3
22 / The National Business Review October 3, 2014 Wherever the current New Zealand boom lands us in the next 50 years, the fundamental industry facilitating that growth relies on the ships, roads, rail, trains and containers. How the puzzle fits together will require cooperation, greater efficiencies, smarter thinking and infrastructure upgrades. The question is: is New Zealand Inc up to the task? Special Report Freight, shipping, logistics and storage Air is no longer New Zealand’s most-shipped good, finally Nathan Smith Anybody who has tried to ship freight to one of New Zealand’s ports might have noticed a few inefficiencies along the way. Now, some of those ports are working together to streamline the process One inefficiency is the sheer number of ports. There can’t be nearly enough freight to justify them all. Some have overlapping areas of responsibility, and it makes sense to try for greater collaboration. Perhaps because New Zealand industry produced so little for so long – or maybe because no one noticed – but New Zealand’s most-shipped product for years was air. Containers would land at a port before being transported down country to various destinations. Once the job was complete, the container made its way back to the port for storage, hopefully with new goods inside. Without wanting to sound too cartoonish, if a trusty kiwifruit grower or lamb provider has enough goods for shipping internationally they’ll then order a container. Sure enough, an empty container turns up at the yard freshly driven from its home 500km away in Auckland. It seems like a workable system until you look a bit closer. Ports of Auckland programme manager Dale Harrison says until they focused on a more efficient method, they were essentially shipping oxygen down the most expensive road route in the country. “Simplistically, all the empty containers are in Auckland, while all the cargo is down country,” he says. “As long as you’re shipping air around the country, you’re not utilising resources. If we clean that up, it buys us a whole lot of addi- tional capacity and lowers costs.” University of Waikato professor of man- agement systems Eric Deakins says cleaning up New Zealand’s supply chain now is better late than never. “This is really part of a global trend of consolidating freight, moving it and dealing with it long before it gets to the port. I guess today is the day, you can’t turn clocks back and the reasons we are here are many and complex. “Although the answer is obvious when it’s presented, a lot of these problems are not actually that trivial given that there are often a lot of different ways of achieving the same thing. But it’s good to see some more orches- tration taking place to work in certain new ways which should benefit everyone,” Pro- fessor Deakins says. One reparative option is putting goods in the empty container as it travels south. Two birds, one stone. But that’s not always appli- cable especially with time-sensitive prod- ucts like fresh fruit. The other option is creating hubs along the route where empty containers can loiter closer to the centre of New Zealand’s pro- duce gravity. “We’re now trying to take transport moves out or fill it with cargo. So the kilometres travelled are a lot less. Intermodal freight hubs makes it more efficient to deliver prod- uct in and out,” Mr Harrison says. To a large -– and worrying – extent the supply chain has always looked like this. But it took until 2014 to work on cooperative fixes because many of New Zealand’s port systems needed ironing out first, including parts of the administration and management. Conlinx chief executive Stephen Owles says the issues “inside the gate” (on the wharf ) needed addressing first. “Sort your own house out, then sort the rest of the supply chain out. And that will instigate a behaviour change in the mar- ket. That waste has always been there – it’s just how we make NZ Inc more efficient. We couldn’t do that before,” he says. Mr Owles says as long as the supply chain ships air around the country, the precious resources aren’t being utilised properly. “There’s also a change in the industry where we’re starting to get people to actually think more carefully about the way they run their supply chain and how they move their freight, rather than just let it happen. “If we clean that up, it buys us a whole lot of additional capacity. A lot of the infrastruc- ture is in place – we’ve just got to use it more smartly,” he says. A quick story is in order to help paint the picture of how convoluted New Zealand’s supply chain has been in the past. Fonterra used to rent a shed inside the gates at Ports of Auckland where it boxed and packaged milk powder. Bizarrely, its freight would then be loaded on to a train bound for Tauranga 250km away from Auckland. Once it arrived in Tauranga, the milk powder was loaded on to a waiting contain- er ship, which still had to make a port visit to Auckland before steaming to Australia. If you think there are some inefficiencies in this process, you’re not alone. Zurich head of marine business Matthew O’Sullivan says logistics is an extraordinar- ily competitive part of the industry. But the concept of NZ Inc could be a good opportu- nity for more cooperation. “New Zealand isn’t alone in trying to make this whole logistics thing more efficient. “A lot of the ports here are driven by spe- cific accounts so the actual customer from a port’s point of view ends up having a con- trolling element in some of the infrastruc- ture development,” he says. Professor Deakins says New Zealand’s supply chains are, for want of a better word, quite primitive. He thinks it has more to do with New Zealand sitting a long way from anywhere, by which he means it is relatively isolated from the latest trends. For example, Europe’s Rotterdam port is CONTAINERS: Ports are trying to pull the air out of them MATTHEW O’SULLIVAN: Logistics is an extraordinarily competitive part of the industry Simplistically, all the empty containers are in Auckland while all the cargo is down country Continued on P6 Over 100 years of global marine experience makes one insurer stand out. For security and expertise choose Zurich’s dedicated team of marine insurance specialists. Zurich Australian Insurance Limited (incorporated in Australia) Trading as Zurich New Zealand. ABN 13 000 296 640, AFS Licence No: 232507 Zurich House: Level 16, 21 Queen Street Auckland Central 1010 www.zurich.co.nz You can minimise your overseas exposures with our global reach and product coverage that is tailored to your business needs. Whether your cargo travels by rail, land, sea or air we understand the complexities you face daily. With Zurich’s century of technical marine expertise, including claims and risk engineering, you can rely on us. Zurich New Zealand is at the forefront of marine insurance. Contact us for more information or visit www.zurich.co.nz/content/marine-logistics-insights-nz. ZU22315

storage - The National Business Review · the container made its way back to the port for storage, ... University of Waikato professor of man - ... Continued on P6 Over 100 years

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22 / The National Business ReviewOctober 3, 2014

Wherever the current New Zealand

boom lands us in the next 50 years,

the fundamental industry facilitating

that growth relies on the ships, roads, rail,

trains and containers. How the puzzle fits together will

require cooperation, greater efficiencies,

smarter thinking and infrastructure

upgrades. The question is: is New

Zealand Inc up to the task?

Special Report

Freight, shipping, logistics and storage

Air is no longer New Zealand’s most-shipped good, finallyNathan Smith

Anybody who has tried to ship freight to one of New Zealand’s ports might have noticed a few inefficiencies along the way. Now, some of those ports are working together to streamline the process

One inefficiency is the sheer number of ports. There can’t be nearly enough freight to justify them all. Some have overlapping areas of responsibility, and it makes sense to try for greater collaboration.

Perhaps because New Zealand industry produced so little for so long – or maybe because no one noticed – but New Zealand’s most-shipped product for years was air.

Containers would land at a port before being transported down country to various destinations. Once the job was complete, the container made its way back to the port for storage, hopefully with new goods inside.

Without wanting to sound too cartoonish, if a trusty kiwifruit grower or lamb provider has enough goods for shipping internationally they’ll then order a container.

Sure enough, an empty container turns up at the yard freshly driven from its home 500km away in Auckland. It seems like a workable system until you look a bit closer.

Ports of Auckland programme manager Dale Harrison says until they focused on a more efficient method, they were essentially shipping oxygen down the most expensive road route in the country.

“Simplistically, all the empty containers are in Auckland, while all the cargo is down country,” he says.

“As long as you’re shipping air around the country, you’re not utilising resources. If we clean that up, it buys us a whole lot of addi-tional capacity and lowers costs.”

University of Waikato professor of man-

agement systems Eric Deakins says cleaning up New Zealand’s supply chain now is better late than never.

“This is really part of a global trend of consolidating freight, moving it and dealing with it long before it gets to the port. I guess today is the day, you can’t turn clocks back and the reasons we are here are many and complex.

“Although the answer is obvious when it’s presented, a lot of these problems are not actually that trivial given that there are often a lot of different ways of achieving the same thing. But it’s good to see some more orches-tration taking place to work in certain new ways which should benefit everyone,” Pro-fessor Deakins says.

One reparative option is putting goods in the empty container as it travels south. Two birds, one stone. But that’s not always appli-cable especially with time-sensitive prod-ucts like fresh fruit.

The other option is creating hubs along the route where empty containers can loiter closer to the centre of New Zealand’s pro-duce gravity.

“We’re now trying to take transport moves out or fill it with cargo. So the kilometres travelled are a lot less. Intermodal freight hubs makes it more efficient to deliver prod-uct in and out,” Mr Harrison says.

To a large -– and worrying – extent the supply chain has always looked like this. But it took until 2014 to work on cooperative fixes because many of New Zealand’s port systems needed ironing out first,

including parts of the administration and management.

Conlinx chief executive Stephen Owles says the issues “inside the gate” (on the wharf) needed addressing first.

“Sort your own house out, then sort the rest of the supply chain out. And that will instigate a behaviour change in the mar-ket. That waste has always been there – it’s just how we make NZ Inc more efficient. We couldn’t do that before,” he says.

Mr Owles says as long as the supply chain ships air around the country, the precious resources aren’t being utilised properly.

“There’s also a change in the industry where we’re starting to get people to actually think more carefully about the way they run their supply chain and how they move their freight, rather than just let it happen.

“If we clean that up, it buys us a whole lot of additional capacity. A lot of the infrastruc-ture is in place – we’ve just got to use it more smartly,” he says.

A quick story is in order to help paint the picture of how convoluted New Zealand’s supply chain has been in the past.

Fonterra used to rent a shed inside the gates at Ports of Auckland where it boxed and packaged milk powder. Bizarrely, its freight would then be loaded on to a train bound for Tauranga 250km away from Auckland.

Once it arrived in Tauranga, the milk powder was loaded on to a waiting contain-er ship, which still had to make a port visit to Auckland before steaming to Australia. If you think there are some inefficiencies in this process, you’re not alone.

Zurich head of marine business Matthew O’Sullivan says logistics is an extraordinar-ily competitive part of the industry. But the concept of NZ Inc could be a good opportu-nity for more cooperation.

“New Zealand isn’t alone in trying to make this whole logistics thing more efficient.

“A lot of the ports here are driven by spe-cific accounts so the actual customer from a port’s point of view ends up having a con-trolling element in some of the infrastruc-ture development,” he says.

Professor Deakins says New Zealand’s supply chains are, for want of a better word, quite primitive. He thinks it has more to do with New Zealand sitting a long way from anywhere, by which he means it is relatively isolated from the latest trends.

For example, Europe’s Rotterdam port is CONTAINERS: Ports are trying to pull the air out of them

MATTHEW O’SULLIVAN: Logistics is an extraordinarily competitive part of the industry

Simplistically, all the empty containers are in Auckland while all the cargo is down country

Continued on P6

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Zurich Australian Insurance Limited (incorporated in Australia) Trading as Zurich New Zealand. ABN 13 000 296 640, AFS Licence No: 232507Zurich House: Level 16, 21 Queen Street Auckland Central 1010 www.zurich.co.nz

You can minimise your overseas exposures with our global reach

and product coverage that is tailored to your business needs.

Whetheryourcargotravelsbyrail, land, seaorairweunderstand

thecomplexitiesyoufacedaily.WithZurich’scenturyoftechnical

marine expertise, including claims and risk engineering, you

can rely on us. Zurich New Zealand is at the forefront of

marine insurance. Contact us for more information or visit

www.zurich.co.nz/content/marine-logistics-insights-nz.

ZU22315

Jamie Ball

The changing face of international freight is likely to have significant long-term con-sequences for New Zealand in the cost and time of importing and exporting product, but how prepared is this country for those changes?

As over 90% of product leaves or enters this remote south Pacific nation by contain-er ship, issues such as vessel capacity, the rationalisation of ports, offshore hubs, slow steaming and climate change may prove paramount to the future of New Zealand trade.

Firstly, container sizes are increas-ing from the standard 20ft model to 40ft, thereby requiring much larger vessels. Over recent decades, most container ships servic-ing New Zealand have been in the 4000 to

6000 TEUs (20ft equivalent units). Ultra large container vessels (ULCV)

introduced in the past five years in some international mega-ports can hold 15,000 to 18,000 TEUs but no port in New Zealand can accommodate such behemoths as yet.

NZI marine manager Mark Roelink says there is much debate as to how such devel-

opments may affect New Zealand’s trade.“Tauranga is undergoing some work

so that it will eventually be able to handle about 7000 TEU containers. But as more and more product is building up in the port and going on a vessel, we need to buy higher levels of cover, which obviously makes the insurance more expensive.”

Mr Roelink says if the ULCV become standard in international freight and New Zealand cannot accommodate those ves-sels, offshore hubs may be our only option: product freighted to large, deep-water ports in Australia, for example, where it is then reloaded onto ULCVs.

“For us, there is a huge issue with perish-able products, which is a lot of the product that New Zealand exports. If we have to start going via Australia, that would be a con-cern,” Mr Roelink says.

Similarly, the issue of slow steaming could prove an impediment to trade. Before the global financial crisis, Mr Roelink says

container ships typically travelled at 24-26 knots, whereas after it there was less capac-ity needed on shipping routes. As a result, freight companies started travelling at around 18 knots, to make significant savings on fuel.

“They will always argue they have reduced their emissions, which is true – but it has also reduced their costs. But you do question, if global demand picks up again, whether they will go back to steaming at the proper speed,” Mr Roelink says

“We do a lot of perishable products, so the longer it takes the vessel to get to Eng-land, for example, that reduces the shelf life in stores. That’s an ongoing issue we will have to face: if they slow down speeds even further, can we get our perishable products to our key market or do we have to start doing more air freight?”

Despite the rise of extreme global weath-er patterns in the last decade, Mr Roelink says marine insurance remains a minor component in international freight, and has even reduced in price over the last 20 years.

This is partly because handling methods have become more sophisticated and there have been cost reductions in marine insur-ance companies, owing to fewer staff deal-ing with more claims, aided by numerous digital-age efficiencies.

Mr Roelink adds that he has not seen any direct evidence in the marine freight indus-try that climate change is making the cost of importing and exporting to New Zealand any more expensive.

“However, since the GFC the traditional reinsurance companies are facing competi-tion from the pension funds. There are now alternative sources for that catastrophe premium.

“I would say if investment returns improved internationally, and that money came out of the insurance market, then reinsurers could charge what they wanted to and you may find there is an increase in costs.”

[email protected]

It’s freight but not as we know it

24 SPECIAL REPORT: FREIGHT, SHIPPING, LOGISTICS AND STORAGE / The National Business ReviewOctober 3, 2014

New Zealand’s freight task is projected toincrease by around 50% over the next 30 years,with volumes in the upper North Island regionprojected to grow by 59%¹.

The Symposium programme will be driven by such vitalquestions as:

• What are the challenges andopportunities for New Zealand’sgrowing freight task?

• How can we collaborateto achieve the best possible21st century multi-modaltransportation model?

Limited attendee numbers to encourage open and lively debate, plusleading industry and academic speakers from within New Zealand andoverseas, will ensure the Symposium provides a unique opportunity toexplore the intermodal linkages of an integrated supply chain capableof transforming New Zealand’s international competitiveness.

[1] Ministry of Transport’s National Freight Demand Study 2014

NEW ZEALAND’S GROWING FREIGHT TASK

UNIVERSITY OF WAIKATO SUPPLYCHAIN LOGISTICS SYMPOSIUM

SAVE THE DATE; PARTICIPATE IN THE SYMPOSIUMThursday 20th to Friday 21st November 2014

Gallagher Academy of Performing Arts, The University of Waikato, Hamilton

For further information and to register your interest: www.waikatologistics.co.nz

Otago University’s Department of Marketing professor James Henry says the changing face of freight only affects the transportation methods and the price of goods in and out of New Zealand when freight prices rise again.

“But it hasn’t been rising significantly, because of the downturn in shipping brought on by the economic decline in world trade. So there have been excess ships wanting to come into New Zealand.”

Prof Henry says freight costs have stayed low in recent years and are about 10-20% lower than before 2008.

“There was an all time high just before the financial crisis, and then it slipped back considerably. There has been a surplus of shipping in and around New Zealand since,” Prof Henry says.

Prof Henry lectures in pricing and distribution as well as the financial aspects of marketing, but also

has hands-on international business experience.He added that he does not believe climate

change will impact upon the logistics of New Zealand trade unless this country experiences a significant “left-wing swing” in government.

Problem? What problem?

MARK ROELINK: Says there is much debate about the effect of giant-sized ships on New Zealand’s ports

NOT MUCH CHANGE:

Professor James Henry says only

transportation methods and prices when

freight prices rise will change

SPECIAL REPORT: FREIGHT, SHIPPING, LOGISTICS AND STORAGE 25The National Business Review / October 3, 2014

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NBR0930 09/14

Global shipping could bounce back after long hiatusNathan Smith

The international shipping industry accounts for approximately 90% of global trade by volume and is essential for connect-ing large areas of the world.

However, the industry has faced some serious trials over recent years it is only starting to recover from.

Overall confidence levels in the industry fell slightly in the three months to August 2014, according to Moore Stephens’ latest Shipping Confidence Survey.

Nevertheless, confidence in shipping is still significantly higher than the same peri-od 12 months ago. Even more encouraging is the news that industry confidence will reach a six-year-high in 2014 among charterers.

Late last month, Danske Bank also released a positive credit analysis of the global shipping industry predicting the

industry may be at the beginning of a five to seven-year upturn.

The report says shipping cycles histori-cally last five to seven years, with 2014 look-ing to be the first year in the recovery stage and moving toward mid-cycle earnings.

“We’re seeing a positive trend in the ship-ping market. This applies broadly across the segments, including chemical tankers, though we don’t believe this market will real-ly take off until 2015 or 2016,” says Danske Bank shipping analyst Bjorn Kristian Roed.

Both reports suggest the shipping indus-try could be climbing out of a multi-year fiscal hole which began after the 2008 global financial crisis.

The good news comes at a time when the global shipping industry is broadly oversup-plied. Shipping rates have plummeted in

The big focus for shipping lines is to take costs out

because they’re all sitting in the red

Continued on P26

surrounded by its market – it’s immedi-ately in your face, he says.

“Because there is a six-week delay from when we send dairy product off-shore until it arrives in Europe, we tend to view things down the wrong end of a tel-escope – there’s not that immediacy,” Prof Deakins says.

So for that reason and the fact that education of executives has perhaps been lacking, New Zealand’s elaborate supply chain has taken its toll on forming good answers for tough problems.

“Internally companies are often quite efficient but they’re not necessarily doing the right things or doing things that could be considered world-class.

“In the North Island there is a lot going on between the Ports of Auckland and Port of Tauranga and the new inland port in Hamilton. So there’s a lot of change in the air,” Prof Deakins says.

Each of these changes has the poten-tial to affect every other part of the New Zealand trade system, but it will take a while to work out what the new land-scape will look like.

“All of that is good because at least something is happening in a part of the world where for a long time not a great deal has happened,” the University of Waikato professor says.

Mr O’Sullivan thinks there might be more room to move in getting the various New Zealand ports to consolidate and cooperate further.

“I’m not sure why they wouldn’t come together. You could easily have a NZ ports infrastructure.

“Ports are certainly merging in Austral-ia because it doesn’t take a rocket scien-tist to work out that merging three ports in the Sydney basin, for instance, would bring a better return on their capital investment,” he says.

[email protected]

I’m not sure why they wouldn’t

come together Matthew O’Sullivan

Global shipping could bounce back after long hiatus

26 SPECIAL REPORT: FREIGHT, SHIPPING, LOGISTICS AND STORAGE / The National Business ReviewOctober 3, 2014

With inland ports in Palmerston North and South Auckland, plus fast, efficient connections between them, Ports of Auckland is bringing foreign markets closer. Ports of Auckland, your choice.

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Bringing the port to you

From P22

Air is no longer New Zealand’s most-shipped good, finally

recent years because supply far outstrips demand.

“Excessive tonnage is still a major con-cern,” the Moore Stephend survey says.

“The amount of anticipated significant new investment over the next 12 months was down over the three-month period as were levels of expectation with regard to improved freight rates in the dry bulk and container ship sectors. Once again, the dominating concern among respondents was the perceived adverse effect on the market of an excessive amount of ton-nage,” it says.

Some shipping companies have sought to capitalise on the low demand-high sup-ply situation by buying newer, larger ships at basement prices to remain competitive. Now, as demand might rise again, by the time these ships become operational the industry may start to assuage its oversup-ply problem.

Since 1734, the industry has weathered more than 20 boom-bust cycles, popping up about once per decade as indicated in the Moore Stephens report. The most recent bust cycle in 2004-08 affected each of the industry’s main categories: tanker, dry bulk and container.

The industry has far more ships than it needs now and Ports of Auckland pro-gramme manager Dale Harrison says many of the lines are looking at a long crawl back into the black.

“Most shipping companies tend to reduce the price of their services in an effort to underbid their competitors.

“They’re now asking: how quickly can I get my ship in and out of your port because each minute that ship sits there costs me money and it’s delaying my schedule? If I can stick to my schedule of make-up time, I can steam slower and save costs? If I’ve got here late and pro-ductivity is up I can turn my ship around quickly to make up time?

“From a ship’s point of view, that pro-

ductivity is important. The big focus for shipping lines is to take costs out because they’re all sitting in the red,” Mr Harrison says.

Ships are long-term investments that can offer returns for 20 or 30 years, so stocking up on large vessels now is a sound business strategy. History suggests the industry is bound to pick up again at some point during the lifetime of a com-mercial ship.

In terms of capital expenditure, the cost of a ship soaks up a disproportionately large fraction determining how profitable a vessel will be over the course of its life-time. Low ship prices today should set the industry on a good footing if the economy picks up as predicted.

And the larger the ship, the cheaper the prices for customers. Maersk, which dominates nearly 70% of the New Zea-land shipping industry, recently chris-tened the first ship in its Triple-E line, which is now the largest line of container ships in the world.

These vessels measure an enormous 0.4 of a kilometre long and can hold roughly 11% more cargo than their nearest com-petitors. However, if the next boom cycle doesn’t arrive soon as planned, these types of newly acquired ships will only aggravate the industry’s problems.

“The shipping markets are still unpre-dictable, and much will depend on politi-cal and economic developments between certain nations and on the easing or intensifying of economic embargoes,” the Moore Stephens report says.

Dale Harrison says Ports of Auckland is focusing on getting the costs right so it doesn’t have to increase charges for ship-ping lines.

“Our productivity keeps the costs down so we don’t have to push charges on to the shipping lines, because they’re push-ing all the time for costs to drop so they can move from the red to the black.” Mr Harrison says.

[email protected]

From P25

SPECIAL REPORT: FREIGHT, SHIPPING, LOGISTICS AND STORAGE 27The National Business Review / October 3, 2014

This week’s drop in the exchange rate will bring some welcome relief for exporters who, for some time now, have had to deal with a situation not of our making.

New Zealand is largely a taker when it comes to exchange rates. Notwithstanding tough talk from the governor of the Reserve Bank and even occasional dollar sales, the value of our currency is set more by actions in Washington than Wellington.

This is particularly galling for exporters who, day by day, have to make decisions that affect not only their business but also collectively the whole country.

New Zealand lives by trade. The returns from exporting and New Zealand’s offshore investments pulse back into the economy and provide the funding for a world class health, education and social welfare sys-tem. Money for kohanga reo, hip replace-ments and training initiatives does in fact grow on trees – and on the land, in the sea, in the factory and the lab.

Yet for all the daily successes of New Zealand exporters – and there are many – collectively our performance is not what it could be. Not only do we have a low rate of trade as a share of GDP compared to countries of similar size, our exports are not growing as fast as others’ and our export strengths are focused in a few areas. None of this is new and the causes have been analysed in multiple reports – size, scale, distance from markets are all factors.

What is new is the way business is being done today. Recent years have seen the growth of highly complex global value chains which link supply to demand the world over.

Goods often are no longer sold just to one end-customer. They pass through multiple stages of processing across differ-ent geographies before they reach the final consumer. About a third of international trade is taken up by these “intermediate goods.”

Embedded services – such as after-sales care – form part of the supply of goods. Data accompanies goods as they move through the supply chain, providing infor-mation for suppliers, customers and regu-lators alike. Services are also increasingly exported – whether through education, consultancy or other professional services.

New Zealand exporters are already adapting to this new business model, forg-ing more sophisticated relationships and

supply arrangements. Government policies also need to adapt.

That’s because increasingly our national economic performance will depend on our ability to link to these global value chains.

The government needs to pay no less attention to the business environment – fis-cal discipline, innovation, investment – but more research is required about how we are doing in relation to these global value chains and what sort of support policies are required to anchor ourselves in this new business reality.

The panoply of government agencies involved in the export sector – NZTE, MFAT, MBIE, MPI – and the nation’s universities and research bodies need to align in this effort. A deeper understanding of these matters the part of the country’s political leaders would also help.

Above all, we must continue to ensure New Zealand can link effectively with the rest of the world through a series of trade and economic agreements that will enable enterprises to operate more effectively across multiple jurisdictions.

The Trans Pacific Partnership (TPP) is an example of one such agreement. Progress in TPP is frustratingly slow and depress-

ingly controversial. It is worth persevering with because it seeks to respond to the new business models now being developed and because it is designed as a pathway to wider economic integration in the Asia Pacific region.

When the negotiation is finished, and the results are made available for all to see, a strong effort will be required to convince the public that the final agreement is in the nation’s interest. Business will need to play its part in this effort.

Competition today is less between countries than between competing value chains. New Zealand’s ability to participate depends on the extent to which we can develop greater flexibility in becoming part of these value chains and integrating more deeply into global markets.

Beyond managing the exchange rate, we need inspirational business leadership, the commitment of our workforce, encourag-ing government policies and bipartisan support from across the political spectrum.

Stephen Jacobi is executive director of the New Zealand International Business Forum (www.nzibf.co.nz)

Lifting export performanceNew Zealand’s export effort needs to reflect the growing importance of global value chains writes Stephen Jacobi

STEPHEN JACOBI: Addressing the Japan NZ Partnership Forum

Pulling together the strands of New Zealand’s supply chain brings to mind the oft-quoted idea of “NZ Inc.” However the concept never appears to be more than an ephemeral notion, especially when most businesses still prefer to work in competition to each other.

New Zealand can act a bit like a dog sled with all the dogs pulling in different directions. It slides forward but nowhere near as efficiently as it could.

But, as the concept gains more purchase, some in the shipping and logistics industries are embracing the idea by working together to streamline their fundamental operations.

University of Waikato professor of management systems Eric Deakins says NZ Inc is a good idea, if it can work.

“In principle, anything is feasible along these

lines but the practice is somewhat different. There does seem to be a turning of the tide in terms of how people see NZ Inc and this notion that we can be better and efficient.

“What’s the point of polishing something that’s no longer suitable for the task? We need a step change in how we do things, then we can worry about becoming more efficient for the next phase,” he says.

Ports of Aucklands programme manager Dale Harrison suggests the efficiencies have to be about longevity if they’re to truly work.

“If we’re able to create the most efficient, reliable and cost effective supply chain that’s sustainable, the business will come. Sustainability is a huge part of what we’re trying to pull together here. It’s got to last to future-proof NZ Inc,” Mr Harrison says.

Aligning the NZ Inc dog sled