Can NZ’s supply chain build enough resilience and sustainability to survive the next global crisis?
- Written by Julia Fehrer, Associate Professor, Business School, University of Auckland, Waipapa Taumata Rau
New Zealand is highly reliant on trade – particularly on maritime routes, which are lifelines for exports and imports. Key sectors such as agriculture, construction, and wholesale and retail trade depend heavily on this global network.
External events can severely disrupt the flow of goods, delay deliveries or damage critical infrastructure.
But a crisis like the COVID pandemic can also disrupt business commitments to sustainability goals such as reducing carbon emissions, minimising waste and improving resource efficiency.
This is important, because several major New Zealand companies have introduced sustainability measures into their operations over the past decade.
Fonterra, for example, adopted low-carbon logistics and distribution practices. Zespri uses blockchain technology to improve the transparency of its sustainable practices and enhance tracking across its supply chain. Air New Zealand partners with local suppliers and adopts initiatives to lower its carbon emissions.
In our recent research[1], we reviewed 287 studies on supply chains. We identified key tensions between efficiency and sustainability, and how major disruptions to supply chains and operations can swing the balance between the two.
On one hand, businesses are pressured to maintain lean, cost-effective operations. On the other, there is a growing recognition of the need to build resilience and sustainability, particularly in the face of climate change.
Traditional strategies
New Zealand’s supply chains are susceptible to disruptions[3] from natural disasters (such as earthquakes and floods[4]), geopolitical tensions and global health crises.
Businesses have historically responded in a variety of ways: diversifying suppliers, increasing inventory buffers and securing alternative transport routes.
The use of technology, such as radio frequency identification, has played a crucial role in tracking goods across the supply chain. It provides real-time visibility and accurate inventory management.
Blockchain[5] is becoming a key tool for making supply chains more sustainable. This technology uses a digital ledger to keep information safe and easy to trace.
But the ongoing technological innovation risks disadvantaging people and businesses with limited resources and capabilities along the supply chain.
Embracing a circular economy
During the pandemic, businesses experienced shortages of critical supplies, delays in shipments and fluctuating demand. This forced them to temporarily abandon long-term sustainability strategies in favour of short-term survival tactics.
This made sense from a business perspective. But to build more resilient and sustainable supply chains, businesses will need to move beyond traditional strategies.
Our research found integrating circular economy principles into supply chain management can help create a buffer for businesses.
The circular economy model focuses on minimising waste – keeping products and materials in use for as long as possible. There is also a focus on regenerating natural systems to foster economic, social and environmental resilience.
Companies can reduce their reliance on external supply chains by focusing on reusing materials, creating closed-loop systems with regional partners and by boosting the technologies already in place.
By fostering stronger links with local suppliers and focusing on regional sourcing, businesses can reduce their exposure to global risks. This will also help build more self-sufficient supply chain ecosystems.
Building sustainable supply chains requires investing in advanced technologies, such as blockchain and artificial intelligence. But implementing these technologies should be done carefully and in stages to minimise disruption. Going slowly can also allow for the inclusion of all supply chain partners in these technological transitions.
The way forward
New Zealand’s supply chain future hinges on greater collaboration between everyone involved, including businesses, policymakers and communities.
In practice, this means working together to build systems that are not only efficient and cost-effective but also resilient and sustainable.
Equally, resilient supply chains require regional manufacturing ecosystems. To mitigate the risks from global supply chain disruptions, it’s essential to support local manufacturing, even when offshore manufacturing costs are lower.
This will require government support and strategic investment in regional manufacturing innovation.
While New Zealand’s supply chains face significant challenges, there are great opportunities to reshape them for a more resilient and sustainable future.
By integrating circular economy principles, using advanced technologies and fostering regional collaboration, New Zealand can build supply chains that are prepared for future crises and which also contribute to the country’s sustainability goals.
References
- ^ recent research (doi.org)
- ^ Zhao Gang/Getty Images (www.gettyimages.com.au)
- ^ susceptible to disruptions (theconversation.com)
- ^ such as earthquakes and floods (theconversation.com)
- ^ Blockchain (www.ibm.com)
Authors: Julia Fehrer, Associate Professor, Business School, University of Auckland, Waipapa Taumata Rau
