How Can New Zealand Recover Its Lost Supply-Chain Strength?

Wednesday, 23 February 2022, 9:32 pm
Press Release: Kalkine

Summary

• Supply-side constraints have been affecting businesses worldwide in the form of rising prices and delayed shipments. 
• A growing concern has been the lack of a skilled workforce, especially in sectors such as yield harvesting. 
• Government reforms can only temporarily relieve the economy unless these are introduced with a long-term vision.  

Over recent years, supply chain issues have only deteriorated with time, impacting global markets deeply. New Zealand is no different in experiencing shipment delays, snags in raw material imports, and trade disruptions due to ongoing supply-side constraints. With many other production-related issues plaguing global supply chains, it seems essential for New Zealand to focus on its domestic resilience to overcome supply-side woes.

With economies gradually standing back on their feet and consumer sentiment riding high, businesses have sprung into action and seen strong demand globally. The result is evident in the booming demand for Kiwi exports in 2022. 

However, with transportation systems in peril, businesses have been facing difficulty meeting the growing international demand for products. Particularly for New Zealand, the global demand for oysters and wine has soared rapidly, with the country yet to keep pace with the booming demand. 

New Zealand has moved to Phase 2 of its Omicron plan amid these demand-supply dynamics. Under the plan, people who had caught the virus are no longer needed to isolate for fourteen days. Such people could instead leave self-isolation after ten days. 

At a time when the country continues to follow COVID-19 and vaccine mandates, managing shipment and supply-related delays can become a daunting task for New Zealand.

Challenges associated with the pandemic

It is no surprise that these supply-side restrictions have exacerbated during the virus-infused environment. A lot has changed in the last two years, including the way of doing business across industries. While many businesses have taken a quick shift to online platforms, some are forced to rely on physical deliveries and the presence of labour to function seamlessly. 

A growing concern has been the lack of a skilled workforce, especially in sectors such as yield harvesting. This can, once again, be attributed to the virus as border closures have forced industries to work with limited human capital. In a way, border reopening could be hailed as the next big gateway for New Zealand to unlock its lost potential. 

Meanwhile, pressures are not limited to the lack of workforce, as the rising cost of raw materials and soaring fuel prices have left businesses reassessing their balance sheets. An industry that received a major shock during the pandemic has been the semiconductor industry, which prompted the hampering of many IT-related activities. Taking a cue from this sector, Kiwi companies are expected to raise import prices if international demand outruns domestic supply. 

Most importantly, these cracks in the overall supply-chain ecosystem have existed for several years without ever needing a reform. Perhaps one way to look at the disruption caused by the pandemic is that it highlighted the existing flaws, paving the way for better systems in the future. 

What can be done?

On the policy front, authorities have little room to experiment or introduce laws, as most of these concerns stem from global factors. The country has some measures that can help prevent domestic sectors from supply-side snags and meet international demand for goods and services. 

However, a good place to start can be to build a domestic powerhouse of skilled workers that can keep businesses afloat. The lack of a skilled workforce has often been met with the influx of foreign immigrants as a resolve. Towards this end, the policymakers can build better training systems in industries such as farming and harvesting. 

The government could do its bit by reducing the fuel taxes on a broader level. Though this measure may not be sustainable, it could help revive businesses to some extent by reducing the cost of transportation in such precarious times. Meanwhile, reducing taxes could also spur consumer spending amidst inflationary pressures.

Similarly, New Zealand can strengthen foreign relations with partner countries via more comprehensive agreements to make imports cheaper. A great example is the trilateral supply chain initiative between India, Australia, and Japan. Under the initiative, these countries need to focus on investing in their supply chain resilience by working on the weaker areas. 

These changes are unlikely to be implemented overnight and require sufficient time to take shape. However, taking the initiative to execute these long-term changes could be a far more rewarding option than simply waiting for borders to reopen. Even as the government implements certain tax-related relaxations, New Zealand should prepare for a rocky road ahead, marked with rising prices.

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