Covid disrupts just-in-time delivery but good news for blockages

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Business

Import / export companies are turning to storage facilities as an alternative to just-in-time shipping.

Kennards self-storage operations manager Andrew Kirkham said the past year had been “unprecedented” in the company’s 50-year history.

“When Covid arrived, I didn’t know what would happen. If someone had said we would have significant demand in 2021, I would have been surprised.”


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Previously, Covid’s storage facilities were 80% occupied, but now well over 90% of its storage spaces are occupied.

“We have experienced unprecedented growth in all areas. We have been fortunate to have strong demand across the country,” Kirkham said. “People are willing to pay monthly for large spaces because they just don’t know when they will have upcoming shipments.”

Everyone from retailers to businesses hires large storage facilities to store goods in short supply, he says.

Kennards recently opened a new 6,000 square meter storage building on Auckland’s North Shore, and it recorded the best occupancy in its first month than any of its other stores.

Sarah Bola, owner of an online business in Auckland, said shipping delays pushed the arrival times of her custom-made shoes back by two weeks.

Bola started Sandy Days three years ago, after the birth of her son, as a side business. It has since become a full time business.

She says that before Covid, customers could expect to receive their personalized shoes in two weeks, now it takes around three to four weeks.

Bola, which also sells clothing, is stocking items at her home to avoid shipping delays. But the shoes, which are custom made, make it more difficult to bulk order and stock.

She says if things continue as they are, she may also have to consider renting a warehouse.

International freight costs have increased “exponentially” since Covid, she said.

While there have been several pain points, Bola says it’s not all bad news. Pent-up demand from consumers means his incomes have increased by about 300% since the pandemic.

“We’re just rolling with the punches,” she said.

Export NZ executive director Catherine Beard says companies are holding more inventory because no one can count on the movement of goods “just in time”.
Photo: Supplied

Export NZ executive director Catherine Beard said companies are holding more inventory because no one can rely on the “just-in-time” movement of goods.

“In some ways, this has exacerbated the constraints on the supply chain,” says Beard. “It’s also more expensive because companies have a lot of money in inventory and have to rent places to store that inventory.”

The just-in-time movement began in the Japanese auto industry in the 1960s, as a simple reform of supply chain management to reduce overhead costs by removing internal storage.

Instead, they bought parts as and when they needed them. For this to work, supply chains had to be reliable.

“Almost everyone is affected by this, so inevitably the price increases will trickle down to the customer until the problem is resolved.”
– Catherine Beard, Export NZ

But Covid has put a wrench into the work, and a number of issues, including increased customer demand and epidemics closing factories, have caused significant delays in international shipments.

Shipping companies have also made huge profits due to supply chain delays linked to Covid.

Sea Intelligence industry analysts have reported that the world’s 11 largest shipping companies reported combined profits of US $ 16.2 billion in the first quarter of this year alone. That’s more than the combined profit of US $ 13.3 billion they posted in the second half of last year.

To put it in perspective, according to Sea Intelligence, in the decade through last year, a carrier has only twice recorded operating profit of over US $ 500 million.

Beard says that for a number of years the shipping lines barely made any markups because there was oversupply, and the shipping industry says that is a correction.

These transportation problems are expected to last at least another two years, she said.

Beard says that because shipping issues are felt internationally, customers will end up paying the costs that businesses bear.

“Almost everyone is affected by this, so inevitably the price increases will be passed on to the customer until the problem is resolved.”

Meanwhile, Kennards boss Kirkham said the company was looking to expand its footprint with more stores slated to be built in the regions.

“We have just expanded our Hawkes Bay store and look forward to confirming some acquisitions in the next quarter.”

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