Construction sector at risk as suppliers ‘drop’ New Zealand

9 August 2021

 

New Zealand’s construction sector may encounter as many building material suppliers “drop” the country off their supply chains routes, New Zealand Building Industry Federation has warned
Federation chief executive Julien Leys said post-pandemic reviews of business models by global shipping and building supply companies have resulted in many supply routes now only going as far as Australia.
Leys said he had spoken to construction companies which had been forced to spend up to $65,000 per week on shipping costs to ensure security of supply.
Maritime Union of New Zealand said the country needs to develop its own shipping capacity to respond to shipping congestion and avoid dependence on overseas shipping firms which have other priorities.
The union’s national secretary, Craig Harrison, said there needed to be an innovative response to ongoing shipping congestion and that New Zealand needed to build a level of redundancy into its system.
This would ensure it was not left struggling for options to ship freight whenever global conditions change.
Harrison said the shortage of global shipping capacity had led to ongoing congestion and delays in New Zealand’s supply chain and there is no indication when this situation might end.
This week, drug manufacturer AFT Pharmaceuticals and sports and homeware retailer Briscoe Group told radio station RNZ they had each invested in extra inventory to guard against shipping delays.
"We took the decision to invest approximately $10m into inventory because we foresaw the potential for global supply chain disruptions," AFT chief executive Hartley Atkinson said.
And Briscoe Group managing director, Rod Duke, told RNZ the company was holding 15% more inventory than usual, and added that many more retailers are unable to fill their shelves.
Trina Farr, business manager for New Zealand construction market intelligence company Pacifecon, said the construction sector was seeing increased demand from local firms.
“Some (companies) are ordering stock as soon as they’ve won a job, despite the project not commencing for some time. Some businesses have completely reviewed their purchasing and project management systems,” she said.
Also, Leys said other issues such as the rising prices of materials worldwide and reduced margins were threatening the construction industry.
A shortage of skilled labour is adding to capacity issues, with Leys estimating the country requires about 60,000 additional construction workers.
Building firms are also worried that Australia’s giant infrastructure-building programme might attract skilled workers away from New Zealand.
Leys quoted a report by Statistics NZ in September 2020 which said New Zealand’s Alert Level 4 lockdown had delayed building projects by six to seven weeks and that some could now be facing delays of up to eight months.
“Before Covid the supply chain appeared to be fine, but the pandemic exposed the fact it was a lot more fragile than anybody realised. We have to find a way to manufacture things ourselves and fill those supply gaps,” he said.

New Zealand’s construction sector must diversify as many building material suppliers “drop” the country off their supply chains routes, New Zealand Building Industry Federation has warned

Federation chief executive Julien Leys said post-pandemic reviews of business models by global shipping and building supply companies have resulted in many supply routes now only going as far as Australia.

Leys said he had spoken to construction companies which had been forced to spend up to $65,000 per week on shipping costs to ensure security of supply.

Maritime Union of New Zealand said the country needs to develop its own shipping capacity to respond to shipping congestion and avoid dependence on overseas shipping firms which have other priorities.

The union’s national secretary, Craig Harrison, said there needed to be an innovative response to ongoing shipping congestion and that New Zealand needed to build a level of redundancy into its system. This would ensure it was not left struggling for options to ship freight whenever global conditions change.

Harrison said the shortage of global shipping capacity had led to ongoing congestion and delays in New Zealand’s supply chain and there is no indication when this situation might end.

Trina Farr, business manager for New Zealand construction market intelligence company Pacifecon, said the construction sector was seeing increased demand from local firms.

“Some (companies) are ordering stock as soon as they’ve won a job, despite the project not commencing for some time. Some businesses have completely reviewed their purchasing and project management systems,” she said.

Also, Leys said other issues such as the rising prices of materials worldwide and reduced margins were threatening the construction industry.

And a shortage of skilled labour is adding to capacity issues, with Leys estimating the country requires about 60,000 additional construction workers. Building firms are now worried that Australia’s giant infrastructure-building programme might attract skilled workers away from New Zealand.

Leys said: “Before Covid the supply chain appeared to be fine, but the pandemic exposed the fact it was a lot more fragile than anybody realised. We have to find a way to manufacture things ourselves and fill those supply gaps.”

New Zealand’s supply issues go beyond construction and this week, drug manufacturer AFT Pharmaceuticals and sports and homeware retailer Briscoe Group told radio station RNZ they had each invested in extra inventory to guard against shipping delays.

"We took the decision to invest approximately $10m into inventory because we foresaw the potential for global supply chain disruptions," AFT chief executive Hartley Atkinson said.

And Briscoe Group managing director, Rod Duke, told RNZ the company was holding 15% more inventory than usual, and added that many more retailers are unable to fill their shelves.

LATEST
JOBS
Canary Wharf, London (Greater)
£33,119 - £37,209 pa
CMA
Canary Wharf, London (Greater)
£41,673 - £45,337 pa
CMA
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE