What NZ Supply Chain Business Leaders Say

5-minute read

Anticipated in the coming 12 months, the “Mid-Year 2023 New Zealand Supply Chain and Logistics Risks Outlook” reveals an increasing likelihood of encountering issues related to cyber-attacks and financial vulnerabilities.

The report, crafted by the Supply Chain Risk Analytics Network (SCRAN) at Massey University, highlights the following top five concerns on the rise:

  1. Cyber attacks, with a prevalence of 63%.
  2. Financial weaknesses, noted at 61%.
  3. Costs associated with inventory carrying, registering at 57%.
  4. Turnover of personnel within the supply chain, reported at 47%.
  5. The strength of relationships among supply chain partners, indicating 46%.

The report’s commentary also underscores potential negative effects on the business environment in the supply chain sector.

Facing staff burnout, initiatives to enhance efficiency, and cost-cutting measures simultaneously, along with memories of remote work during COVID, can result in adverse effects on the organizational culture of a company.

The combined impact of these elements has the potential to establish a demanding work atmosphere characterized by elevated stress levels, reduced motivation, and feelings of job insecurity.

Employees are likely to encounter feelings of being overwhelmed and excessively burdened, ultimately leading to diminished morale, decreased job satisfaction, and an increased likelihood of staff turnover.

Collaborative efforts and teamwork might suffer as employees concentrate on fulfilling targets and meeting deadlines, often at the expense of their personal well-being.

The trust between personnel and management could deteriorate due to the implementation of cost-saving measures, which can further contribute to a prevailing sense of apprehension and ambiguity.

“Still domestic challenges associated with empty depot capacity and berthing windows that will continue to put a strain on our supply chain and thus the risk remains, albeit something we are accustomed to managing. With challenge comes opportunities but importers and exporters are still fatigued by the ongoing and perpetual challenges in NZ.” (Comments by Industry Practitioners)

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While this might not be evident in your business, some of your supply chain partners could be grappling with similar challenges.

“Next couple of years will be very challenging for supply chain in New Zealand due to post-Covid consequences, climate change and inflation. Traders have significantly increased the price of raw material, subcomponents and finished products – minimum 40% to 100% price hike compared to 2019. Skilled labour shortage is major concern in the market, skilled human resources are moving to Australia considering better pay and lower cost of living compared to here. New Zealand should be more resilient and try to address to its economic policies to build a strong economy.” (Comments by Industry Practitioners)

However, the report notes that a decrease in demand and supply chain activity can open an opening for organizations to concentrate on elevating their supply chain performance.

During periods of low demand, companies have the opportunity to assess and enhance their supply chain procedures, streamline efficiency, and address any existing bottlenecks or inefficiencies.

This phase facilitates the optimization of operations, reduction of wastage, and augmentation of overall supply chain responsiveness.

The potential outcome is faster processes, better product availability and improved customer service.

However, when demand rises again, customers might expect more. Having experienced improved supply chain performance during the slowdown, customers may now develop higher expectations for order accuracy, on-time delivery, and overall customer experience.

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An extended economic recession can have notable repercussions on supply chains.

We have already seen a surplus of inventory and disrupted production schedules as businesses struggle with lower demand.

Suppliers could confront financial difficulties, potentially even leading to liquidations.

Companies are finding themselves forced to reduce expenditures, resulting in workforce reductions, fewer investments, and losing skilled employees.

“The future of supply chains in New Zealand over the next 6-12 months is uncertain and subject to various factors. Financial weaknesses, import and export volumes, stockouts, supply chain congestion, turnover, shipping challenges, and inventory carrying costs can all impact the supply chain dynamics. Monitoring economic indicators, government policies, global trade conditions, and industry-specific developments will provide a clearer picture of how supply chains in New Zealand might evolve during this period.” (Comments by Industry Practitioners)

An uptick in cashflow issues and postponed payments might also become foreseeable.

Additionally, an extended recession can lead to trade barriers, further complicating the landscape of global supply chains.

People not buying expensive products is already changing supply chains.

Challenges with excessive inventory and pressures related to pricing have surfaced.

“Although shipping costs may be coming down, business costs are going up. Our biggest supplier just increased prices by 20-25%. Several domestic customers have become slow to pay.” (Comments by Industry Practitioners)

Supply chains have had to adjust to shifting consumer preferences and prevailing economic circumstances to handle this situation effectively.

On a good note, the survey also reveals that over 70% of participants expect supply chains to operate with somewhat greater efficiency in the forthcoming period.

“The supply chain seems to be returning some kind of normality, at least in the port environment. This is largely driven by better vessel schedule reliability and more vessels arriving on proforma schedule. Less noise and last-minute changes, improved planning reliability and less re-planning.” (Comments by Industry Practitioners)

Only an insignificant percentage foresees the opposite extreme, where supply chains would deteriorate far worse than their current state.

Source: New Zealand Supply Chain and Logistics Risks Mid-year Outlook for 2023, July 2023, Massey University and the New Zealand Shipping Gazette

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