Posts Tagged ‘Manufacturing’

Buying New Zealand made – Jeans?

September 12th, 2010 2 comments

In my last post, I indicated that I had a side project that had chewed up a bunch of my time. As part of the Bright Ideas Challenge, my flatmate and I had been investigating the plausibility of making jeans in New Zealand. After much research and spread sheeting, we determined that it was not economically viable for us to pursue this venture.

This is not to say that it’s not viable for someone else to pursue, but in my current job as a programmer, the extra supplemental income doesn’t match what I would make by going contracting and working sixty hours a week for a bank. The hours would be the same, but with more consistent income, and without the added hassle of juggling jobs and chasing up suppliers.

Our target market was the men’s denim market at around the $140 retail per pair price point. The observant among you will note that this is approximately the price of a pair of red tab Levi’s. In order to make it worth while for both us, it would have required around the fledging company to have taken or generated around 20% of Levi’s market share in New Zealand. That’s much more difficult than it sound.

Finally – this simply isn’t our area. If you’re in fashion design and manufacturing, it might be possible to make this work, but for an accountant and a programmer, we were going to have to contract in everything, and we simply don’t have the contacts to cut the kind of deals required to make this work.

So – what did I learn?

Firstly, New Zealand suppliers are awful. In May, I gave Ross Green of Drive Technologies a hard time for his statement in a NZ Herald article where he lambasted local manufacturers for not keeping up;

“But the simple fact was we just couldn’t get the subcontractor support locally, and we couldn’t get the logistics performance locally,” he says. “Local subcontractors just didn’t understand the importance of meeting dates.”

This matched up all to well with my own experience. Almost nobody in New Zealand was willing to give quotes, talk about schedules, time frames, or anything involving numbers. Several of my calls and emails from a few weeks ago are still unanswered. One contractor said the she did not have the equipment to sew denim. I asked how many would be required to make it economic to buy the equipment – in effect, subsidising an upgrade. She was not interested in doing that as it was “too much of a hassle”. Anyone familiar with Kiwi culture may find this all too familiar.

In contrast, my discussions with overseas suppliers were much more constructive. An organic producer in Australia happily gave me a full price list with bulk discount options, and then if asked if I’d like a sample book of swatches couriered to me, even though I had stressed that we were merely at the information gathering and concept stage. That’s service.

When we purchase a good at a retail store, we pay, in part, for the convenience of not having to deal with the myriad of details that involve the supply chain. The more complications and difficulties that beset that chain, the more the final good will cost. I can’t help wondering, how much the glacial responsiveness of the New Zealand fabric and garment manufacturing industry impacts on the final price of locally made clothing.

Which brings me full circle to my original question a few months ago – if New Zealanders aren’t ready to pay workers a first world wage for common goods, how can we expect to maintain a first world lifestyle?

Outsourcing Everything

May 31st, 2010 Comments off

For the last few weeks my flatmate and I have been discussing various things such the effects of monetary policy, the Wal-Mart Effect and it’s local equivalent, The Warehouse, local manufacturing and it’s various advantages and disadvantages, tarifs, globalisation, and New Zealand’s free trade agreement with China, the 800 pound gorilla of manufacturing.

Then John Key announced the budget, and then it seemed like everyone was discussing these things. In all probability, this has been a hot topic for quite some time, and I’ve only just woken up to it now.

Previously, I was largely oblivious to wider impact of government policies. The few instances of outsourcing to IT to India that I have been privy to were so catastrophic that any future outsourcing projects were simply vetoed. At the time, it seemed that baring a large culture change in India, that my job was safe from outsourcing.

Perhaps it is, but that job does not exist in a vacuum. Unless the rest of New Zealand has a viable economy, nobody is going to have any money for my services. At a purely survival level, it is in my best interests to see that the rest of the population as well employed as I am.

So, it is with some trepidation that I read commentary in the NZ Herald by the CEOs of F&P Healthcare and Next Window.

While it’s a nice idea to think that New Zealanders are much smarter than everyone else, and that our much lauded number-eight wire mentality and ingenuity will give let us enjoy the benefits of first world living standards – without actually doing any of the work – it unfortunately does not coincide with reality.

Quite apart from the major details that a large quantity of people are simply not cut out to be ‘knowledge workers’, and that the smart people who do naturally have high mobility and therefore having this annoying habit of moving to where the pay is better – experience in the USA shows that if you do not have good native manufacturing capability, then you will burn money overseas while you struggle to bring your own countries languishing manufacturing capability up to speed. In the meantime, your company has essentially funded the training, and built the plant for it’s competitors, without even the small side benefit of keeping that money in your local economy, where it can be spent on your products.

If New Zealand wishes to halt it’s decline of quality of life, it is imperative that we rebuild our local manufacturing capability. Since New Zealand simply cannot compete on a worker for worker basis with underpaid, subsidized Chinese competition operating without substantial or equivalent worker rights and environmental controls, we must compete on other terms. In the article above, Al Monro of Next Windows says most Kiwis wouldn’t want to carry out the work of “relatively low-skilled labour, working with tweezers and soldering irons … its laborious, painstaking” to build the products of his company. Of course not. It’s the 21st century. He is talking about the kind of work that is, can be, and should be, automated. Instead of innovating, and doing things better and smarter, his company has taken the cheap way out and chosen human, rather than mechanical slave labour to carry out the monotonous industrial work.

That’s not to say that financially, that it wasn’t a good decision. Indeed – anything else may not have been an option. Right now, I doubt that there are three people in New Zealand who could competently discuss the intricacies of designing an automated production line. I suspect that more and more countries have discovered that it’s simply cheaper to hire and treat foreign labour to act like robots, rather than buying the real thing.

In the long term, this strategy isn’t good for anyone. Factory workers who have spent five years or more doing the same thing over and over again for 80 hours a week at 43 cents per hour are unlikely to transition well to being technicians where they must diagnose and repair complex machinery. The more credible reality is that Chinese labourers who are not dead from exhaustion will be simply marginalised and bypassed. If so-called-Communist China would like to know the long terms results of systematically forcing people into permanent unemployment, they could ask New Zealand. After all, we’ve been doing it for decades now.

* – I could move to Australia right now, and dollar for dollar, earn 50% more than I do now. If I factor in the exchange rate, it’s even better.