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Forging a new future … What changes ahead for HB economy?

HB Recovery

Keith Newman23 July 2020

As published in July/August BayBuzz magazine

Fortitude, determination and time will be required for Hawke’s Bay businesses to recover and refocus after being smacked over by circumstances beyond their control during the New Zealand and global lockdown.

It’s been an unsettling and disruptive time and while the mist is clearing there’s a collective sense of uncharted waters ahead and the need to prepare for a prolonged period of uncertainty.

Businesses, and by implication the region, had to make difficult decisions more rapidly than ever and now face a unique opportunity to re-position with new strategies, supercharged leadership and tools, including automation, e-commerce and smart technologies.

For those who hadn’t already subscribed to the digital age of more open and fluid communication, the Covid lockdown surely signals the close of the industrial age and with it the era of dense box-ticking bureaucracy.

The Hawke’s Bay Regional Recovery Plan is supposed to deliver a big bright inclusive Hawke’s Bay vision, based on collaboration between the region’s five councils, iwi, businesses and government agencies.

While each council will continue to do their own thing, ‘the Plan’aims to grow jobs, increase household incomes and raise our economic performance.

Daunting task ahead

The task of charting the course ahead for business and regional recovery is daunting. We’re only just beginning to steel ourselves for the inevitable fallout and how to get beyond mere survival.

We’re frequently told we’re more fortunate than other regions because of our baseline primary sector performance; however some farmers received a double portion of misery with drought on top of the slowdown, which will reduce cashflow across the region.

Social distancing took a big toll on traditional customer-facing outlets, impacting their capacity to serve and slowing production cycles and productivity from kitchens to manufacturing, orchards and farms to all kinds of food processing.

Early predictions by Infometrics suggest total regional earnings will plummet by around $380 million for the year, with 7,000 of our 83,600 jobs lost. That might prove conservative when job support grants and industry assistance wear thin.

The analytics firm, commissioned by BusinessHB, expected a 6.2% decline in GDP compared to 8% nationally, but agreed we were in for a rough ride, with senior economist Rob Heyes saying local leadership will be essential for recovery.

BusinessHB chief executive, Carolyn Neville, and the various partners at the HB Business Hub who rallied to support regional businesses, were inundated with inquiries around strengthening digital capability, downsizing, restructuring and realigning for changed circumstances.

Every business was reeling from the impact with “heart, guts and passion on display,” said Neville, as we came to terms with Level 2 and beyond. 

For now, there’s a cushioning effect from Budget 2020 with a $4 billion business support package, $3 billion for ‘shovel ready’ projects, and $10 million for small-to-medium businesses to improve e-commerce capabilities.

Increased support for research and development (R&D) was factored in along with short-term government loans to help new businesses plan, and $216 million for New Zealand Trade & Enterprise to expand its support, specifically for digital services.

Stay close to customers

Business advice from Hamish Whyte, managing director of Furnware, is be cautious and optimistic, keep cash tight, get to know your customers better and “go deeper in a more empathetic rather than in a sales or business way”.

For him that means treating customers as partners and looking for ways to help each other; “everyone’s in this together and that’s the way to build great businesses”.

Whyte says Hawke’s Bay businesses should look at the health of their distribution and supply channels and let their customers know as clearly as they can ‘we’re still here’. “In many parts of the world business will not return to the way it was.”

Furnware is now reconsidering its international strategy and struggling to get up to capacity after facing “a fair bit of grief” particularly as its South East Asia market for educational furniture was decimated, down 80% on the previous year.

With over 75 years’ experience, Furnware now runs five welding robots at its Hastings production line, and Resero its parent company recently acquired another furniture manufacturer in Sydney employing 100 people.

Whyte agrees it’s time to rethink the role of robotics and automation, work smarter and make better use of the communications tools to reduce travel. “There’s always opportunity even when the world’s falling apart, but of course you also have to make sure you get paid.”

“We’re an optimistic company…we’re always half full … right now there are so many paradigms you can’t control … the whole global market is very reactive,” says Whyte.

As for Hawke’s Bay, he reckons we need to step up our profile and be more confident of our products and the New Zealand brand. “Maybe we need to be a bit more aggressive … stand a bit taller… go out and be more authentic … and just push.”

CBDs remain hopeful

Our central business districts, already struggling to compete with online commerce and being redesigned to attract more foot traffic, will likely see more ‘For lease’ signs up before the spark of revival shines.

Anita Alder, general manager of Hastings City Business Association, says Covid-19 was tough on all 500 businesses it represents. In the CBD some are down and out, some are downsizing and others changing ownership.

Two buildings were leased, including a Ministry of Social Development call centre that will employ about 80 people focussed on job opportunities.

The Common Room pub underwent a refurbishment and initiated a collaborative promotional approach with other East Side Heretaunga St businesses, but all eyes are the Tribune development, other Hastings developments and growth plans, and the council-funded CBD recovery strategy which kicked off in July.

“Many of our local retailers are seeing positive returns from including online sales,” says Alder who remains “focussed and optimistic”.

Napier City Business manager Pip Thompson says about five businesses closed, including national chains, while others decided to operate online from home.

Many engaged with e-commerce and alternative offerings to survive. Thompson says an important lesson from lockdown was the importance of maintaining a shopfront presence.  “Human interactions are vitally important for our health and wellbeing.”

She insists business is booming with the ‘buy local’ commitment making a difference. “Shoppers have gone hard and fast since lockdown lifted”. The question is, will this sustain or are we just seeing a burst of pent-up ‘relief’ spending as lockdown has ended?

A Napier City Council campaign to restore vibrancy back to the main streets will aim to further boost the ‘buy local’ spirit.

Food always sells

The supermarket chains, considered ‘essential services’, experienced consistent Christmas-level sales and often had to advertise for staff to keep their shelves stocked.

Some product shortages were evident early on as supply chain issues were sorted out, with some traditional suppliers and transport and logistics firms not considered essential and warehouses backing up.

Although smaller suppliers, butchers, bakers, some greengrocers and the majority of retailers had to close during Level 4, the adaptive ones compensated with online ordering and home deliveries.

Boutique suppliers and a selection of Sunday Farmers Market artisans created a collaborative approach to online sales. Holly Bacon became Holly Fresh, offering complementary meat, dairy products, fresh fruit and vegetables in a move owner Claire Vogtherr and others believe will continue to create demand.

She used her customer database to upscale from 30 products to 150 immediately and remains surprised at how many businesses don’t know how to keep in touch with customers if they’re not coming through the door.

The pressure eased when fast food outlets opened in Level 3 and we showed just how addicted we were to McFood, with cars lined up around the block for drive-in and then socially-distanced dine-in’s.

Agri-automation

The horticultural sector was in peak export season during lockdown, although social distancing in the field, packhouses and meat processing reduced output in some cases to about 65% of capacity.

Tasks were redesigned so workers weren’t so close together and the spotlight was shone on automation, robotics, artificial intelligence (AI), computer vision and the uncertain future of the Recognised Seasonal Workers Scheme (RSE).

In the past, the main drivers have included health and safety and reducing repetitive tasks, but staffing issues and pressure to perform added new incentives for automation, particularly in the horticultural sector.

Peter Richards, managing director of Hastings-based CR Automation, says big players like Turners & Growers, FreshCo, Freshmax, and Mr Apple are continually looking at their processes to prepare for a ramped-up growing and processing environment.

CR Automation, delivering automated and robotic processes for Heinz Watties among others, is one of the suppliers to the new Taylor Corp packhouse south of Napier, which Richards believes is one of the most advanced in the world.

He’s provided three self-driving forklifts to Kelvin Taylor at Taylor Corp. “He’s is the first cab off the rank and a lot of people will be watching what he does. He’s got robot palletisers, automatic guided vehicles and pallet scanning to reduce the amount of labour getting off and on and around forklifts”.

Richards says automation is one way to provide resilience at a time when Agriculture minister Damian O’Connor is trying hard to clamp down on the RSE labour forces, leaving “growers and packhouses very exposed”.

While grape-picking machines are becoming mainstream, Richards says apple harvesting is also evolving, with Turners & Growers, for example, working with kit from the US that uses computer vision technology.

That requires a change in planting techniques to a 2D format with apples trained on vines with less foliage so automation can more readily identify and pluck the fruit, doing away with the use of ladders.

The race to keep pace with increased production across a range of industries requires a constant supply of pallets so CRA in conjunction with Tumu Timbers is now delivering its second Rambo, rapid-fire robotic pallet producer.

The first delivered three years ago and trebled Tumu’s output, although someone still needs to feed timber into the system and replace the nails in the guns.

The virtual world

During the Covid containment our technological dependence was evident across all sectors.

All but daily newspapers closed, and major magazine titles were lost.

The web and social media became the go-to places for news, Covid updates and the latest conspiracy theories. Streaming media, online learning and video conferencing technology sent Internet consumption on an exponential gigabyte curve.

That included a huge surge in the use of Zoom, Skype and Microsoft Team collaborative and conferencing software for councils, real estate companies and businesses for decision-making and staying in touch with staff and customers.

Local software developers mostly carried on as usual with Sportsground and WebFox releasing their own Covid contact tracing apps around the country before the Government got into the game.

Many businesses who hadn’t taken the time to embrace e-commerce capability either stepped up during the Covid lockdown or realised they needed help to make that transition.

Webfox director and developer James Simmonds says “get around to it one day” is here, and those struggling with ‘how to’ or affordability questions are being thrown a lifeline.

Webfox has signed up to help businesses take their existing processes and services online through Hawke’s Bay Regional Business Partners ‘digital enablement’ programme, which offers funding and resources to get people up to speed.

Workshops are offered to determine what can be done to automatically plug components into Xero or some other system. “They don’t have to understand all the technology just tell us the end result they want,” says Simmonds.

Generally, things are a lot simpler than they were a few years ago. Most software has an application programming interface (API) to communicate with, and automated processes “to do the heavy lifting behind the scenes”.

Part of that might be connecting an inventory system into point of sale systems, and then sucking everything through into a website.

And he says there’s a whole virtual marketing side including the use of social media.

“We’re all geeks and love using new technology to solve problems,” says Simmonds. Even if there aren’t standardised approaches, he assures “there’s always some kind of work around or technique to get the job done.”

Couriers cream it

NZ Post-owned CourierPost was only starting to get through the 150,000 parcels accumulated at its warehouses by the end of May, while concurrently dealing with 300,000 new parcels a day.

Aramex New Zealand (formerly Fastway Couriers) expected demand to stay high for months and was scaling up with courier franchisee recruitment and Blu Couriers, a new crowd-sourcing Uber-style platform.

Zane Townshend, Aramex Hawke’s Bay and Gisborne regional manager, says the initial impact of Covid-19 played havoc. During Level 4, business dropped back to nothing but by level 3 it was bigger than Christmas.

“Christmas, Black Friday and Cyber Monday are peak times for us and recent levels far surpassed those volumes to the point that it was almost impossible for us and other courier companies to keep up with the backload.”

Townshend called up friends and family to man the vehicles and help sort the parcels. A big part of the demand was orders from supermarkets, pharmacies and other outlets that had an on-line presence.

Based on the current demand and international trends he believes demand will continue based largely on new habits of online purchasing encouraged by the Covid-19 lockdown.

Training for the future

The job market is in huge disarray, with “massive change and upheaval” in the working lives of New Zealanders. The high level of uncertainty means many employers have little appetite for hiring full-time workers. And many are still sorting out office versus work-at-home arrangements.

Donna Lynch, general manager of employment agency AWF, says in an uncertain environment, while the market adjusts, the trend is toward contract work, plus existing employees retraining and possibly taking on jobs they’ve not previously done.

Budget boosters for employment include the $1.6 billion Trades and Apprentice Package for people of all ages; $50 million for Maori Apprentice and Trades Training and a $320 million Targeted Training and Apprenticeship Fund to subside student fees and courses.

How much of that makes it into the region is yet to be seen, but the bulk favours construction, manufacturing and primary industries.

Science and technology are notably absent and yet all the evidence points to technology being the enabler of efficiency and creative differentiation in just about every industry.

Luke Irving, chief executive of Havelock North-based Fingermark, says Hawke’s Bay needs to decide whether it is serious about supporting innovation and moving with the hi-tech times.

Instead of tinkering around the edges, he says we should be backing ourselves and “going deep” with technologies that will really matter to Hawke’s Bay and the global market in 3-5 years.

He says EIT needs to be empowered to home in on degrees in robotics, computer vision and deep learning which can be applied in horticulture, agritech and retail, rather than mainstream computer coding which can be studied anywhere.

“We’re going to need optimisation and efficiency through all industries, especially if they’re going to struggle in the next 3-5-years.”

Fingermark, produces AI-based solutions to streamline ordering and customer service for some of the world’s largest fast food chains and has previously offered to help move this region forward.

Irving’s original vision was to help fund a hi-tech laboratory in Hastings in the midst of a Heretaunga Plains vineyard to focus on leading edge technologies and assist next level of computer science students.

EIT, international companies and philanthropists were on board, and while local councils liked the idea, the project ran afoul of rules designed to protect irreplaceable, high value productive land.

He claims Fingermark planned to double or triple its local computer vision team through the proposed development base, which would have attracted talent from overseas and helped EIT develop in those areas.

“Maybe I was a couple of years too early? We still might re-approach it and rebuild the idea.”

Recovery requires resilience

Where does this leave us? From dozens of interviews with HB business leaders, it all comes down to these principles:

  1. Stay closely in tune with suppliers and customers.
  2. Embrace the new tools of the digital age, from online marketing to robotics.
  3. Differentiate, add value, tell your story.
  4. Identify and eliminate obstacles to new ideas and creativity.
  5. Collaborate, cooperate and communicate.

Seems like prudent advice – not just for pandemic recovery, but for any season or business cycle.

Lead photo: Zane Townshend, Aramex. Photo: Tom Allan.

More BayBuzz articles

 

Keith Newman23 July 2020

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