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Two-thirds of businesses having difficulty with supply chain

The global supply chain shortage has exposed the “deep weaknesses” in operation and “laid bare Australia’s vulnerabilities” said the national employer association Ai Group.

Two-thirds of businesses having difficulty with supply chain
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The report notes that more than 60 per cent of businesses in Australia are finding it more difficult to source inputs than in 2020, and more than half expected it to get harder in the coming year.

In a report released on Monday, 20 December, the association said supply chain chaos has been exacerbated by myriad problems which have culminated in a perfect storm.

Ai Group chief executive Innes Willox said as an island nation, 98 per cent of Australia’s trade and jobs are connected to or reliant on sea freight in some way.

"Supply chain chaos has been created by a combination of factors including the increase in global demand for goods; lengthy lockdowns and infections of workers; a global shipping container shortage; reduction in shipping services and port skipping; Australian industrial action; and rising costs. This situation is projected to only moderately ease by 2023 and beyond,” he said.

"These pressures can undermine our economic recovery from the pandemic and ultimately dampen economic growth.

"Supply chain problems should be assessed by how essential the goods are to the wellbeing of Australians and how critical they are to the production of an essential good or service whether for domestic consumption or for export.”

Mr Willox said there increasing concern about geostrategic tensions, trade conflicts and their associated unknowns.

“This creates real risks for businesses reliant on distant suppliers and generates an incentive to change the way they do business, and to avoid over-dependency on particular countries or regions (especially those where trade or diplomatic tensions exist),” he said.

"We asked businesses whether their ability to source inputs in 2021 had changed compared to 2020 and almost two-thirds (65 per cent) reported that sourcing their usual inputs was much more difficult in 2021 than in 2020.

"Given the disruptions in 2021, just over half (52 per cent) of Australian businesses expected their ability to source inputs would continue to be disrupted in 2022, with 17 per cent feeling more optimistic about sourcing supplies in 2022. Twenty-seven per cent expected no change to their ability to source inputs in 2022 compared to 2021, but it is unclear whether this is a cause for optimism, or an indication businesses are expecting the same problems and pressures to continue.”

The report also noted other primary factors impacting businesses in October 2021 included: activity restrictions (24 per cent of businesses), increased demand (27 per cent of businesses), COVID-19 (8 per cent of businesses) and input cost increases (8 per cent of businesses).

"While we may not be able to control the global factors negatively impacting supply chains, we should not shy away from looking inward and improving our own domestic performance and efficiencies,” Mr Willox said.

"The recently announced Productivity Commission inquiry into Australia's Maritime Logistics System is a positive development that will further identify the impacts that go beyond the productivity on our wharves, the reliability of our supply chains and the high prices faced by businesses and households.

"Hopefully, determined actions will follow the report's recommendations next year.”

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