Supply chain troubles arecosting New Zealand businesses $1.7 billion in lost revenue a year, new research shows.
Supply chain consultancy group TMX Global found delays caused by strict Covid-19 restrictions and lockdowns, the war in Ukraine, and climate change, had significantly impacted the private sector.
The New Zealand economy is worth $360 billion and with supply chain unreliability costing companies on average 0.47% in lost revenue, TMX estimated $1.69b a year in sales were lost.
Supply chain disruption reached crunch levels in 2021, with shipping containers and ships stuck in logjams in ports around the country. Some container ships sat lined Waitemata Harbour for weeks at a time waiting to get into Ports of Auckland.
The availability of consumer goods was significantly affected, creating widespread shortages from frozen food to wine and chocolate.
While shipping, freight and logistical disruption had largely subsided, the costs for these services remained at sky-high levels.
Shipping prices have increased more than six-fold, from $800 per container pre-Covid-19 pandemic to between $5000 add $6000, according to the Ministry of Foreign Affairs and Trade.
The Government last year announced an investigation into supply chain disruption, and the Productivity Commission inquiry, is expected to identify ways to enhance the resilience of the economy which is reliant on foreign factors.
TMX Global NZ general manager Caleb Nicolson said New Zealand was more exposed to global supply chain troubles than most other developed nations.
The country had faced disruption at each stage of the supply chain including production, transportation and distribution in recent years, he said.
“New Zealand is an export nation with a reputation for premium lamb, beef, milk powder, logs and other commodities.
“We also import a large proportion of our vehicles and machinery as well as retail goods, making us particularly vulnerable to higher transportation costs and longer delays when there are supply chain bottlenecks in our source markets,” said Nicolson.
“Compounding these challenges is that New Zealand is also facing a shortage of workers with negative net migration flows – the lowest in nine years – which are placing increased pressure on costs.”David Meagher, owner of Sal Rose Italian Restaurant assesses flood damage.Play VideoSUPPLIEDDavid Meagher, owner of Sal Rose Italian Restaurant assesses flood damage.
No industry had been immune to supply chain disruption faced in recent years.
In November McDonald’s was forced to limit orange juice sales to breakfast only as it grappled with the effects of Covid on the domestic harvesting season and an international shortage of orange juice, and earlier last year KFC was forced to restrict the use of lettuce because of similar supply chain disruption.
Nicolson said supply chains were finally balanced but disruption from Covid-19 and how people reacted to that had caused lost revenue for local firms to swell.
Port delays because of congestion at both origin and destination ports as well as container ships missing certain ports, and businesses having to foot the bill for road transportation had all contributed.
Nicolson warned that further supply chain delays and disruption were likely this year given the geopolitical uncertainty. However, he said he was hopeful in 24 month it would be in a much better position.
By the end of the year he expected reliability of international flows to have resolved.
He said the war in Ukraine had affected Europe significantly, which had in turn impacted some New Zealand exporters.
“The other narrative I think that is coming our way is the climate reality. We’ve all had that on our radar, but we need to take the microscope and completely apply it with the recent weather pattern we have had.
“There is a lot of narrative in New Zealand around the roads, and when you bring that back to supply chain you can have major road disruption.
Retail NZ chief executive Greg Harford said retailers had been significantly affected by supply chain disruption ever since the start of the Covid-19 pandemic in early 2020.
This had forced them to look at alternative products and sources of product to keep shelves stocked and there had sometimes been long delays getting products to customers, Harford said.
“While there have recently been some improvements, international supply chains continue to be disrupted, and there are additional issues arising from the war in Ukraine.”
Retail NZ’s latest Retail Radar survey showed freight costs were continuing to increase, and was a driver of price inflation.
Global political instability, including the Ukraine War and tensions in East Asia, meant there was uncertainty about how supply chains would be impacted in the year, he said.