New Zealand will move from Alert Level 4 to Alert Level 3 at 11:59pm on Monday, 27 April, Prime Minister Jacinda Ardern announced yesterday.
Last week, the Government clarified which businesses will be able to resume trading under Alert Level 3 restrictions,
and updated the regulations for these businesses.
The SMC asked experts to comment on potential supply chain issues for New Zealand businesses and consumers.
Professor Julia Kotlarsky, University of Auckland Business School, comments:
“NZ produces a lot of food products, therefore food take-away shops and restaurants that are able to offer delivery of
ready meals should be able to get food supplies easily to start operating during level 3. Retailers, however, may be
disadvantaged if they rely heavily on import from outside NZ, because they are likely to face delays is supply of goods
that come from overseas. For such businesses it is really important to have a reliable inventory management and online
retailing system.
“Retailers that are able to differentiate in their online system between items that are in stock in a warehouse
somewhere in NZ from items that needs to be shipped from abroad, will be in the position to promote items that are
available locally. The construction industry is also likely to be affected due to delays in materials that are usually
shipped from overseas. Construction companies may need to prioritise projects for which they have materials in stock or
can be purchased locally.”
No conflict of interest.
Professor Ilan Oshri, Graduate School of Management, University of Auckland, comments:
“Global supply chains have gone through a massive storm. In particular, China’s manufacturing sector output dropped
significantly, suffering from the lockdown as well as from the lack of demand since COVID-19 moved outside China. Food
supply chains, on the other hand, seemed to be holding up well in terms of supply and surely in terms of demand.
Clearly, the current crisis exposed many economies to the high degree of supplier concentration (e.g. dependency on
China for electronics) and lack of flexibility in supplier management strategies. Disruption was also evident in service
supply chains such as business process outsourcing, with delivery centres in offshore locations such as India and the
Philippines failing to meet business continuity requirements under lockdown.
“The move from Level 4 to Level 3 is likely to expose New Zealand to these weaknesses in manufacturing and service
supply chains. In the short term, New Zealand business are likely to struggle with shortages of components and products
originated in China. Expectations are that China will be able to ramp up production to desired levels in electronics
only by mid 2021.
“The shift from Level 4 to Level 3 is likely to also stimulate demand across various products that were not considered
essential during the lockdown. With government allowing businesses to use either delivery or click and collect services,
there is a serious concern that most businesses in New Zealand have not prepared their supply chains and logistics to
meet the upcoming demand. Unfortunately, our recent experience of most retailers failing to properly respond to
customers’ stocking-up behaviour is still fresh.
“At the heart of this failure is the retailers inability to quickly adopt alternative logistics tactics by, for example,
ramping-up online shopping capabilities and the outsourcing of food delivery services to platform-based delivery
services such as Uber Eats. I believe we are going to see a similar approach by traditional and large businesses in New
Zealand that will start trading under Level 3, thus resulting in a much delayed delivery of goods to customers.
“On the other hand, it is very likely that restaurants and other small product-based services will start trading in
Level 3 looking for creative ways that will allow them to engage in the delivery of their products as well as offering
pick-up services. These two behaviours are both the concern and the hope of the New Zealand economy. Large traditional
businesses in New Zealand will be able to cope with similar challenges only if they become nimble, experimental and
integrative with external service providers. On the other hand, small businesses in New Zealand that have been
innovative and daring over the years, can once again re-invent themselves.”
No conflict of interest.
Professor Bodo Lang, University of Auckland Business School, comments:
“Consumers like their freedom. They like to buy the products and brands they prefer, enjoy experiences with people they
like, and travel to places of their choice.
“However, at present that freedom is greatly limited. Reactance theory predicts that consumers can have strong negative
reactions when they realise that their preferred alternative is not available. Reactance has two key effects: The first
effect is that the alternative that is not available becomes even more desirable. In other words, consumers really want
what they cannot have. The second effect is that consumers have a negative reaction towards the agency that they believe
has limited their choice. Thinking about the ‘out of stock’ example, consumers would have likely shown reactance against
the supermarket, other shoppers, or the government. So how can agencies and organisations possibly lessen consumers’
reactance?
“Communication is critical. For example, informing consumers why restrictions are in place, what is and what is not
restricted, and how long the restrictions are likely to be in place for are important. Messages – and their delivery –
need to be authentic and relatable. Providing examples that resonate with a highly diverse audience is key.
“One way to achieve this is to make things personal and getting consumers to see the linkage between short-term,
non-compliant behaviour and the possible detrimental long-term consequences, for them, their family and whānau, and
particularly for vulnerable people in their network. Think grandparents, parents, aunties, uncles, etc. As a country, we
respect old people and those who are vulnerable, particularly if they are part of our social network and our bubble.
Tapping into that respect to craft messages around the ‘why’ is one fruitful avenue to encourage New Zealanders to
comply with – and show less reactance towards – maintaining level 4 until Monday 27 April. Using such appeals will also
help with achieving high levels of compliance with level 3 after 27 April.”
No conflict of interest.