ontainers mount. Now, the issue is impacting retailers in New Zealand.
According to supply chain management company TM Insight, many are waiting on stock to arrive from other countries and have been informed that ships carrying their stock have been turned around. Auckland port is now running approximately 14 days behind in discharge.
“This is complicated locally with specific capacity issues. In New Zealand the key challenge is the reduction in capacity at the Auckland ports with Auckland Ports quoted as saying they have lost around 14 per cent of available labour hours; that combined with the [stalling] of the crane automation project has disrupted the normal throughput,” Caleb Nicolson, general manager of New Zealand at TM Insight, and former chief supply chain officer at Kathmandu, told Inside Retail.
As a result, many retailers have reported key stock shortages leading into peak trading.
With increased retail demand from ANZ consumers, there is even greater pressure on retailers in terms of inventory management and warehousing requirements. Now that lead times have increased, retailers are struggling to plan ahead and costs are skyrocketing. Nicholson said the freight rate increases, most notably from early September have continued with rates now well over double what is normal at this time.
“In addition to rising freight rates to NZ, carriers have implemented a ‘congestion surcharge’ (approx. US$200-300 per twenty-foot equivalent unit). This cost squeezes margins for retailers/importers and ultimately passed onto transport companies/LSP’s, and often consumers,” he said.
There are no signs of delays slowing down with suggestions it could be the second quarter of 2021 before there’s any sign of recovery.
Nicolson is advising retailers to consider the impact to business in both the short and long term.
“In the short term you can only make decisions with the information and stock you have, optimise Christmas trading and margins, and communicate well with customers. Longer term there are considerations around risk management with stock levels and nearshore vs offshore manufacturing.”
International freight issues
The imbalance in traditional supply chain flows globally is largely due to the effects of Covid-19.
“Covid was clearly a key trigger point, however as we know Covid impacted different regions and economies at different times,” Nicolson said.
Empty container repatriation is also an issue for carriers. Vessel operators typically want to discharge containers as soon as possible to avoid incurring high operating costs, but in many cases empty containers cannot be discharged due to capacity constraints. This means that shipping lines are passing detention charges onto transport companies which are then passed onto businesses and consumers.
Nicolson said the empty container crisis, surrounding density and inability to repatriate containers back to AU and Europe is expected to continue into the first quarter of the 2021 calendar year, and there are network impacts in the broader supply chain due to reduced frequency of containers in circulation which slows down the import and export of cargo around the world.
Globally, he said there is typically a surge in demand for ocean and air freight ahead of Chinese New Year. While the usual slowdown in December due to Christmas closures in Australia will provide some relief in NSW, he said the backlog will offset any slowdown and is “likely to build” from Q1.
