Woolworths boss has made a promise ahead of Christmas

The supply chain crisis and Christmas demand is creating a big problem for Australia, but Woolies has made customers a promise.

Woolworths has promised that customers will have access to what they need this Christmas, despite the global supply chain crisis impacting businesses across the country.

The supermarket’s boss Brad Banducci said he was “very comfortable” that stores will be stocked and the company was doing whatever it could to ensure it.

“However, it would be fair to say there is enormous pressure still in the supply chain on all aspects of that supply chain,” Mr Banducci said in a financial update to shareholders last week, highlighting the significant increase in international freight prices, and pallet issues within Australia.

“But from where we stand right now we feel it will not manifest on the shelf for us and we will deliver what we need to.”

The company revealed that Covid had a bigger impact on costs this year than last year due to both direct and indirect impacts, including significant disruptions across the supply chain.

Indirect disruption to stores and distribution centres led to elevated operating costs of about $60 to $70 million from July to December this year, the company said.

Mr Banducci labelled the period as one of the most challenging in recent memory.

Woolworths chief executive Brad Banducci has described the second half of this year as the most challenging in recent memory. Picture: John Feder / The Australian.

Coles also remained optimistic when news.com.au asked about supply chain impacts, with a spokeswoman saying the business had learnt to prepare for disruptions to supply.

ALDI said it was doing its best to minimise disruptions to customers, but some “Special Buys” were not arriving in-store on the advertised on-sale date due to supply chain impacts.

A survey of 346 Australian chief executives, taken in October and released this week, found almost two-thirds of businesses had a much harder time sourcing their usual inputs this year compared to last year.

And just over half expected their ability to source inputs to still be disrupted next year.

Australian Industry Group chief executive Innes Willox said 98 per cent of trade relied on sea freight. Picture: AAP Image / Mick Tsikas

Australia Industry Group chief executive Innes Willox said the pandemic had laid bare many Australian vulnerabilities as an island nation with 98 per cent of trade and most jobs connected to or reliant on sea freight in some way.

“Supply chain chaos has been created by a combination of factors including the increase in global demand for goods; lengthy lockdowns and infections of workers; a global shipping container shortage; reduction in shipping services and port skipping; Australian industrial action; and rising costs,” Mr Willox said.

“This situation is projected to only moderately ease by 2023 and beyond.”

What’s the global supply chain crisis?

There’s enough shipping containers in the world to circle the earth four times at the equator.

When they’re moving in a smooth pattern, things work. But disruptions from the pandemic have created a significant problem.

David Leaney, an International Supply Chain Management lecturer at Australian National University, says the best analogy is musical chairs.

“As long as the music keeps playing and everyone keeps moving, you don’t notice if you happen to be missing a chair or two, but it’s when the music stops and everyone is sitting down that you go ‘uh oh’,” he told news.com.au.

“Christmas is when it’s crunch time because your level of activity goes up, demand goes up, the volume of stuff moving around goes up and there’s a lot more time pressure.”

The wait to book a shipping container can be two or three weeks at the moment. Picture: NCA NewsWire / Paul Jeffers

Mr Leaney said a lack of international workers in Australia, a shortage of incoming raw materials to make the things we need and availability of resources to move things around the country and the world was a problematic combination.

Fortunately, he said big companies like your major supermarkets were throwing a lot of resources at the situation so customers could remain confident.

Just like the world is suffering from issues with the flow of shipping containers, Australia is dealing with a similar issue on land – pallets. Pallets are used to distribute products within the country on trucks.

“There are plenty of pallets, they haven’t disappeared. It’s just that they’re not smoothly distributed and because we’ve had border closures and intermittent demand and shut down of manufacturing, the pallets are stacked up in certain cities and they’re not where you want them,” Mr Leaney said.

Australia has also been dealing with a looming shortage of AdBlue, which is needed to keep trucks on the road.