While optimism grows that the Omicron wave may signal a
diminishing public health impact of COVID-19, a swift return
to pre-pandemic normality for New Zealand’s supply chains
remains far from certain as global conflict and rising
inflation threaten to further weaken its already damaged
links.
From farmed produce to building supplies,
consumers here have seen prices and availability trend
rapidly in opposite directions. As a small country that
relies heavily on importing manufactured goods, JLL NZ
Supply Chain Director, Mike DeDera, says New Zealand’s
current challenges are largely due to the ‘butterfly
effect’ of global supply.
“Global labour issues
induced by the pandemic first created the initial shortfall
and then the ongoing deficit in the raw goods at the
beginning of the supply chain, resulting in smaller
manufacturing runs and fewer products for distribution.
Then, with the cost and priority of freight indexed to
volume, this initial shortage has impacted on shipping and
ultimately created insufficient supply to meet demand here
at the far end of the distribution network.”
Mike
DeDera
DeDera says that although we
can’t control what happens at the start of the chain,
there are changes that we can look to make at our end that
can ensure we’re better prepared to respond to the
challenge of global events.
“Like most countries
around the world, New Zealand has operated on a
‘Just-in-time’ inventory model, whereby businesses save
on storage and running costs by operating lean stock levels
in small warehouses. This model relies on all links in the
supply chain running harmoniously. Therefore, given the
ongoing disruption, businesses around the world are
increasingly moving towards a new model known as
‘Just-in-case.’”
The Just-in-case model
is a way for businesses to reduce their exposure to
international shipping price increases and delays by
increasing their inventory through larger, but fewer
shipments.
“In a market where ocean shipping prices
have risen more than 10 times over, there is plenty of
incentive for businesses to change model,” says
DeDera.
“While this will mean finding greater
storage space within an already tight industrial property
market, the additional warehouse rental expense can often be
underwritten by the tens of thousands in savings made from
an improved logistics network.”
In reviewing their
current operating strategy, business today shouldn’t be
using the opportunity to just make their supply chain more
efficient, but more energy-efficient too, says
DeDera.
“Questions business leaders should be asking
themselves right now include: Are we working with green
carriers and suppliers who use sustainable vehicles for
deliveries? Do we know what our carriers’ and suppliers’
sustainability strategies are and do they correlate with our
own? Do we use electric forklifts instead of gas? Are our
warehouses optimised for sustainability? And if not, should
we retrofit or consider moving?”
“And instead of
asking ‘when will things go back to normal?’, businesses
should be asking themselves ‘how prepared are we if things
stay this way for another two years?’”
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About JLL
JLL (NYSE: JLL) is a leading
professional services firm that specialises in real estate
and investment management. JLL shapes the future of real
estate for a better world by using the most advanced
technology to create rewarding opportunities, amazing spaces
and sustainable real estate solutions for our clients, our
people and our communities. JLL is a Fortune 500 company
with annual revenue of $16.6 billion, operations in over 80
countries and a global workforce of more than 91,000 as of
31 December 2020. JLL is the brand name, and a registered
trademark, of Jones Lang LaSalle Incorporated. For further
information, visit jll.com.
