31 August 2022
22 min read
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Whenever there’s a ‘push’, such as a global financial crisis, or pandemic, we see significant change. In the next three years, we will experience this change. Add changing technology and geo-political uncertainty into the mix and these changes are forever.
Supply chains are an example of a ‘forever’ change. Supply chains effect every business and consumer. Whilst dynamic at the best of times, the effect of the pandemic, technology and politics is transforming and will continue to transform supply chains.
Managing these changes and their impact on economies and societies, in particular encouraging innovative solutions, present a challenge to local and international regulators.
We still don’t know the true transformative effects of the pandemic. However, at the very least, it has fractured globalisation. While people couldn’t travel, freight continued to and often with renewed urgency and in greater volumes. The human element was often the ‘weak link’ in supply chains with healthy labour at (and remaining at) a premium.
The effects of the pandemic have been exacerbated globally by the Chinese government’s ‘zero-COVID’ policy by which it has tried to eradicate COVID altogether, rather than reach an uneasy accommodation with the disease as much of the West has done.
This has had a dramatic impact on the export of Chinese manufactures and the efficiency of Chinese ports. These disruptions have had a domino effect particularly on the world’s shipping fleet, reducing the availability of products and pushing up the prices (including through increased freight rates) of those products which are still available.
Where people are fragile, technology is less so. New technologies are and will increasingly be, instrumental in supply chains; resilience is now key, alongside efficiency; ensuring that supply chains can withstand shocks, so that food, fuel and medicine will continue to reach the consumer.
There is a digital transformation taking place. The CSIRO is describing it as a ‘digital tsunami’[1]. Supply chains will be at the centre of this transformation with much of it originating here in Sydney. Wisetech Global is an Australian logistics technology company with a global reach. Its innovative technology platforms are being developed in Sydney and deployed to logistics companies globally. Its products have the potential to be transformative to international supply chains including with the development of electronic bills of lading (eBL). The growth of companies such as WiseTech Global (alongside Atlassian) in Sydney is not to be underestimated. Sydney is fast developing as a hub for new and innovative technologies.
The other technology ‘pushing’ supply chains is decarbonisation. Of all the sectors of the economy, the transport sector offers significant decarbonisation opportunities.
Shipping is already undergoing a transformation to new and innovative fuels, including the opportunity to power the world’s fleet with ‘green’ ammonia, produced renewably in Australia. Many Australian ports (including Newcastle and Port Kembla) are actively exploring opportunities presented by hydrogen.
This transformation in shipping has been engineered by regulators, with the International Maritime Organisation (IMO) and the European Union taking active steps to require the decarbonisation of shipping.
The IMO has adopted key short-term measures aimed at cutting the carbon intensity of all ships by at least 40 per cent by 2030.
Land transport is similarly looking to the future, in what is a slightly more complex process, with local regulators having to take the lead in the absence of international regulators.
In this instance, should rail be preferenced (for people and freight) due to its lower carbon footprint? What would that look like? How could that be achieved? What are the implications for national supply chains and the massive infrastructure (both human and built) that supports them?
Can trucks use lower emission technology (in the short term) or run on electricity (in the longer term)? What would this transition look like? How should it be directed?
What implications does that have for road pricing? Should the true cost of carbon be factored in to incentivise lower carbon forms of transport? Should competition laws be set aside or modified to optimise the movement of freight?
More broadly, transport infrastructure has been developed to accommodate the internal combustion engine. The inevitable transition towards electric vehicles for freight and passengers will require a radical re-think around how transport infrastructure is designed and delivered.
In a significant development, both Germany and France have passed ‘ESG Due Diligence’ laws. These laws require companies to monitor Environment, Social and Governance (ESG) factors in their supply chains. Penalties for breaching these laws are substantial. These laws will potentially impact Australian businesses which are subsidiaries of German and French companies, as well as companies which trade with or supply German and French companies.
These European ESG laws have a similar model to the Australian Heavy Vehicle National Law (HVNL) under which responsibility for heavy vehicle safety is shared across supply chains. It is entirely conceivable that Australian legislature will eventually upgrade current ESG legislation (applying for example to Modern Slavery and Greenhouse Gas Emissions) to more closely resemble the European model.
The third transformative disruption underway is geopolitical.
For much of this century the Australian economy has grown alongside the Chinese economy as a supplier of raw materials; a consumer of Chinese products and a safe haven for Chinese investment, tourism and education.
However changes have occurred, with the consensus now being that the Australian economy must diversify. Australian state and federal governments are now making renewed efforts to develop alternative markets, for example by increasing trade with India. Whilst worthy and perhaps necessary, these market building exercises require significant investment of both time and money, often with uncertain results.
As for supply chains, ‘just in time’, the supply-chain mantra of the late 20th and early 21st century, has been replaced with ‘just in case’. The economic theory of ‘comparative advantage’ requires global free markets to operate in real-time. In reality, Australia’s reliance on imported energy and medicine (to name but two) now leaves us feeling exposed. The eponymous Procurement Manager; whose role was to source the ‘best products at the best price’ is no longer enough. They are now required to diversify suppliers to ensure adequate stock levels are maintained in anticipation of disruptions to the manufacturing process.
Whilst markets and consumers are at the frontline of supply chain disruption, governments and regulators must also be attentive and responsive, particularly where disruptions are a result of factors relating to public policy.
All parties must be attentive as to the opportunities presented by this disruption, which is likely to be profound and long-lasting.
Innovation will be key. This will require close co-operation and understanding between government and industry to navigate and take full advantage of a profoundly disruptive period.
Author: Geoff Farnsworth
[1] https://research.csiro.au/tf/
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Alramon Pty Ltd v City of Ryde Council [2022] NSWLEC 108
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James and Secretary, NSW Department of Communities and Justice [2022] NSWCATAD 280
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Commonwealth
Act Compilation
Child Support (Registration and Collection) Act 1988 29/08/2022 – Act No. 3 of 1988 as amended
Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Act 2018 25/08/2022 – Act No. 13 of 2018 as amended
Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 25/08/2022 – Act No. 69 of 2020 as amended
Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020 25/08/2022 – Act No. 66 of 2020 as amended
Aged Care Quality and Safety Commission Act 2018 23/08/2022 – Act No. 149 of 2018 as amended
Aged Care Act 1997 23/08/2022 – Act No. 112 of 1997 as amended
Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 23/08/2022 – Act No. 156 of 1988 as amended
Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 23/08/2022 – Act No. 69 of 2020 as amended
Social Security (Administration) Act 1999 22/08/2022 – Act No. 191 of 1999 as amended
National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Act 2020 22/08/2022 – Act No. 68 of 2020 as amended
Aged Care Quality and Safety Commission Act 2018 19/08/2022 – Act No. 149 of 2018
Military Rehabilitation and Compensation Act 2004 18/08/2022 – Act No. 51 of 2004 as amended
Administrative Appeals Tribunal Act 1975 18/08/2018 – Act No. 91 of 1975 as amended
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Children's Guardian Amendment (Child Safe Scheme) Act 2021 No 30 (2022-477) – published LW 26 August 2022
Stronger Communities Legislation Amendment (Children) Act 2021 No 45 (2022-476) – published LW 26 August 2022
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Betting and Racing Regulation 2022 (2022-478) — published LW 26 August 2022
Children and Young Persons (Care and Protection) Regulation 2022 (2022-479) – published LW 26 August 2022
Children’s Guardian (Amendment) Regulation (No 2) 2022 (2022-480) – published LW 26 August 2022
Civil and Administrative Tribunal Regulation 2022 (2022-481) – published LW 26 August 2022
Contaminated Land Management Regulation 2022 (2022-482) – published LW 26 August 2022
Contract Cleaning Industry (Portable Long Service Leave Scheme) (Cleaning Work) Order 2022 (2022-483) –published LW 26 August 2022
Contract Cleaning Industry (Portable Long Service Leave Scheme) Regulation 2022 (2022-484) – published LW 26 August 2022
Conveyancing (Sale of Land) Regulation 2022 (2022-485) – published LW 26 August 2022
Crime Commission Regulation 2022 (2022-486) – published LW 26 August 2022
Crimes (Administration of Sentences) Amendment (Miscellaneous) Regulation 2022 (2022-487) – published LW 26 August 2022
Drug and Alcohol Treatment Regulation 2022 (2022-488) – published LW 26 August 2022
Duties Regulation 2022 (2022-489) – published LW 26 August 2022
Final Determination (2022-490) – published LW 26 August 2022
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Jury Regulation 2022 (2022-496) – published LW 26 August 2022
Local Government Amendment Regulation 2022 (2022-497) – published LW 26 August 2022
Major Events Amendment Regulation 2022 (2022-474) – published LW 24 August 2022
National Electricity (New South Wales) Regulation 2022 (2022-498) – published LW 26 August 2022
NSW Self Insurance Corporation Regulation 2022 (2022-499) – published LW 26 August 2022
Place Management NSW Regulation 2022 (2022-500) – published LW 26 August 2022
Property and Stock Agents Regulation 2022 (2022-501) – published LW 26 August 2022
Public Health Regulation 2022 (2022-502) – published LW 26 August 2022
Rail Safety (Adoption of National Law) Amendment Regulation 2022 (2022-503) – published LW 26 August 2022
Referable Debt Order (2022-504) – published LW 26 August 2022
Road Transport (General) Amendment (Penalty Notice Offences) Regulation 2022 (2022-505) – published LW 26 August 2022
Superannuation Regulation 2022 (2022-506) – published LW 26 August 2022
Totalizator Regulation 2022 (2022-507) – published LW 26 August 2022
Transport Administration (Staff) Regulation 2022 (2022-508) – published LW 26 August 2022
Water Sharing Plan for the Darling Alluvial Groundwater Sources Amendment Order 2022 (2022-513) – published LW 26 August 2022
Work Health and Safety (Mines and Petroleum Sites) Regulation 2022 (2022-509) – published LW 26 August 2022
Environmental Planning Instruments
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Burwood Local Environmental Plan 2012 (Amendment No 22) (2022-511) – published LW 26 August 2022
Canada Bay Local Environmental Plan 2013 (Amendment No 20) (2022-512) – published LW 26 August 2022
Lismore Local Environmental Plan 2012 (Amendment No 52) (2022-514) – published LW 26 August 2022
Mid-Western Regional Local Environmental Plan 2012 (Amendment No 28) (2022-515) – published LW 26 August 2022
Snowy River Local Environmental Plan 2013 (Amendment No 4) (2022-516) – published LW 26 August 2022
State Environmental Planning Policy (Transport and Infrastructure) Amendment (Intertrade Industrial Park) 2022 (2022-517) – published LW 26 August 2022
Sydney Local Environmental Plan 2012 (Amendment No 79) (2022-518) – published LW 26 August 2022
Wagga Wagga Local Environmental Plan 2010 (Amendment No 45) (2022-519) – published LW 26 August 2022
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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