By Glenn Baker.
When it comes to managing freight and logistics, New Zealand’s geographical distance from the world’s markets doesn’t exactly make life easy for our exporters and importers. Exporter identifies some of the issues and goes in search of the answers.
Look up the meaning of the word logistics in a dictionary and it reads ‘detailed planning and organisation of a large operation’. For New Zealand, I can’t think of any bigger, more complicated ongoing operation than the country’s trade with international markets. It is the lifeblood of the economy, and therefore of all our lives.
We may only be a small country, but few nations rival us in terms of dependence on international trade. Ours is an export-driven, competitive economy with exports of goods and services accounting for just under
30 percent of GDP (Source: World Bank, 2014).
From our comparatively isolated position in the South Pacific, thousands of innovative, entrepreneurial enterprises do business with partners and customers worldwide – and the logistics involved is staggering in its complexity and its efficiency.
Helen Masters, VP South Asia for Infor ANZ and ASEAN, a company that automates critical processes for industries through cloud applications, sums the situation up succinctly when she says the increasing globalisation of New Zealand’s manufacturing industry has been a boon for local companies but a real challenge for logistics managers across different sectors.
“As an example, even small food manufacturers are likely to source raw materials at home, process in, say, Singapore and sell to customers in the China. With more than 50 percent of New Zealand’s manufacturing bound for overseas markets, local logistics managers need to manage an ongoing physical flow of materials using a complex workflow that includes scheduling, quotation, warehousing, resourcing and supplier management.
“This big export focus and geographic remoteness means New Zealand managers have some of the most challenging logistics jobs anywhere in the world,” she says.
Producing goods and shipping them by sea or air to world markets, or sourcing goods for consumption here, is by no means a simple straightforward process. And there are always major issues that can potentially put a spanner in the works.
Peter Webb, CEO of Independent Verification Services (IVS), a local container-handling support company heavily involved in training and certification, reels off just some of the issues currently impacting the market as he sees it. They include:
- A lack of good talent in the logistics industry, particularly in warehousing.
- Increased compliance charges.
- The increasingly competitive international marketplace (reflected in fluctuating dairy prices).
- Peak season carrier surcharges – specifically shipping lines. Starting around September 1st it generally means increased container rates without any improvements in service.
- Declining container volumes worldwide – threatening container services into New Zealand.
- The exchange rate and rising dollar values against the USD – resulting in lower sale prices for exporters.
- New Zealand’s trucking industry struggling to recruit quality and competent long haul drivers.
- Space limitations in Transitional Facilities regarding container placement and internal warehouse storage.
Container handling issues
Specifically on container handling, Webb believes the biggest challenges are around higher costs and ensuring compliance while keeping operations running smoothly.
Importers are finding it more expensive to run their Transitional Facilities. While for exporters the new Verified Gross Mass (VGM) requirement means containers must now be weighed before entering the port of origin gates. Exporters who didn’t have the container weighing equipment have had to either invest in some, pay the freight company to take the container to a weighbridge (which can mean delays and extra costs) or book a mobile container weigh service.
“One of the main reasons the VGM requirement was implemented is to avoid accidents, damage to equipment and dangerous vessel loading,” explains Webb. “The new regime was welcomed as it obviously intends to protect people and cargo, but at the same time, there was uncertainty about what to expect.
“The ports have been strict. Many were already weighing the containers, so the adjustment was small. Others have opted to use a mobile weighing service, which has proven to be more convenient and reliable than the weighbridges.”
Webb says his IVS inspection team is working closely with customs brokers and transport operators to ensure that VGM obligations are met.
“The IVS Container Weigh system is transportable and flexible and allows IVS personnel to weigh each corner of the container to ensure even loading has occurred, whilst assisting the exporter to meet their legal obligations under the new legislation.”
From December 16, new Transitional Facility Standards (MPI-STD-TFGEN) will come into effect.
“To coincide with these changes MPI has announced that the Transitional Facility Operator training course will extend to a full day,” explains Webb. “This move by MPI sets a precedence that all facilities approved under the Biosecurity Act are to be compliant.”
IVS anticipates that some importers may prefer to utilise other means of receiving sea containers. There is, for example, the Multi-Transitional Facility Service, where importers can still receive low risk containers on site.
“IVS sends an inspector to every container clearance, so there is no need to train staff,” says Webb. “The inspector takes all the equipment required and deals with any contamination found. We also take care of all reporting to MPI.”
Webb’s advice for importers and exporters is to call IVS, CBAFF or your freight forwarder if you’re unsure about any processes or requirements.
“Enforcement and penalties are a real risk and the regulators won’t accept excuses if the lack of processes, lack of honesty, or the use of unreliable equipment leads to misdeclaration, accidents or the introduction of unwanted pests and diseases.”
Technology’s impact
Wherever there are savings and efficiencies being made within New Zealand’s freight and logistics sector, you can be sure there is a technology behind it.
Infor’s enterprise software solutions, for example, which are increasingly ‘cloud’ delivered, focus heavily on integrated transport and inventory planning. If your warehouse plan changes, then the software anticipates the potential impact on other areas of your business such as inventory, labour allocation and billing.
Logistics managers can use the transport planner to analyse shipment orders based on their origin and location anywhere in the world, consolidate loads and determine dates – without having to worry about potential resource or cost constraints, explains
Helen Masters.
“We’ve also placed considerable emphasis on making of this happen in real time, around the clock. So if you’ve got supplier issues in Europe, you’ll instantly be able to identify and manage the problem without ever leaving your desk in Auckland or Wellington.”
Dairy manufacturer Synlait Milk deployed Infor M3 (ERP) and Infor ION (middleware) to enable new capabilities including simplified tracing with third-party transport and packaging suppliers, and providing customers with improved visibility of the packaging process.
Infor has also allowed businesses such as freight management partnership Kotahi, to go one step further and integrate merchandising, marketing, and demand data within their solutions.
As for the local supply chain industry, Masters believes the phenomenal growth of sectors such as the high-tech manufacturing industry means it’s on a very solid footing.
“Even as recently as ten years ago, New Zealand supply chain maturity would have been well below markets such as the UK in terms of sophistication and integration. Today it would absolutely be on par or even exceeding global benchmarks.
“A good indication of this is Synlait Milk. This year at our global awards they beat some stiff competition to take out our international operations excellence award in New York. It’s not too much of a stretch to say that more New Zealand supply chain programmes will be joining them on the podium in the not-too-distant future.”
A carrier’s perspective
Gerard Morrison, managing director of Maersk Line Oceania, says overall the new VGM requirement has been implemented smoothly in both Australia and New Zealand.
But on challenges being faced by the shipping and freight industry in general this year, he sees declining shipping rates as the big one, which have impacted heavily on revenue generation. “Compare Q2 2015 with Q2 2016 and there’s been a global drop of around 24-25 percent in freight rates. They’re at all-time low,” he says.
While that’s good news for exporters, and not-so-good news for the shipping companies, Morrison says the real challenge for everyone is whether it’s sustainable.
He says Maersk has put a lot of effort into lowering its cost base as much as possible – however, with New Zealand the difficulty factor is much higher than the rest of the world due to our geographical distance from markets and the comparatively small, often seasonal, volumes of freight shipped.
“The cost of serving New Zealand will always be extremely high compared to other countries.”
Shipping companies’ strategies are now based on making networks as efficient as possible, explains Morrison. Competition for business has become fierce, and the key to survival is to find new ways of doing things, he says. For Maersk that has meant launching new services out of New Zealand that have not been seen before. One is a north-bound service out of New Zealand directly to China, with another in the opposite direction. And there is a new service to and from South America. Flexibility on capacity and connections is made possible through Maersk’s extensive global networks.
There’s also a move from paper to digitalisation and automation in regards to documentation, which also results in greater efficiency for not just shipping companies, but also freight companies and customers.
Morrison’s advice for export and import companies is to properly understand the many shipping options available. “To be educated involves a lot of talking and information gathering. So spend a lot more time in the investigation phase before making any decisions.”
