SUBMISSIONS to the Productivity Commission’s interim report on vulnerable supply chains have closed, with several organisations making submissions explaining where they think Australia’s supply chains are vulnerable.

Back in February, Treasurer Josh Frydenberg started this process by requesting the commission undertake an independent review into Australia’s supply-chain vulnerabilities.

The commission released an interim report in March, calling for submissions, which closed last week. The report’s findings focused on the sourcing of goods and products rather than on logistics.

A total of 42 submissions* were submitted to the commission from various parties.

The ports perspective

Ports Australia made a submission to the commission, pointing out that a secure and resilient supply chain is integral to the livelihood of the Australian people and economy.

The ports peak body said that although the Productivity Commission’s report is primarily focused on risks to specific commodities, Ports Australia’s approach takes on a comprehensive examination of vulnerabilities related to the transportation of these commodities.

Ports Australia’s feedback addresses five key risk areas: shipping lines; shipping routes; service provision; worker status; and critical resource and commodity procurement.

All key risk areas address vulnerabilities which have been realised clearer than ever following world events such as the COVID-19 pandemic, Suez Canal blockage and the international seafarer crisis.

Ports Australia CEO Mike Gallacher said he past 12 months have held witness to a challenged yet resilient Australian supply chain despite a multitude of international crises.

“The five key risk areas Ports Australia has addressed are issues which will not go away with the end of the pandemic, or the unblocking of the Suez Canal, they will remain thorns in our side and only become bigger problems when world crises hit, meaning we need action from the top now,” Mr Gallacher said.

“While Ports Australia and other supply chain partners detail a number of key issues and the Productivity Commission is focusing on commodities, it’s important to remember that every link, asset and vulnerability are an interconnected web which will ultimately determine the productivity of our international supply chain.”

Port of Newcastle also made a submission to the commission. It pointed to the fact that some container ports in Australia have experienced terminal congestion recently, with consequences for freight efficiency on the east coast.

“Ultimately this impacts the productivity and efficiency of the national economy and is a supply chain risk,” the submission reads.

“The recent disruption and price increases in container shipping has led to some commodities, such as steel, switching from containers to break bulk. This shift has placed greater pressure on demand for port side storage for weather-sensitive cargo and has resulted in increased shipment costs to domestic and international markets.”

Port of Newcastle in its submission called on the commission to examine the capacity of empty container storage at major Australian container ports, saying Transport for NSW found in 2020 that there is inadequate ECP capacity in Sydney.

“This leads to inefficient movements and extra costs as empty containers are double-handled, adding to congestion around ports,” the Newcastle submission reads.

“During periods of major port disruption vessels often depart port leaving the empty containers behind. This exacerbates the empty container situation leading to inefficiencies and additional costs.”

Port of Newcastle’s submission suggested the establishment of a multi-purpose deepwater terminal at the port would help alleviate congestion issues, support existing supply chains and “provide an opportunity to grow the overall market and help reduce supply-chain risk”.

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The shipper perspective

Rigby Cook Lawyers partner Andrew Hudson wrote in a submission on behalf of the peak industry association Food and Beverage Importers of Australia that there needed to be a focus on import regulatory issues at the border.

Mr Hudson pointed to a specific vulnerability in the supply chain being deficiencies and failings in the electronic systems used by the ABF, DAWE and other agencies to report the movement of goods through the supply chain.

“The significant disruptions to the supply chain occasioned with the introduction of the [ABF’s] Integrated Cargo System and associated new reporting systems in 2005 is a prime example of problems which could arise,” Mr Hudson wrote.

He went on to write that there has been an increasing incidence of outages and delays in the reporting systems used by the agencies at the border, which also threatens the supply chain.

Mr Hudson said both the ABF and DAWE are reviewing their systems and processes to better align their operation, but he cited their “lack of resources, coupled with the slow uptake of technology that may be able to assist processes or support human resources” as an issue.

“The inability to import or source single ingredients can stop production or require a significant change to production (particularly in relation to food and pet food). These issues need to be addressed and one specific recommendation be that proper allocations of funding and other resources be made to deal with current issues,” Mr Hudson wrote.

“All agencies are trying to do more with the same or less money.”

Additionally, Mr Hudson wrote the “sheer complexity of reporting to various agencies” is another specific vulnerability. He wrote that the establishment of a “single window for trade” would help alleviate these issues and called on the Productivity Commission to support such initiatives.

And, like many supply chain participants who submitted to the commission (including the FTA), Mr Hudson pointed out that there is a “real and present danger to the supply chain through congestion”. He also said increased shipping charges of all types by the lines, as well as unregulated landside access fees charged by stevedores were likewise dangers to the supply chain.

“My recommendation (supported by a number of parties) is that Australia needs a new regulator such as the US Federal Maritime Commission,” Mr Hudson wrote.

“That agency would also have authority over the ‘reasonableness’ of detention and demurrage charges which are ruinous … An equivalent Australian agency would be a much-needed body with specialist expertise and powers, serving to fill holes in regulation and removing duplicative and less effective acts by federal and state governments.”

The Apple Isle perspective

The submission from the Tasmanian Department of State Growth pointed out that the island state is heavily reliant on sea freight. More than 99% of the state’s freight by volume is moved by sea, the submission said.

“Any disruption to services across Bass Strait – for example, industrial action at the Port of Melbourne, limitations on container availability and peak period demand for services – can have significant flow-on impacts for businesses,” the submission reads.

“Tasmania has inherent supply chain characteristics that increase vulnerability to external changes. These have been highlighted through COVID-19. We encourage the Inquiry to consider the recent experiences of business through the pandemic, particularly in relation to the impacts of disrupted transport networks and services on supply chain costs, efficiency and reliability.”

*This article has been updated to reflect that there were 42 submissions to the commission. Reporting on further submissions can be found here.

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