04. Supply Chain Disruption

Supply Chain Disruption

The Bullwhip Effect.

The Supply Chain has been profoundly impacted by COVID-19. The ability to procure raw materials, transportation restrictions and manufacturing impacts, combined with downward price pressure has resulted in the ‘bullwhip effect’.

This is where small changes at one end of the chain turn into big ripples at other Supply Chain layers. The previous twelve months has seen significant changes turning into insurmountable obstacles.

We’ve seen artificially low freight prices in play for several years, now real pricing is being implemented and impacting the ability of goods and services to be released in the market.

Customs Brokers and Freight Forwarders Federation of New Zealand, Rosemarie Dawson confirms, “In December 2020, freight costs soared by 289%.”

The severe lack of freight capacity has positioned New Zealand importers and exporters in direct competition with global companies for freight. Empty containers leaving New Zealand are now worth more to these companies than ones filled with our produce.

The end of JIT methodology.

For decades Supply Chains have been changing to adopt a JIT methodology; delivering goods when needed - designed to save time, money and storage.

However, with COVID-19 breaking several links in this chain, we may be looking at the end of this model as New Zealand deals with the business impacts of this approach.

New Zealand businesses have few levers left at their disposal, and manufacturing businesses especially face the reality of losing market share, incurring debt and encountering adverse employment outcomes.

This less-than-ideal Supply Chain environment is likely to hamper New Zealand’s export-led recovery.

The importance of retaining talent.

These cumulative impacts have meant New Zealand businesses have recognised the undeniable value of the Supply Chain.

With business plans and strategies that were delayed due to the pandemic now being implemented, we’re seeing new jobs being created – adding to the talent shortages in the sector. We note that contract roles have become a way to fill this void.

The shortage of talent can be attributed at least in part, to the previous lack of investment in Supply Chain training and education. This means retaining talent is more important than ever, and we’re seeing considerable investment from businesses into their teams through training, remuneration and career progression.