Costly ‘just-in-case’ supply chain ordering mode may be ending

Ports of Auckland, New Zealand's main imports gateway, brings back fixed berthing dates. Photo / Michael Craig

Relief may be in sight for retailers and importers with piled-high goods inventories and squeezed working capital as the cargo sector predicts a return to a “just-in-time” ordering in the supply chain.

With ports globally and in New Zealand reinstating predictable, fixed berthing schedules for container vessels after the congested shipping and consumer demand frenzy of peak pandemic days, there are hopes the “just-in-case” ordering mode NZ Inc had to switch to, may be able to revert to “just-in-time”.

Ports of Auckland chief executive Roger Gray is one who has no doubt “just-in-time” mode will return.

Auckland’s container terminal, along with other major New Zealand ports reinstated fixed berthing on Monday.

“My view is that as interest rates go up, retailers and cargo owners will be reviewing the amount of working capital they’ve got tied up in inventory and will be looking to reduce inventory. To do that we need to get stability back into the process,” Gray said.

“I think over the next 18 months, just-in-time will return as we see reliability coming back into shipping and port operations.”

Ship berthing windows are important in the supply chain because they offer ship and cargo owners set days of the week they can rely on and plan around.

As freight forwarding company Go Logistics said in its latest client newsletter: “Many clients will remember when a shipping schedule to Auckland was almost akin to a bus timetable.

“They knew when a particular vessel from a particular service was arriving at Ports of Auckland and had a fairly robust understanding of the gap between the ETA at port and the ETA at their door.

“The past two-plus years has seen those dates become much more difficult to predict....in reverse, changing receival dates for exports (especially difficult commodities like hazardous materials) has seen us having to scramble to find alternate homes for containers at the last minute while receival windows changed.

“Fixed berthing removes much of this pain.”

Go Logistics said the pandemic-driven “just-in-case” model had led to higher inventory stocks and changed the way the country’s supply chain operated, which affected Auckland’s port.

The Auckland Council-owned port is the country’s main imports gateway. It struggled to cope with container volumes when consumer demand for imports soared during the pandemic, resulting in severe berthing delays, consequent congestion and bottlenecks in the national supply chain and loss of business to other ports such as Tauranga and Northport. Importers and exporters already grappling with soaring shipping costs copped extra Auckland congestion penalties imposed by shipping lines, and had to deal with severe empty container shortages and delivery delays.

“A return to predictable schedules, transit times and ETAs - coupled with falling ocean freight rates - may well be the defibrillator that the just-in-time model needs to get back into supply chain managers’ planning,” said Go Logistics, which called the return of fixed windows “a watershed moment” for Auckland’s port.

Gray, who, in taking up the port chief executive’s job nearly a year ago, committed to turning around container operations, said the reinstatement of berthing times was going well.

Ports of Auckland CEO Roger Gray believes a return to "just-in-time" freight mode is coming. Photo / Dean Purcell

“There is a real acknowledgment across the sector that it’s about time we got container operations back to pre-Covid ways. Really this is about putting a line in the sand and getting cracking.”

While the return to fixed scheduling was partly due to “the demand and the chaos of Covid” passing and the world’s ports getting back on schedule, the port’s own improvements had helped, he said.

“We have increased our staff and increased our equipment. Five new straddle carriers are coming on in the next couple of weeks ...we regularly now run four cranes. When I arrived, two were operating.”

Gray said the port had reinstated berthing windows, for transtasman and coastal shipping, some time ago.

“Because they have such a short turnaround they needed reliability....so we had a soft launch. We’ll progressively start to harden up the schedule over the next two weeks.”

Even slow implementation of berthing windows was a win for the New Zealand supply chain because it provided greater certainty, Customs Brokers and Freight Forwarders’ Federation president Rachel Madden said.

“We know a lot of hard work by POAL [Auckland port] and the wider community has gone into implementing berthing windows again at [Auckland] which is important to recognise and support.

“Pre-Covid, importers or exporters could build robust supply chains around how many days it would take to get goods to market or bring in goods from overseas. This was due to service reliability.

“Windows also help reduce bottlenecks in the supply chain.”

But New Zealand still had many supply challenges to overcome, Madden said.

“It is important that we are still investing in our infrastructure ... so that when a link is broken or under greater strain the impact on the rest of the link can be minimised.”

Other factors, beyond the control of Auckland port or New Zealand, could still challenge berthing windows being maintained, she said.

They included industrial action at Australian ports, how other ports and shipping lines kept to service schedules and a continuing labour shortage.

Go Logistics said industrial relations and several unresolved issues at Australian ports were “a significant factor in schedule integrities” in New Zealand. Congestion, particularly for roll-on, roll-off services, was still “significant” at some Australian ports, the company’s newsletter said.