Thursday, August 18, 2022

Labour pains here to stay, warns SFF

Silver Fern Farms (SFF) general manager sales Peter Robinson says “the big employment reassessment” is real, and the industry needs to plan for a longer season in the years ahead.  

“This is not just an SFF challenge, but [one affecting] all parts of the supply chain, all of New Zealand and the world,” he said. 

Robinson and chief supply chain officer Dan Boulton presented an “under the hood” look at the shocks the company has faced, the effects on the business and how it has navigated these challenges, to the company’s annual conference in Christchurch last week. 

The disruptions and shocks being experienced in the supply chain are unprecedented and continue to be felt across the globe, Boulton said.

“The days of just-in-time supply chains or being able to hold low inventory levels and the ability to export at ease with flexibility and choice are gone and unlikely to return any time soon,” he said.

“This makes exporting from NZ, here at the bottom of the world, as challenged as ever.”

The covid-19 pandemic, labour shortages, global shipping capacity, the availability of empty containers, cold store capacity, NZ coastal service, geopolitical risks and northern hemisphere recession all make running the supply chain at SFF a mammoth achievement every day.

Robinson said port congestion continues at record levels across the globe due to unprecedented import demand.

“Every seaworthy vessel in the world is operating and operating at capacity, but the global average has just one in three vessels departing and arriving on time, with the global average vessel delay being eight days,” he said.

This congestion has removed 13% of global container and vessel capacity. Shipping rates have skyrocketed, with SFF rates increasing by $22 million in 2022, Robinson said. 

But the situation is not all doom and gloom.

Boulton said that “SFF’s ownership in Kotahi, a joint venture with Fonterra, has us in one of the most privileged positions globally with Kotahi being one of Maersk Shipping Lines’ VIP customers”.

“Through the Kotahi team we have worked hard to access priority space of Maersk vessels and get priority access to empty shipping containers,” he said.

“SFF has not lost a single production day this season due to this preferential position, allowing animals to keep flowing off farm.”

Read: Supply chain logistics disruptions continue

SFF has shown its ability to be agile and change its market mix and port destination. 

With port closures happening at short notice and reduced shipping capacity to key routes, SFF has had to move large volumes to new destinations at the drop of a hat, said Robinson.

“Moving away from your optimal market mix comes with value erosion. In some instances this market diversification cost can be as much as $100 to $150 per head on beef and can happen at short notice,” he said.

Knowing the capacity shortfall was looming, SFF partnered with AFFCO and ANZCO and stepped back in time 30 years to export its product by chartering a bulk conventional vessel. IT shipped 2500t via this method this season, allowing it to maintain the value from the North American market.

“All these initiatives have allowed us to keep processing animals and keep product moving to market, but at a cost,” said Boulton. 

“Conventional shipping costs 30% more than containerised, but it’s still better than not processing at all.”

Through food service disruption, SFF has seen exponential growth in its United States retail channel, now servicing 1700 retail stores across the US. Before covid it was 200.

This processing season has been one for the history books as one of the longest seasons ever.  

Since February, due to staffing challenges, bovine and ovine capacity has run at 80%-85% of normal capacity.

Also read: Facing up to a permanent labour shortage

This “big employment reassessment” is a challenge for all parts of the supply chain, domestically and globally. Robinson said SFF is working hard to adjust its working arrangements, but it is unlikely NZ will return to the favourable situation of having access to large numbers of seasonal workers. 

“Collectively we all need to plan and prepare for a longer season in the years ahead,” he said.

To help with pressure on farm, the livestock team has facilitated grazing arrangements for more than 300,000 stock units.

This season store stock movement increased 55% from early action to move animals between islands to maximise processing. 

“We have had a 300% increase of lambs going into our winter lamb finishing plan and we have had a 50% increase of prime animals into our winter finishing plans,” Boulton said. 

“As we have navigated the market disruptions and supply chain challenges, we have also mitigated the risk and cost, and achieved better net returns than we were originally forecasting.” 

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