Ai Group reports on Australia’s supply chain vulnerabilities

supply chain

Ai Group, the national employer association, has released the Australian Supply Chains: State of Play report to explore current business experience associated with supply chain pressures (particularly as they relate to sea freight), and connected impacts in other areas of policy. 

The aim is to identify possible constructive solutions and pathways forward. 

“The COVID-19 pandemic has exposed deep weaknesses in the operations of global and domestic supply chains and laid bare many Australian vulnerabilities, as an island nation with 98 per cent of trade and most jobs connected to or reliant on sea freight in some way,” Ai Group chief executive Innes Willox said. 

“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.” 

According to Willox, these pressures can undermine Australia’s economic recovery from the pandemic and 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,” he said. 

“There is 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).” 

As part of the report, Ai Group asked businesses if their ability to source inputs in 2021 had changed compared with 2020. Almost two-thirds (65 per cent) reported that sourcing the usual inputs was more difficult in 2021 than the previous year. 

“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,” Willox said. 

“27 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. 

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,” 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.” 

A copy of the full report is available here. 

 

Responses to this survey were received from the CEOs of 346 private-sector businesses across Australia in October 2021. Together, these businesses employed 119,827 people (378 people in each business on average) and had an aggregate annual turnover of around $74 billion in 2021. 

All Australian states and all major non-farm private-sector industries are represented in the survey.