Australia’s supply chains proved generally resilient in response to the COVID-19 pandemic, but the experience with COVID-19, following the devastating 2019-20 bushfires has highlighted Australia’s potential vulnerability to supply chain disruptions. Panic buying of some goods, notably personal protective equipment, and the imposition of export restrictions on these products by some countries added a degree of urgency to the unfolding situation.
As organisations look to recover from COVID-19, they must adjust their risk assessment approach in order to be better prepared for future business impacts and improve their business resilience. While there are many ways business can identify and manage its supply chain risks, KPMG has deep expertise in supply chain resilience and geopolitics. As these areas are topical and relevant to the inquiry, we have structured our submission to provide the Commission greater insights into how businesses across Australia best manage these risks. We also provide feedback on the Interim Report’s framework to identify vulnerable supply chains and explain how policy makers may be able to leverage existing frameworks and dynamic assessment methods active in the private sector to help address geopolitical risk and other disruptive challenges facing supply chains.
In this submission we look at the recommendations from KPMG as well as insights from KPMG. The submission looks at risk management practices in the export of higher education and the importance of having a long-term view when it comes to rare earths and critical minerals. In this context, we explore the potential for bilateral critical supply agreements as a measure for governments to secure the supply of critical goods and services in times of global supply disruption.
The following is a summary of nine KPMG Australia recommendations
The framework to identify vulnerable supply chains outlined in the Interim Report is a valuable first step to managing Australia’s supply chain risk, however it may benefit from further expert consultation and the inclusion of real time data sets to move it from static to dynamic.
The Australian Government could consider support for smaller businesses by introducing a voucher scheme for supply chain risk assessments. This would assist businesses of all sizes to build their resilience capability in order to reduce their vulnerability to supply chain disruptions.
The Australian Government consider the creation of frameworks that encourage collaboration so that industries work together and invest in measures to mitigate supply chain risk brought about by accelerated digitisation.
Businesses of all sizes should stress test their business continuity plans under all types of duress to better understand where, how and why the supply chain failed but most importantly, to learn from past events like COVID-19. From these learnings, they will define better supply chain strategies to shore up supply certainty and enhance customer fulfilment. Each alternative strategy then needs to be evaluated to ensure cost, customer service, financial impacts and risk factors are all balanced. They should also better understand what new capabilities will be required to protect them into the future.
The Australian Government should consider education programs and incentives for geopolitical risk management and country related diversification. By diversifying and managing the risk, Australian businesses will be less vulnerable to geopolitical shocks or disruptions.
The Productivity Commission analyse supply chain export risk on a sector basis to take into consideration the diverse nature of risks across Australia’s key export sectors, while also considering export sectors such as rare earths that will be a major focus in the longer term.
As a key export that contributes to Australia’s wellbeing, the higher education sector should focus on greater international student experiences for each target market to address supply chain risk and global competitiveness. The Australian Government could support this initiative by refreshing Australia’s national ‘Go to Market Strategy’, originally published in 2016 under markedly different economic conditions.
The Australian Government consider updating Australia’s Critical Minerals Strategy 2019 to take into consideration recent supply chain risk and account for opportunities that may be present in the circular economy.