By Gareth Vaughan
The Government's push to develop a national supply chain strategy doesn't make much sense because supply chains need to be matched to specific products, says a leading supply chain academic.
Tava Olsen, Professor of Operations and Supply Chain Management and Director of the Centre for Supply Chain Management at the University of Auckland Business School, spoke to interest.co.nz for the latest episode of our Of Interest Podcast.
Earlier this year the Ministry of Transport issued the New Zealand freight and supply chain issues paper. In the wake of global supply chain disruption caused by the Covid-19 pandemic. Transport Minister Michael Wood said the Government was "taking action to future proof our supply chain, limiting the impact of the next global shock on our businesses across the country."
Olsen said while the paper does an excellent job of outlining the background and all the issues, she's not convinced a national supply chain strategy is a good idea.
"I don't think a national supply chain strategy makes much sense. A freight strategy maybe, quite possibly. But in our very first class on supply chain what we teach is that you don't have one supply chain strategy. You have to match your supply chain strategy to the type of product."
"So Fisher & Paykel Healthcare exporting their high tech, light masks, are going to need a completely different supply chain than Fonterra exporting their low value, heavy milk powder bags. Those are two fundamentally different supply chain types. And if you look at what you're going to emphasize, you're going to emphasize responsiveness for Fisher & Paykel Healthcare, and you're going to emphasize minimising cost for the Fonterra milk powder," Olsen said.
"The other issue I have with their proposed strategy is they don't seem to recognise that. So they want productivity or efficiency, and they want responsiveness or resilience. Yes, we want both of those but where's that trade off? Which one do we want to emphasize? Well, it depends on what product we're actually thinking about. So I think coming up with a country strategy for supply chain, it doesn't make a whole lot of sense."
"Coming up with a country strategy for freight, thinking about the modes we want to use, and whether we want to subsidise rail more, or roads more, or coastal shipping more, that makes a lot of sense. So yes, we should be thinking a lot more in terms of our strategic planning for our country's freight network," said Olsen.
The Ministry of Transport says it received more than 70 submissions on the issues paper. Some will be published, along with a summary document, by the end of July.
In the podcast Olsen also argues NZ should "absolutely be looking at" developing a system for compulsory stocks of critical supplies such as fuel, medical supplies and key foods that are brought in from overseas.
Additionally she talks about whether the "just in time" model has a future, the concept of a national shipping line, how local government ownership prevents a shift to a hub and spoke model for NZ export and import ports, coastal shipping, automation and robot deliveries, supply chains and climate change, the tyranny of distance, and the need for NZ businesses to upskill their supply chain knowledge and her desire for more investment in research and development.
10 Comments
Well the Kirk Labour government established in 1973 the Shipping Corporation of New Zealand subsequently renamed the New Zealand Line. It plugged away well enough alongside quite a few other carriers, general & reefer cargo, conventional & container, until the next Labour government sold it.
Great listen. Thanks. Perhaps gently prying control of the ports loose from local bodies in the interest of more efficient national importing/exporting and distribution of goods by the Government is a way forward. If the 3 waters is anything to go by a very tough ask.
In resilience terms, 3 waters is a step backwards. Resilience inevitably means local; locally do-able, locally fixable. anything going away from that - any continuance of the trading we have temporarily known but which was unsustainable - must therefore be a wrong move.
Same argument re your import/export comment. We have passed the high-water-mark of globalism, for obvious physics reasons (from here on in, a reduced amount of available energy compounded by increasing entropy). This is why the war in Ukraine, for instance; energy-blindness renders much opinion to the dust-bin marked inappropriate.
https://thegreatsimplification.libsyn.com/energy-blindness-frankly-by-n…
Maybe asset-stripping from local councils and ceding even more control of our lives to be run by government-by-centralisation that has so far demonstrated zero ability to execute or plan infrastructure is a really bad idea too. So far we've seen essential services, infrastructure and zoning laws take forever to catch-up with the population growth that central government itself has foisted upon the rest of the country. Do we really want to go putting control of our port operations and businesses in the hands of the same people?
Maybe we should start asking to see some proof of competency before we got throwing more good money after bad.
The notion that there is 'a national supply chain' is evidence enough to dismiss anything following that completely inane and Clueless phrase.
Agriculture by analogy, is a matrix of latitude, local climate, soil types, altitude, GDD per crop grown, and dozens more factors. The permutations and combinations from all this make a 'national agricultural strategy' meaningless.
Supply chains likely number in the hundreds of thousands, being, as with agriculture, a matrix of product, process, locations, pre- and co-requisites, number of discrete steps on any given overall process, type of firm and its maturity index, and so on and on.
Now freight, transport modes etc - that's probably enough for the current clown car occupants to attempt some minor tweaks for.
Too many successive governments full of folk believing in a benign strategic environment and everlasting cheap globalisation. Not a lot of strategic planning. Just look at our electricity generation - selling off assets for a short term sugar rush and failing to ensure a plan for adequate future generation.
I agree that supply chain strategy is supply chain specific, and in a closed loop 'circular system' sort of way, what makes supply chains different is what drives the need for differences in strategy.
The strategy I believe is what is needed to drive the overall system, and change however.
Interested to hear about models for developing supply chain strategy. I developed one some years ago as a regional strategy project, called the Supply Chain Mapping Toolkit.
The drivers I propose for supply chain strategy are a dynamic balance of the following factors:
Service
Cost
Supply Chain Risk
Commercial Risk
Safety
Environment
Holistic Ecosystem Health (eg ethical sourcing)
In these terms I propose it is possible to see what supply chain drivers exist in any proposed strategy. The strategy drivers in the proposed New Zealand Freight and Supply Chain Strategy are I also find difficult to see. It appears to be more of a situation and risk analysis.
The same applied in the previous Upper North Island Ports and Shipping Strategy from 2020. I wrote a full strategy in response to the proposal. My strategy included a recommendation for an update to the Port Companies Act to allow co-operation and sharing between ports, and an integrated national port performance management system, in conjunction with the development of 'supply chain clusters', in order to take the strategy, in to operations. Pleased to see that the coastal shipping part has been taken up though.
Just In Time I have seen misunderstood on many occasions recently. In supply chain practice it is nothing more than a philosophy of continuous improvement and waste reduction. The recent over-reaction to stock outs has led to a global situation of over-stocks in many areas. The so called 'bull-whip' effect. Stock level targets can be strategic however, so called 'strategic inventory'. The other problems are that the end to end systems are not integrated so become disconnected if interrupted, and demand often driven by history at each stocking point, resulting in a cumulative 'bull whip' effect.
As a long time and founding logistics and supply chain practitioner in NZ and Australia, it is pleasing to see the efforts go in to try to determine where we should go with our supply chain strategies. The other key strategy that needs to be addressed I believe, is food supply strategy, at regional, and national levels. Two words of caution in supply chain to note, a little bit of knowledge can be dangerous, and everyone is an expert until it comes to doing it!
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