Businesses on both ends of the supply chain are stockpiling in anticipation of ongoing global supply chain disruptions.
Photo: RNZ
Drug manufacturer AFT Pharmaceuticals and the sports and homeware retailer Briscoe Group were a couple of examples of companies who took early action to address shipping delays and shortages of everything from raw materials to consumer goods.
"We took the decision to invest approximately $10 million into inventory because we foresaw the potential for global supply chain disruptions," AFT chief executive Hartley Atkinson said.
"In hindsight, this has been a good decision. We intend to maintain these elevated levels of working capital until we are confident these disruptions have been resolved."
Atkinson said the company had increased its inventories in Australia and New Zealand which accounted for about $100m of annual turnover.
"With our international business we actually in the fortunate position where effectively we buy the stock and then sell it straightaway," he said adding the company's products were manufactured in a number of overseas jurisdictions under licence.
"So just locally we've increased the stock holdings and working to persuade our international customers to be a bit careful themselves and hold a bit more stock as well."
Briscoe Group managing director Rod Duke said the company was holding 15 percent more in inventory than it would normally.
"But at the end of the day, I've secured it and I'm able to make sales and fill my shelves, which a lot of people, a lot of retailers can't do."
Duke said the company had anticipated there would be shortages and increased shipping prices in late 2019 when reports about the Covid-19 virus were first reported.
"So we made the conscious decision to secure stock where we could, and then safeguard our position downstream in the event that there were likely to be shortages."
Duke said the situation was likely to persist for some time to come as shipping companies and Asian-based manufacturers focused on the larger and more lucrative markets in North America and Europe.
"Whilst you've got Europe and the United States building inventories, from relatively low levels, you're going to have shipping companies commit more vessels and factories in Asia committing more inventories to those key markets," he said.
"Those key markets traditionally pay a little bit more, and factories, right now have got limited production space left over, and so they are servicing the more profitable regions of the world rather than some of the smaller, less profitable regions."
