New Zealand‘s first national freight and supply chain strategy: a lot of work to do

Te Manatu - Waka The Ministry of Transport knows that there are longer term supply chain issues which government has a role in addressing, and that is why the Ministry has been progressing a national freight and supply chain strategy. Photos: Stock images

BY HARRIET SHELTON AND LIAM FECHNEY

IT FEELS SLIGHTLY LIKE déjà vu one year after my last article on supply chain congestion: ships are still queuing outside congested ports, container yards are at or over capacity, and transport and storage costs are still surging. While specific challenges are continually changing as congestion hotspots around the world pop up and down, I think a key difference from 2021 is a greater understanding of the global system’s vulnerabilities amongst freight and supply chain participants. Many of the companies we regularly talk to are reviewing their sourcing, shipping early in anticipation of delays, and holding higher inventory to deal with disruption.

In last year’s article, this was exactly the sort of short- and medium-term planning that I said would, and should be, market led, and to date it largely has been. But we know that there are longer term issues which government has a role in addressing, and that is why the Te Manatu - Waka Ministry of Transport has been progressing a national freight and supply chain strategy. On April 20 this year, we released a paper presenting a view of supply chain issues and opportunities for public consultation. Over the next few months, we will continue to engage with stakeholders and our Treaty partners through focus groups and workshops to identify ideas and options that will set the freight sector and supply chain up for success over a 30-year horizon. This work will culminate in a draft strategy, the first version of which will be ready for the Minister of Transport and Cabinet to consider around the end of this year.

The feedback we have received so far has been generally positive. We are seeing a wide span of perspectives about how involved government should be in the supply chain system, ranging from laissez-faire (free market) to a more interventionist approach. Our view is that the Government’s role lies somewhere in between. We have a key role to play as a regulator, as an investor in infrastructure, and in representing the broader public interest. An important aim of the national freight and supply chain strategy is to produce a shared system-wide view and to introduce a wider context, within which individual companies will be able to continue making decisions that are good for them and also good for the country.

Our four focus areas are reducing emissions, productivity, resilience, and equity and safety. Given that many of the issues we are examining through the strategy are of national and global importance, failing to take a whole-of-system approach would risk locking in suboptimal transport investment. Even if the Government’s only role was to fund major infrastructure works, we would still need a nationwide strategy to tell us where they should be located to deliver benefits to the entire country, and to allow businesses to plan their own investment efficiently around the future transport network.

One of the key challenges identified in the issues paper is how to lower emissions from the freight transport sector in order to avoid the worst impacts of climate change. The recently released SeaRise tool highlights the importance of shifting our transport sector to net zero emissions by 2050, with key transport infrastructure such as our ports facing acute effects of sea level rise in the not-too-distant future. Our engagement to date with stakeholders and the public through the strategy work and Emissions Reduction Plan (ERP) consultation has highlighted widespread ambition for more action and for urgent progress on decarbonising the transport sector including heavy freight. The change in the sector will have to be dramatic because the consequences of doing too little or nothing will be even more pronounced.

Achieving the ERP target of reducing freight emissions by 35 per cent by 2035 will take a coordinated effort across the sector combining infrastructure provision, regulation, and driving operational change within the industry. Government action alone cannot achieve the emissions reductions necessary, but we are developing tools to help support freight sector businesses in the transition to net zero by 2050. We will keep working on the commercial availability of zero emission medium and heavy trucks, investment in restoring the national rail network, and investment in the coastal shipping sector. These are all opportunities to reduce the emissions intensity of our current transport network and we’re keen to work with industry to understand how the transport network could evolve to further reduce its emissions.

As a small remote country at the very end of international supply chains, we know that New Zealand businesses need to be highly productive and innovative to compete on the international stage. However, as our issues paper outlines, our relatively low labour productivity and a lack of robust data collection and sharing across our supply chains can hamper the ability of many local companies to be internationally competitive.

Skills and labour shortages, variable productivity and an ageing workforce are not unique to the freight industry, so these issues may need to be tackled in conjunction with other sectors. Automation brings opportunities, even alleviating some labour supply issues, but could also create a threat to existing workforces if not well managed. While choices about workforce composition, renumeration and development will always fall mostly to the market, government does need to ensure that our regulations and funding of work training programmes are fit for purpose in the context of a changing work environment.

Improving data availability and consistency across our supply chains has real potential to reduce uncertainty, increase the flexibility to choose between different freight operators and modes, and simplify regulatory compliance. There is a role for government, in partnership with industry, to set data standards that allow different information systems to talk to each other seamlessly, which would facilitate the data availability that would otherwise take significant time to develop organically.

Over the past few years, we have seen the impacts of a freight system with very little slack in the face of disruption. Very few people would have predicted a global pandemic three years ago, yet the consequences have been enormous and much more significant than anyone expected at the outset. It highlights the importance of considering more than just the “expected and understood” events like natural disasters when we examine supply chain disruption. The national freight and supply chain strategy is deliberately taking a long-term systems view, rather than being a response to the pandemic specifically.

It has been well-documented that the nature of very lean, “just-in-time” supply chains means they are more vulnerable to disruption. The public expectation is that critical goods, such as food and medicine, should always have reliable supply at a reasonable cost. We need to explore how this resilience can be built in, given that supply chains are not homogenous and there is no single silver bullet. There is a price to pay for resilience and response, whether that is the costs of disruption or the costs of building in greater resilience (through infrastructure, inventory, etc).

We also want to work towards a system where every person in the transport sector, whether they are a stevedore, a truck driver, or a logistics manager, is safe at work and is part of a productive and valued workforce. We also need to ensure that every business and person can access the freight opportunities they need in order to thrive. As highlighted by recent events at the ports, and the Road to Zero work across transport agencies, New Zealand has a long way to go when it comes to minimising harm in the transport system. It needs to be a collective effort.

Accessing freight is also an important consideration. Many of our primary industries are located rurally, with limited access to different freight modes, routes and even operators. There may be opportunities to provide smarter options, especially in regions which have historically faced underinvestment in transport.

We want to pay particular attention to regional economic development and to explore with our Treaty partners the ways in which the freight system can better support the Ma -ori economy to develop and flourish.

The issues paper is very much a starting point for the work we are doing on the strategy; its aim is to provoke discussion. There are many complex issues to tackle, some of which might not be front of mind right now but will become more important in the future, and so we need to start preparing now. We believe there are many things we can do in the medium and longer term to ensure that New Zealand is better positioned for the future. Moving to a lower emissions freight sector will most likely make us more resilient and productive as well. Addressing safety could also improve productivity and efficiency. New Zealand’s first ever freight and supply chain strategy will be an opportunity to set ourselves up for the future so we are ready to capitalise on whatever changes are round the corner. We’re looking forward to working closely with industry, academics, logistics professionals, and the public as we develop the draft strategy throughout the rest of this year.

Harriet Shelton Harriet has worked in transport planning and policy for over 20 years, mostly within local government, and recently made the move to central government. In her current role at the Ministry of Transport, Harriet leads a policy team focussing on strategic freight and supply chain issues including rail, ports, and shipping.

Liam Fechney After completing a Bachelor of Commerce in Management at the University of Canterbury, Liam briefly worked in supply chain management for an international SME before joining the supply chain team at the Ministry of Transport. He was involved in the transport COVID-19 response, monitoring and responding to supply chain congestion issues, and is currently working on the productivity workstream of the strategy.