Standing together as one
Designing an export supply chain ecosystem based on the principle of collaboration enabled Kotahi to keep New Zealand’s crucial export sector moving during the COVID-19 pandemic.
Navigating the complex waters of international freight supply is an ongoing challenge for distant New Zealand. Ocean freight supply chains are notoriously intricate, and disruptions are bound to happen.
Recognising that unforeseen challenges will always arise, Kotahi Logistics, New Zealand’s largest containerised exporter, developed a responsive approach that keeps them agile in all market conditions. By building an exporter/logistics ecosystem centred on long-term partnerships and collaboration, the company has kept many of New Zealand’s key export products moving through the global system in challenging times.
Long before Covid-19 turned the freight world upside down, New Zealand’s exporters had already faced a formidable test during the Global Financial Crisis (GFC), through a lack of shipping options. Kotahi Chief Executive David Ross (Bootcamp V) was working for Fonterra in Asia at the time and says that the GFC was the catalyst for development of a new export supply chain model that would provide certainty.
“Post GFC was extremely problematic for New Zealand’s food exporters. We simply couldn’t get the containerised shipping we needed and it created serious supply chain constraints when the world started trading again. Working alone, New Zealand exporters simply weren’t getting the traction they needed with shipping lines,” he says.
Fonterra started conversations with a number of leading exporters and subsequently formed a partnership with Silver Fern Farms, and gradually these two pillars of dairy and meat exports began to build Kotahi, an exporter’s platform with a mandate to use their sizable cargo pool to create a more resilient and reliable supply chain solution.
“Before we established Kotahi, exporters would have annual discussions with global shipping lines, negotiating rates and capacity. There was no permanence to these relationships and no real scale – New Zealand equates to 1% of global containerised trade; we’re effectively a rounding error! Exporting freight is not as simple as filling up an import container before it leaves here – for example, a third of our primary exports need to be refrigerated, so it’s an entirely different container-mix, compared to imports,” says David.
Once established, Kotahi began discussions with the major carriers, culminating in a unique 10- year strategic partnership with global shipping line Maersk and a separate long-term partnership with the Port of Tauranga. These partnerships marked a step change towards achieving a secure, sustainable export supply chain, leading to bigger ship services, which are more emissions efficient on a per-container basis, calling to New Zealand.
“Maersk recognised the value of our national cargo pool and the possibilities of what we could jointly do. Together we have been able to develop improved networks and integrated planning that is a key enabler for Kotahi to perform at market-leading levels of capacity availability and container supply.”
David moved from Fonterra to become Kotahi’s chief executive in 2015 and attended a Te Hono Bootcamp at Stanford University in 2016. He says it was the first time he had truly seen the impact of collaborative partnerships for New Zealand.
“At Te Hono, I had the opportunity to personally experience everyone’s passion for being there for NZ Inc. You’d see people working to collaborate on different
things, coming together with ideas, and viewing the rest of the world as our
competition, not each other.
“That’s what Kotahi is all about, and Te Hono served as a reminder that we needed to double down to ensure the experience we give our loyal smaller customers is the same quality that we give to our large shareholders. “Kotahi’s ethos is that all our customers are valuable, regardless of volume. We truly believe that Kotahi wins when we enable all our exporters to win on the
“When we get their product to market with better delivery performance, they increase the confidence of their customers, they grow, we export more freight, and that keeps us relevant with major carriers. It’s synergistic.” David says that Kotahi’s collaborative strategy is built on transparency.
“The benefit of long-term partnerships is they build trust within our ecosystem and it allows for better collaboration to solve the typical range of export supply
chain issues we all face, which allows us to operate better in disrupted situations.
“But unless you’re prepared to be genuinely open, you can’t see the end-to-end view that allows you to operate best,” says David.
It’s a strategy that paid off when Covid-19 hit, with the company already managing 30% of New Zealand’s containerised exports.
“In the first six months, the world hit pause, and trading slowed. As it turns out, it was the calm before a storm, the magnitude of which we’ve never seen before. We’d all been at home for a while, and suddenly a switch was flicked. Globally, people went online shopping, ordering that new lounge suite or DIY materials. It wasn’t a slow burn, it was sudden, and it didn’t take long for the freight backlog to have a serious impact on the world’s ports,” says David.
“Kotahi’s collaborative partnerships and capability meant that we were able to maintain a resilient ocean freight supply chain in tough market conditions.
“Overnight, the global shipping network became one big traffic jam. The number of port calls traditionally seen in New Zealand per week dropped by almost a third for most containerised services. There was a real danger there wasn’t going to be enough capacity to get New Zealand’s export cargo away. It was a pretty frightening outlook.
“Maersk really didn’t need to bring any extra capacity to our market – but because of our joined-up partnership, they chose to bring additional vessel capacity here at critical moments. The trust we had already built with
them led to a whole different level of collaboration during the pandemic,” says David.
New Zealand’s exporters benefitted immediately.
“It wasn’t a perfect situation, but the pandemic would have cost New Zealand more greatly than it did if we hadn’t been able to bring in the additional capacity,” says David.
“Fonterra happened to have a record sales year amid the worst of the pandemic disruptions, driven by demand out of China, and we were able to ensure their dairy products reached their market when other non-New Zealand competitors were struggling to supply. It was a huge team effort, across Fonterra, Coda Group, Kotahi and all our shipping partners doing extraordinary things together.”
“During the pandemic, we were able to find ways to help a number of smaller exporters, new to Kotahi, that were struggling at the time, to get their containers out of the country and into their markets.”
Looking to the future, Kotahi will be further increasing its partnership focus to tackle emerging issues.
“We’re going to take a lead for exporters, to support new solutions that focus on decarbonising ocean freight.
“Technology is advancing rapidly which will see vessels no longer running on fossil fuels. For example, Maersk’s target is 100% renewable fuel by 2040 and this year they undertake a maiden voyage with the world’s first green methanol-enabled container vessel. Kotahi is in a unique position to be able to facilitate the introduction of these services to New Zealand in the future, when the timing is right.”
David says that collaboration will remain an essential part of the strategy as the country’s export sector pivots yet again.
“This is the case for every business. If you can foster collaborative relationships with your partners, and build useful scale, you provide them with the leverage they need to navigate the ever-changing global landscape,” he says.