Container ships queueing to unload were a familiar sight during the pandemic. Photo / Erin Schaff
Container ships queueing to unload were a familiar sight during the pandemic. Photo / Erin Schaff
New Zealand is likely to remain exposed to higher risks of supply chain disruption for the next 10 years, says the Productivity Commission as it launches an inquiry into how to build economic muscle against further shocks.
The independent Crown entity, which is asking supply chain participants - which isnearly everyone - to answer four questions to help it in its quest, said “the future outlook for supply chains is not a simple return to pre-pandemic operations”.
“Global trends indicate that disruptions are likely to be more frequent. The pandemic is an ongoing source of disruption, even if no new variants appear. The war in Ukraine has increased volatility ... for energy and food. Climate change increases the likelihood of extreme weather events while rising temperatures and sea levels increasingly impact major trade routes,” said an issues paper for the inquiry. Submissions close on April 17.
“Geopolitical rivalries and political tensions are driving the global economy towards more fragmented trade and investment flows ... Further the desire of governments in large economies to achieve strategic autonomy or dominance will continue reshaping global markets for energy and innovative technologies, and may cross into protectionist policies.
”While some disruptions may be temporary, others are likely to persist for years.”
The paper seeks responses to these initial questions:
What supply chain disruptions and trends are you worried about?
What is your industry/community doing or planning to do to address supply chain concerns?
How can the Government help to enhance your resilience to disruptions?
What should the commission study do to learn more about the economic resilience of industries and communities?
The commission, asked to do the inquiry by the Government, is due to deliver a final report in February next year, said chair Dr Ganesh Nana.
New Zealand was more exposed to supply chain disruptions than other advanced economies due to its remote location and economic focus on primary production, the paper said.
It describes supply chains “as part of the invisible plumbing of the global economy”.
“Much like water pipes under cities, they remain largely invisible and out of mind when they work well. However, when supermarket shelves are empty, petrol stations blocked by long queues, or when major export products cannot be shipped to overseas countries, people start paying attention to the vulnerability and fragility of supply chains.”
Dr Ganesh Nana, chair of the Productivity Commission. Photo / Mark Mitchell
Supply chains are complex networks that connect suppliers of goods and services to producers, distributors and end users, the paper explains. They encompass the flow of material inputs, labour, information and finance, from raw materials to finished products and their distribution to customers.
Supply chain disruptions caused by the pandemic, the weather and the Ukraine war had wrought havoc across the world and helped fuel inflation and the cost of living, the paper said.
“These disruptions represent a major change after three decades of smooth, behind-the-scenes expansion of global supply chains that allowed even distant countries like New Zealand to participate in global just-in-time networks.”
Just-in-time became just-in-case networks after pandemic lockdowns drove a surge of demand for consumer goods with an associated rapid increase in demand for shipping, increasing costs. Pandemic complications and other shocks had increased delays.
For the inquiry, the commission defines economic resilience as “the capacity of industries and associated communities to anticipate, prepare, absorb, recover and learn from supply chain disruptions”.
It seeks to identify medium-term policies and interventions that could enhance this economic resilience and living standards.
