Supply Chain Woes: Delayed Transit Times and Increased Costs

There is no denying that the COVID-19 pandemic has created an unsettling year for many Kiwi Exporters, and the 2020 ExportNZ DHL Export Barometer results have highlighted that high costs and lower frequency of transport options are the top barriers for the New Zealand export industry.

According to the research conducted among more than 270 New Zealand exporters, whilst 2021 outlooks remain positive, top barriers to doing business have changed substantially from previous years, with the costs of logistics and transport shooting into the top spot, followed closely by COVID-19 and the general costs of doing business.

The backlogs at Ports of Auckland have caused shipping lines to bypass not just the Ports of Auckland, but country-wide, creating real challenges for Kiwi importers and exporters.

It is not just the ports causing issues, however, the recent 2020 ExportNZ DHL Export Barometer highlighted that due to the loss of passenger subsidisation and fewer flights, the majority of companies surveyed (86 percent) said they are experiencing delayed transit times and 73 percent are now experiencing increased logistics costs. A further 33 percent stated they were trying to reduce their reliance on other markets by creating more products locally.

“With the backlogs at Ports of Auckland being nationwide for Kiwi importers and exporters, we can’t be certain which products are most at risk of delays and shortages here in New Zealand,” commented Selina Deadman, vice president commercial, DHL Express NZ.

“However, with the new focus in Kiwis reliance on locally produced products, means we could see these shortages eased.”

The significant reductions in or the complete cancellation of commercial flights in most countries has had a dramatic impact on commercial air uplift capacity, meaning there is now a large demand for air freight, even more so at this time of year.

“We estimate pre-COVID 80 percent of New Zealand air freight travelled via commercial passenger airlines, many of those flights are no longer operating, therefore driving strong demand for air freight capacity,” noted Deadman.

“On November 21st DHL Express launched the New Zealand – Melbourne Dedicated Aircraft, giving us the additional 19 Tonnes of freight capacity to Melbourne, to help Kiwis get their goods delivered on time this festive season.”

Deadman went on to explain that consistent and strategic investments into the DHL network aviation enhancements mean New Zealand and Australian exporters and importers are able to connect to the world via the Auckland, Melbourne and Sydney trade lanes. DHL has already seen the outbound volume growth to Melbourne at 27.5 percent above pre-COVID volume.

This increasing demand for air freight capabilities across the Tasman is fuelled by DHL customers in industries such as clothing, apparel, footwear, agricultural spare parts, just in time spare parts replenishment, as well as a boom in e-commerce volumes; with eCommerce shipments to Australia specifically growing at a staggering 37 percent.

Supply chain bottlenecks have varied based on COVID-19 and its impacts around the globe. At the start of the pandemic, China and Hong Kong were heavily congested and at other times this year, both Europe and USA have also been heavily congested. In New Zealand, the government’s International Air Freight Capacity (IAFC) Scheme has supported keeping air cargo lines operating and keeping exports moving.

As far as increased costs, Deadman explained that air cargo fluctuates on supply and demand and based on the lack of commercial air cargo space, rates have fluctuated. Express rates are consistent and have not changed significantly, however DHL Express globally introduced a temporary ‘emergency situation surcharge’ in April to cover the additional costs of maintaining reliable and high-quality delivery services.

With a year such as this, it is expected that businesses will have had to adapt accordingly to a change in market and Deadman pointed out that ecommerce has been at the forefront of this change.

“Whilst our exporters still run through traditional outlets, ecommerce is becoming more apparent as we move further into a digital age. COVID-19 forced many Kiwi businesses into the digital world to keep sales going.”

Historically, the most common initiative to increase sales has been developing new products and services, and this is the first in five years that enhancing online presence has overtaken this. Of the exporters who increased their sales in 2020, the most common initiative implemented was ‘enhancing their online presence’, with 44 percent doing so.

Results are reflected in what DHL Express is seeing in business activity; with the increasing demand for air freight capabilities in the DHL Express network across the Tasman is fuelled by growth in industries such as electronics, agricultural, fashion, engineering, manufacturing and e-commerce.

According the 2020 ExportNZ DHL Export Barometer, (51 percent) of businesses surveyed said that COVID-19 has changed the way their company runs; including introducing permanent Work from Home structures and social distancing practices, however the vast majority of businesses (84 percent) have not changed the products that they offer. Exporters are being careful to maintain their competitiveness and not invest too heavily on business costs when they are already struggling with increased transportation and other COVID related costs.

“Peak season is Oct – Dec, generally volumes fall away significantly in January so historically this suggests the backlogs may have time to clear then. In terms of Air freight once borders open for passenger flights capacity constraints should ease, but we don’t expect the air freight market to return to pre-COVID levels until at least 2022,” concluded Deadman.

“We will be conducting a full review in the coming weeks to ascertain the full extent of the delays and disruptions as we head into 2021.”

A joint initiative between ExportNZ and DHL, a total of 278 New Zealand exporters were surveyed for the ExportNZ DHL Export Barometer 2020. The ExportNZ DHL Export Barometer is an initiative aimed at analysing export confidence in New Zealand and identifying export trends. It is based on nationwide research, examining the business outlook of Kiwi exporters, highlighting changes in overseas market demand and providing insights into the factors impacting on New Zealand’s export trade.