Small businesses have been hit with delays when sourcing supplies from overseas, as congestion across global supply chains causes major disruptions to trade ahead of Christmas, competition regulator Rod Sims says.
Speaking to SmartCompany, Australian Competition and Consumer Commission (ACCC) chair Rod Sims notes that small businesses are significantly affected by container freight rates, which have increased by seven times in the last year.
“For small businesses that rely on either imported goods to sell or imported inputs for their production, it’s a dreadful time,” Sims says.
‘They cannot rely on the price and they cannot rely on things arriving on time,” he continues.
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An ACCC report, released today, states that the state of the global supply chain has deteriorated over the past few months, with shipment rates soaring due to changes to shipping lines, industrial disputes and limited cargo capacity.
Smaller exporters squeezed out
Storage space on vessels is so scarce that freight costs have risen to what the ACCC describes as “unprecedented levels”.
Sims says while some large exporters have started buying their own containers and even chartering their own vessels to overcome these challenges, small businesses are being squeezed out all together.
“Unfortunately at a time of crisis in our container freight industry, small business is very much at the receiving end and can do very little about it,” Sims says.
On top of increased shipping fees, small- and medium-sized cargo owners are finding reductions in shipping capacity are affecting their ability to negotiate deals with shipping lines.
These small operators have told the ACCC that businesses moving high volumes of containers are given priority by shipping lines, and can better negotiate global agreements and lower rates.
Landslide fees create cash flow crunch
Sims says Australia’s port systems are no longer working efficiently and delays in stevedoring operations are causing “chaos” for small transporters.
The competition watchdog has been monitoring stevedoring, which involves lifting containers on and off ships, at five of Australia’s major container ports.
Small transport operators have told the ACCC that sharp increases in terminal access charges and other fees at ports across Adelaide, Brisbane, Fremantle, Melbourne and Sydney have created cash flow issues for their businesses.
Cash flow crunches arise because there’s a gap between when the transport operator must pay stevedores, and when they receive payment from their customers.
“Obviously, businesses can’t pay until the goods arrive, and yet they incur costs before that,” Sims says.
“It really is causing chaos in our container freight system.”
But according to the competition regulator, many of these problems existed before the pandemic.
A recent study by the World Bank and IHS Markit showed Australian container ports have been well below international best practice. The study ranked Australia’s largest container ports, Melbourne and Sydney, in the bottom 15% and 10% respectively, of the 351 global ports in the study.
“We were told that some shipping lines were already withdrawing services from Australia before COVID-19 hit,” Sims says.
“Australia needs to take decisive action to remain an attractive destination for global shipping lines.”