Wesfarmers chief Rob Scott warns on supply chains

Wesfarmers chief Rob Scott says companies are exposed to global disruptions and should diversify their supply chains.

Wesfarmers CEO Rob Scott. Picture: Marie Nirme

Wesfarmers chief executive Rob Scott, whose portfolio of businesses such as Bunnings, Kmart and Officeworks operate lengthy supply chains sourcing billions of dollars a year in products from around the world including China, has warned that Australian companies are exposed to global disruptions and should think about diversifying their supply.

Although he did not name China directly, Mr Scott said many Australian businesses had supply chains that were heavily concentrated in single countries and that this could create risks and vulnerabilities in the future.

Speaking to the Trans-Tasman Business Circle, Mr Scott also raised the spectre of a possible brain drain of skilled workers and jobs to overseas businesses in the wake of the coronavirus pandemic as many companies consider the next logical step of those jobs — reliably connected via the phone and the internet — going offshore.

“It is also raising interesting questions around onshoring and offshoring, and on the one hand talking about virtual work one of the risks is that we have all become a lot more proficient at working from home as well. Do you really need to be here in Australia or can you be somewhere else?” Mr Scott told the Business Circle in an online address. “So there is a risk that this actually creates a move of roles offshore.”

Mr Scott added his considerable corporate weight to the emerging discussion among Australian businesses and policymakers about the country’s heavy reliance on sourcing manufactured goods from China, with that supply disrupted by the coronavirus pandemic as well as challenged by the ratcheting up of trade disputes between Australia and China.

The Wesfarmers CEO did not single out China, but did remind the business community of the risk of depending too much on a single country for supply.

“There are a number of issues around the diversity within our supply chains, the single point reliances we may have in some jurisdictions,” Mr Scott said.

“We have seen examples where because some other countries haven’t handled the risks as well, that has created some pretty significant disruptions to services and supply, so I don’t think there is any straight forward answer, other than from a risk management point of view, companies do need to look … at where the interdependencies are and where the vulnerabilities are in supply chains.”

It is an issue raised last week by Karen Andrews, the federal Minister for Industry, Science and Technology, in her address to the National Press Club, who said businesses and consumers faced a “wake-up call” over access to crucial inputs and supplies in the midst of the pandemic and disruptions to world trade.

“There’s been … a seismic shift in the thinking of Australian consumers and businesses in relation to their experiences during the COVID-19 pandemic. So many of our businesses, many consumers, but particularly our businesses, faced massive disruption to their supply chains,” she said.

Later in his address, Mr Scott sounded an upbeat assessment of the nation’s economic fortunes despite the huge challenges now facing businesses, consumers and households. “We are all in this together and in a world where things might get tough economically, at a global level there is still opportunities … to outperform in relative terms … notwithstanding some of the broader challenges,” he said.