditions a firm needs as it outgrows direct founder oversight.
However, there is a price to pay. Tacit knowledge is valuable precisely because it is idiosyncratic, scarce, and not easily replicable; it can be the most strategically important resource a company’s competitive advantage is built on. Making it explicit means it can be imitated, implying a potential loss of that competitive advantage. Excessive codification can also lock firms into obsolete schemas and carry high recurring maintenance costs. Even growing firms have strategic reasons to leave some knowledge tacit.
Codification – by its very nature – also reduces the real and perceived influence people have on decisions on how processes should operate; it can stifle initiative and innovative thinking.
Finally, two points:
1) The balance between tacit and codified knowledge isn’t simply a function of a manufacturing company’s size or stage of development. It depends on what manufacturers make, and how they make it. Aerospace, defence, or medical device manufacturers, for example, have much higher codification and standardisation requirements early-on. Also, the simpler the product being manufactured is, and the longer production runs are, the greater the advantage of codification and standardisation early-on.
2) The increasing use of digital tools such as ERP systems, or CAD/CAM software even in smaller operations inherently forces businesses to codify their processes long before the company reaches a physical size that would historically demand it.
Other News of Interest to Manufacturing
•Sometimes you see things, and it ‘feels just right’. Like the annual Design & Build Challenge for year 3 and Year 4 students at Somerfield School, Te Kura Wairepo.
Among others, students received instructions about tools and materials that would be useful in completing their project:
of a helping hand at this stage
From a point of view of keeping the students’ minds open for choosing a career in manufacturing later on, this is just perfect. Especially when followed up with corresponding courses at intermediate and high school.
The introduction of industry-led subjects in Years 12 &13 can build on this, but first, and at the core, must be students experiencing the joy of making / building three-dimensional physical objects with their own hands. It comes naturally in their pre-school years with things like Lego, but if mum or dad don’t have a workshop in the garage – and fewer and fewer of them do – school is one of the very few places where the opportunity to experience that joy is offered.
There is good evidence to support the suggestion that ‘makings things with your hands’ has mental health benefits in adults: here and here, for example. Watching the students at Somerfield School very much suggests that the underlying mechanisms are at work at this age, too.
Fun Facts (some of them not so funny)
•When was the last time you bought a barrel of Brent crude oil – for work, or at home?
And yet, the price of Brent crude (and WTI) is what is being quoted in most business news every day.
Historically, that made sense. Apart from the 2022 fossil fuel crises following the sanctions imposed on the Russian Federation, and the COVID-19 pandemic, prices for both commodities moved more or less in parallel, with the ‘crack spread’ (refining margin) sitting at between USD10 and USD18 under ‘normal market conditions’:
That long-term average refining margin has gone well out of the window since February of this year, and it may well be getting even worse – currently sitting at just over USD60 per barrel:
To put it in another way: if we were to apply ‘normal market’ refining spreads, we’d have to quote the price of oil – as it is relevant to us – at about USD150 a barrel.
There are multiple reasons for that increase – reduced refining capacity in the Gulf states being just one of them. Whatever the reason(s), it’ll be the size of that Refiners Margin that is likely to determine the – mostly indirect- input cost for diesel for your business – not to mention your private car, if you drive a diesel.
•Last week’s newsletter contained the following statement: “It is a fact that in many countries political parties with an agenda to reduce levels of immigration are on the rise” One could be forgiven for thinking about, among others, the USA when reading this. Not necessarily so, however. At least when we look at public opinion rather than politicians’ proclamations:
• The latest PISA tests are out and, well…
But that shouldn’t be a worry right? We’re being told AI models are getting smarter by the day –
So, not a problem then?
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