This month we were invited to BNZ’s 4 panelists discussion on who’s at the forefront of our future supply & freight issues in & out of New Zealand.
It was quite a sobering talk for me, as I thought as soon as Covid had settled and in 6 months’ time, things will just go back to normal, but it doesn’t sound as if it will be that way.
The big message was the new phrase being:
Stock is King! Replacing Cash is King.
Key points
- It costs up to $35,000 a day to have a ship sitting waiting to unload – shipping companies are starting to get very impatient with this and the concern is that the shipping liners will stop coming here, as one has already done this and New Zealand is at the end of the shipping line.
- Our ports and freighting industries are understaffed due to immigrant issues.
- There are issues internally at Auckland port and to fix some of the issues and update plant, this in the short term, will cause more congestion, with temporary closure for the plant upgrade.
- Road issues further afield within New Zealand.
- Consumer spending has not just shot up in New Zealand, but world-wide, the majority of countries have injected/printed money into the economy & just like New Zealand, this has inflated house prices and people perceive that they have more money, so have been spending it within the country (discussion at CECC ExportNZ breakfast) and this has pushed up the consumption, hence the demand on so many more supplies & commodity items needing to be imported into the Country. With this happening world-wide freight liners are stretched.
- Many ships were not seaworthy for this distance and the type of cargo, so have been taken off the water.
- Containers coming in can’t go out – not fit for export so we are getting build-up of containers.
- There is an animosity forming between the freight liners and their clients due to rising rates, lateness, and the threat that ships don’t come here as we are at the end of the shipping line.
- New Zealand orders are smaller compared to larger countries orders; why come to New Zealand if not a significant freight contract.
- Without passenger flights it’s hard to get air freight – need bubbles market access.
- A small change or delay has a massive chain reaction to other places, e.g. one port issue causes massive issues throughout New Zealand.
- This is a worldwide issue, not just New Zealand.
Suggestions
- New capacity is what we need from Government e.g Government having its own shipping line (Thailand Government is doing just this to ease high freight rates & see more exports transported by local carriers & on time).
- Teaming up & collaborating with other exporters & shipping companies.
- Large ships into Australia and reloaded onto smaller liners from Australia to New Zealand.
- More realistic time frames – plan ahead better. Lead time now 3 times longer.
- Use rail and other means.
- Use this as an opportunity, it won’t be the last challenge.
- Do forward contracted freight prices.
- Get finance for stock on sea for longer.
- Communication most important and keep everyone informed.
- Burn working capital, plan 8 months ahead minimum.
- Find local suppliers.
- Maintenance of Plant & Equipment – keep your maintenance up so don’t have breakdowns, waiting long periods for parts. Think out what could break down – order now and keep maintenance program diligent & systemised.
- Lost packages – plan for this.
- Think ahead – don’t be reactive
- Check with your suppliers that they can be relied upon and find out about their supply chain, can they all be relied upon.
- Order in advance and organise storage, if need be, work with the banks, great interest rates and majority of the banks are allowing stock as equity.
- When buying plant & equipment like CNC machines ensure there’s a reputable company to do the training & maintenance that the trainers & maintenance people do not need to come from overseas.• Digitally communicate worldwide and use more marketing platforms such as google, LinkedIn and Bing
- Good time to negotiate with suppliers for large amounts of bulk.
- For air freight connectivity – contact NZ Trade & Enterprise for export finance & work with your Bank with letter of credit & forward contracts.
- Digitally communicate worldwide and use more marketing platforms such as google, LinkedIn and Bing
- Good time to negotiate with suppliers for large amounts of bulk.
- For air freight connectivity – contact NZ Trade & Enterprise for export finance & work with your Bank with letter of credit & forward contracts.
Key message
It’s predicted that the freight price will never drop as we already have some of the cheapest freight costs in the world, these liners can get more for freighting in the northern hemisphere with shorter distances and they will eventually go where they get the highest price and while demand is higher.
An expected norm, pay more and oh yes, you will continue to have further delays.
So key message is plan eight months ahead for supplies, stock, machinery, parts and assets. Keep your maintenance up and buy plant & equipment wisely, thinking low maintenance and availability of servicing.
Please contact us on 03 374 9393 or email business@asl.co.nz if you would like a fuller version of Louise’s notes, or if you would like the contact details for any of the presenters.