Major challenges facing New Zealand’s freight and
supply chain system are laid out in a paper released today
for public consultation.
The government paper says
we’re unlikely to return to a pre-pandemic working
environment, and suggests various solutions such as a
low-emissions freight transport system. Meanwhile, the
nation’s current supply chain problems are predicted
to worsen, given lockdowns in China and their
effect on Shanghai’s supply systems in
particular.
The SMC asked experts to comment on the
paper.
Professor Tava Olsen, University of Auckland
Business School, comments:
“The government issues
paper is a comprehensive piece of work and has done an
excellent job of explaining the current situation and
challenges.
“However, it does have some significant
flaws when it talks about strategy going forward. For
example, it makes frequent reference to “our supply
chain” but NZ doesn’t have one supply chain – it has
many. And supply chains are, by definition, heterogeneous.
Indeed, learning how to target the right supply chain
strategy for a given product is ‘Supply Chain
101’.
“A country-wide one-size-fits-all strategy
independent of product type seems destined to fail. In
particular, there is usually a trade-off between
productivity and resilience, yet the proposed strategy seeks
both with no acknowledgement of this trade-off.
“The
paper outlines the roles of government, which are all OK as
written, but it does not acknowledge that if we want
commercial enterprises to invest in resilience, then
government will need to play a role in that as well. To
re-rebrand lean supply chains as ‘just-in-time’ does not
change the fact that lean is cost-efficient.
“The
paper explicitly suggests “building surplus capacity” to
improve resilience – this may well be warranted for areas
of strategic importance to the country, but the government
is going to have to put forward investment if it wants it to
occur – which is nowhere acknowledged in the paper that I
can see.”
No conflict of interest
declared.
Dr Bill Wang, Senior Lecturer in Supply
Chain Management, Auckland University of Technology (AUT)
Business School, comments:
“This paper is good to
focus on low emissions, resilience, productivity and
innovation, and equity and safety, but it overlooks the
international freight and supply chain challenges. New
Zealand heavily relies on international trade, so this paper
should not confine itself to the domestic issues. Even so,
the four main areas of focus should be in a better balance
rather than simply a parallel listing – their priority
should be made clear.”
What are the likely
implications of China’s COVID-19 crisis for NZ’s supply
chains?
“China is our largest trading partner and
contributes the biggest trade surplus for us, with two-way
trade (exports and imports of goods and services) exceeding
NZ$33 billion. The COVID-19 pandemic is putting global
supply chains under intense pressure and disrupting trade.
Thus, it is significant for NZ to work with China to keep
the physical flow efficient and
effective.
“China’s Covid crisis has been badly
affecting NZ’s supply chains since 2020, e.g. causing
shortage of the supply, increasing the lead time from
production, transition, and through to delivery (partly
because of the low efficiency in the ports in NZ). The
situation will continue for a while because China adopts a
cautious conservative policy to control Covid. The
improvement needs efforts from both China and NZ, influenced
by the updated restrictions and policies on Covid around the
world.
“In my view, the worst thing is that the
Covid crisis has significantly damaged our confidence on
globalisation, and the global supply chain, including the
China-NZ supply chain. Businesses are seeking local,
regional cooperation, but I am positive about globalisation
and would like to think it is a kind of spirally-rising
self-restoration and development opportunity. Consequently,
the global supply chain will improve its resilience to
manage bigger challenges in the future.
“Lastly, we
should have confidence in the NZ-China supply chain recovery
capacity. Both parties, especially China, have experts,
advanced technology, infrastructure, and mature supply chain
management systems. China has regarded NZ as one of the most
friendly and reliable trading partners in the Five Eyes and
in the world, so this is our advantage.”
No
conflict of interest declared.
Dr John de Pont,
Director, TERNZ Transport Research Ltd,
comments:
“The table showing “How goods are moved
into, out of, and around New Zealand” is somewhat
misleading. The percentages by transport mode are based on
tonnes of freight moved and do not take into account the
distances travelled. If, instead, we consider tonne-kms of
freight, the
figures for 2017/18 show 75.1% by road, 13.4%
by coastal shipping and 11.5% by rail. The reason for the
large differences is that road freight movements include
large numbers of local deliveries with short travel
distances while rail and coastal shipping are primarily used
for longer distance trips.
“If we are concerned with
reducing the environmental impact of freight movements, then
tonne kms is more relevant than tonnes. With current
technologies both rail and coastal shipping are less
carbon-intensive than road. For long-distance freight,
decarbonising rail through electrification is already
partially in place and is widely-used
internationally.
“Electrification of the
long-distance road vehicle fleet is challenging. Batteries
are heavy and therefore reduce payload capacity, i.e., more
trips will be required, while green hydrogen is only about
30% efficient. For short trips such as local deliveries,
road transport is usually the only option, but
electrification of these vehicles is achievable because
their daily travel distances are modest.
“Currently
road transport has the largest market share even though it
has the worst emissions performance. This is primarily
because of its efficiency, reliability, and relatively low
cost. For most freight tasks, using the other modes (rail or
coastal shipping) requires a road transport connection at
one or both ends of the trip. The costs of these modal
transfers means that only quite long rail or coastal
shipping legs are economically viable. Exceptions do occur
when no truck trip is required, such as container movements
by rail from the Port of Auckland to their inland port
facility in Wiri.
“Improving the efficiency and
reducing the cost of modal transfers would make shorter
distance freight movements by rail and coastal shipping more
economically viable. The Ministry of Transport proposal in
part 4 of the issues paper does talk about improving modal
options including rail and coastal shipping but does not
explicitly consider inter-modal transfers.”
No
conflict of interest declared. Note: TERNZ
is an independent research organisation
that specialises in transport-related issues.
Dr
Mesbahuddin Chowdhury, Senior Lecturer of Operations and
Supply Chain Management, UC Business School, University of
Canterbury, comments:
“I think this is a very good
initiative by government to address the climate change issue
of the existing logistics and supply chain system of NZ. In
particular, the government’s aim to achieve net zero
emissions by 2050 is an ideal target. Building resilience of
logistics system through decarbonisation is also a good
initiative.
“I hope the government will provide a
clearer plan how to achieve these targets. I think these
initiatives are one way to look at the current supply chain
problems caused by this pandemic from a long-term
perspective. However, some of the other key challenges for
the global supply chain during this pandemic time are to
find alternative supply sourcing, alternative distribution
channels, to enhance the visibility of supply chains so that
firms can rapidly assess any disruptive situation, and most
importantly how to make the supply chain short (from global
sourcing to local/regional sourcing). I hope the government
will pay attention to how these issues can be addressed
gradually in the NZ context. Otherwise, building a
resilience supply chain will be a difficult task in future
if another novel pandemic hits this world.
What are
the likely implications of China’s COVID-19 crisis for
NZ’s supply chains?
“It is obvious that China’s
new lockdown will create a stress on NZ supply chains as we
are highly dependent on China. We have seen this issue in
2020 when lockdowns in China created a chaotic environment
for many countries across the globe. Reducing dependency on
China is a way to address this problem but certainly not all
countries across the globe are able to do that, except the
USA. For example, the USA aims to get China out of their
supply chain. This is a recent initiative taken by the Biden
administration to reduce their dependency on China.
Replicating this strategy may not be feasible for NZ
considering the amount of existing businesses, but NZ may
need to think of alternative sourcing in the coming
days.”
No conflict of interest
declared.
Our aim is to promote accurate, evidence-based reporting on science and technology by helping the media work more closely with the scientific community.
The Science Media Centre is New Zealand’s only trusted, independent source of information for the media on all issues related to science. Thousands of news stories providing context from and quoting New Zealand researchers have been published as a direct result of our work.
