Disruptions to Supply Chains Cost Firms More than $1.5 Billion Yearly

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Disruptions to Supply Chains Cost Firms More than $1.5 Billion Yearly
Analysis by consultancy firm TMX Global has estimated that supply chain disruptions are costing New Zealand businesses $1.69bn a year in sales.

Analysis by consultancy firm TMX Global has estimated that supply chain disruptions are costing New Zealand businesses $1.69bn a year in sales.

It noted that New Zealand is more exposed to global supply chain challenges compared to other nations due to its reliance on imports for machinery and logistics vehicles, resultinging in billions of dollars of lost sales.

TMX Global NZ general manager Caleb Nicolson said: “As the world emerges from Covid-induced lockdowns, we are witnessing disruption at each stage of New Zealand’s supply chain including production, transportation and distribution.

“We import a large proportion of our vehicles and machinery as well as retail goods, making us particularly vulnerable to higher transportation costs and longer delays when there are supply chain bottlenecks in our source markets.”

Such supply chain cost increases risk causing permanent damage to businesses and fuelling a cost-of-living crisis in New Zealand.

“The big question is whether these pressures fall away in New Zealand in the next few years as the global supply chain adapts, or whether the costs will be forever ‘baked into’ the transport expenses of companies worldwide, pushing up our cost of living in New Zealand permanently,” Nicolson outlined.

These issues are being compounded by worker shortages in the country as well as negative net migration flows, which he noted were the lowest in nine years, leading to greater cost pressures.

New Zealand has additionally faced disruptions from the Suez Canal blockage, vehicle factory shutdowns due to microchip shortages, strikes at UK ports, poor weather, power shortages in Chinese factories, and higher energy and food prices globally caused by the war in Ukraine.

Nicolson continued: “Vehicles, fuel, clothing, processed foods and manufacturing materials have all been affected by delays in the global supply chain. International sea freight continues to experience severe delays and congestion, with constrained capacity and elevated prices.”

Consequently, New Zealand companies are changing the way they do business, including switching suppliers, increasing their inventory levels, and altering transport options to mitigate disruption.

According to the New Zealand Ministry of Foreign Affairs and Trade, shipping prices have increased more than six-fold, from $800 per container before the pandemic to $5,000-$6,000 today.

Following the disruptions, the government announced it is launching an investigation into the resilience of the country’s supply chains.

Finance minister Grant Robertson said the inquiry will identify ways to enhance the resilience of New Zealand’s economy, and the commission is expected to recommend policy responses to help anticipate and respond to disruptions.