We posted a blog some months ago in these pages regarding the stresses in manufacturing supply chains due to the pandemic. A new report by the Ai Group exposes that those problems are still plaguing Australian business. Indeed, the situation may well have deteriorated.
To be fair, this is a global problem rather than one unique to Australia. However, the report does identify that Australia is more vulnerable than most countries due to its greater geographical isolation.
So what are the key factors causing these problems?
The Ai Group’s Report entitled ‘Australian Supply Chains: State of Play’ – lays bare Australia’s vulnerabilities. Factors include:-
- Increased demand for goods
- Lengthy lockdowns and infections of workers
- A global shipping container shortage (particularly impacting Australia as 98% of trade and most jobs are connected or reliant on sea freight in some ways)
- Reduction in shipping services and port skipping
- Australian industrial action
- Rising costs
The situation is estimated to only ‘moderately ease’ by 2023.
The aim of the report is not just to stress the vulnerabilities but to identify ‘possible constructive solutions’.
The report states that ‘supply chain problems should be assessed by how essential the goods are to the well-being of Australians and how critical they are to the production of an essential good or service.’
With increasing concerns over geopolitical tensions and shipping freight problems this creates increased risks for reliance or distant supplies. It generate an incentive to change and avoid over-dependency on particular countries or regions.
A diversification of the supply chain may be part of the solution but an encouragement of more domestic sourcing is also key. The cost of goods in some degree is being overridden by considerations of supply chain security. This means looking to create more options domestically.
Innes Wilcox, Chief Executive of Ai Group, said ‘while we may not be able to control factors negatively impacting supply chains, we should not shy away from looking inward and improving our own domestic performance and efficiencies.’
For more detail on the respondents to the report and types of business involved see the link here.