General Market Conditions
Market Situation
Markets are moving at a rapid pace. Supply shortages for overseas sourced items are impacting availability of core as well as non-core supplies. This supply shortage is being caused by reduced production rates in Europe and Asian markets as businesses tool down to manage the COVID-19 situation in their countries.
Further, a reduction in commercial passenger traffic (most airlines are stood down) is causing significant issues with air freight cargo capacity causing a further blow-out in air freight costs as well as capacity.
General commodity suppliers are prioritising deliveries for essential services businesses at this time as well as loyal customers. There are supply shortages in many areas including cleaning products, washroom paper and safety and PPE. Some suppliers are looking at order history to determine anomalies and may restrict out of normal orders from some businesses.
Many businesses are conserving cash flow and looking to mitigate cash flow risk at this time. This is impacting trading credit account terms as well as late payment clauses across many categories.
Impact
- Lead times across most categories are longer.
- Deliveries may not arrive, be placed on back order or delivered in part.
- Keep up to date with changing conditions from your suppliers and the market generally.
- Adhere to changing requirements, payment terms and conditions.
Actions
- Look at alternate suppliers in the short term for general commodities.
- Allow for longer lead times for products sourced from overseas or look to alternate markets or methods of freight in the short term.
- Consider local suppliers who are increasing production capacity to meet current market shortages. This will ensure you can maintain continuity and meet service contracts.
Freight
Market situation
Current service restrictions are disrupting the global supply chain and carrier costs have gone up in the new operating conditions. The reduced capacity of cargo carrying passenger aircraft is causing a significant shortfall in available air freight cargo capacity. This is impacting both cost and service delivery for most businesses.
We have been hearing through our partner InXpress and businesses that the situation is changing rapidly.
Anyone who put all their freight ‘eggs in one basket’ is suffering from significant shipping impacts as capacity is limited.
Impact
- Many carriers are levying emergency surcharges to cover the increased cost of international air freight. These surcharges are being implemented with little or no warning.
- Air freight costs have skyrocketed and depending on the route – could increase by as much as 900% or more. Price increases are under less pressure for carriers that have their own fleet rather than those that relied on commercial passenger transport.
- Lower freight capacity means lead times are longer depending on the carrier.
- There are restrictions on both shipment weight and single piece cargo weight allowed to travel on air freight.
- Those with contracted rates may be impacted by surcharges or non supply of services.
Actions
- Businesses need flexibility in the carriers they are using to meet service levels for shipped goods.
- A freight aggregator such as InXpress can be set up and implemented in less than a day.
- They offer the flexibility of over 5 carriers to choose from for international and local air freight so you can reduce the risk of your deliveries arriving late.
- Their expert team provide excellent customer service.
- Our pre-negotiated member rates are offering excellent value at this time and can be accessed by all members with no lock-in commitment or volume needs over time.
Energy
Market Situation
We have seen some dramatic downward trends over the last few years with our analysis indicating we may have reached the bottom of the market. To make things better, environmental charges have steadily been declining which combined together now makes energy procurement extremely attractive.
If your electricity contract is due to expire within the next 18 months now is a great time to go to market as you are likely to see amazing savings. The Supply Clusters Energy Blitz will help you fight for an even greater deal in what is now a very competitive market.
Impact
- There is little impact on supply in the short term.
- There may be moves to add risk premiums to future pricing as energy retailers look to address their own risk.
Action
- Don’t let contracts lapse. While roll-over clauses are illegal for smaller businesses there are instances of rollover clauses being enacted against large customers.
- Now is the right time to secure future energy pricing. Especially for contracts expiring in the next 18 months.
While we normally act on behalf of our members, we are opening up our May 2020 Member Energy Blitz to any business at this time. If you spend more than $25K per annum, have a contract expiring in the next 18 months and can commit to an energy contract offer in 48 hours – please visit this page for more information and to register.
Insurance/Risk
Market Situation
There have been significant impacts to trade and credit risk already this year and more so during the crisis. Other risks include increased cyber risk during work from home situations. It is also important to consider that an employee working from home requires a safe environment and relevant workplace, health and safety considerations need to be applied.
Impact
- There is an increased risk of malware or cyber risk where employees are accessing corporate networks from a home environment.
- The current crisis does not negate your obligations as an employer or business, or, the requirements under your current policies
Action
- If staff numbers are reduced or impacted, look at your policies and whether they should be adjusted.
- Consider any changes to risk when changing operational processes or procedures
- Check your current coverage for any risk associated with the current COVID-19 crisis – particularly Cyber
For a comprehensive overview from our partner Aon, view their recent webinar here
Waste Management
Market Situation
Waste services are being maintained and there is no advice for delay of services. It is important to maintain health safety and hygiene. Workplace, Health and Safety requirements are still in effect. At this time, increases in environmental levies scheduled from July 1 will be implemented by state governments. Industry bodies are calling for governments to hold increases at this time.
Impact
- You may still be charged for pickups that are not required.
- Automatic contract rollovers (large customers) may still stand in the current climate. This may impact price increase frequency and size. Check your contracts
- With a reduction in waste volume, there is capacity available in market.
Action
- Reduce the scheduling of your waste services if your requirements are lessened.
- Maintain a pickup schedule with a lower frequency rather than move to ad hoc pickups. This way you maintain site sanitary and hygiene requirements.
- Now is a good time to schedule site cleans-ups. Increased waste pick-up capacity is available and pricing is likely to be favourable on bins.
- If you have any waste contracts that are not part of the Supply Clusters managed service – check any contracts that are due for expiry in the next few months for any automatic rollover or price increase clauses.
