Australian businesses strengthen supply chains against risks: DHL

According to a new report 70 per cent of export businesses are confident export sales will grow next year – bouncing back from a record low of 47 per cent during the COVID-19 period.

The findings of the DHL Export Barometer 2022, released today, suggest Australian businesses are confident export sales will grow in the coming year.

As businesses seek ways to diversify supply chains, exporters are more likely to expect export revenue increases in 2023, with many having implemented strategies to strengthen their global supply chains amid a fluid trade environment.

Positively, 70 per cent of businesses surveyed expect export orders to grow over the next 12 months, recovering from a record low of 47 per cent in 2020.

This year’s confidence level is the second highest since the annual study began in 2003 and above the 63 per cent average.

Looking back on the past year, one in two (54 per cent) businesses reported an increase in actual export orders, rebounding from 45 per cent in 2021 and 28 per cent in 2020.

The number of overseas markets businesses are exporting to has also grown in the past year, with the average number rising to 4.5.

In the coming year, 48 per cent of businesses intend to enter a new market.

Export challenges are expected to continue, however, with the most pressing issues reported including the cost of freight impacting 64 per cent of businesses, supply chain issues (28 per cent), inflation (19 per cent), and tariffs (18 per cent).

Of those businesses surveyed, 79 per cent agreed that free trade agreements are beneficial but raising awareness around FTAs is necessary.

With new FTAs coming into effect between Australia and key trade partners since 2020, trade barriers are showing signs of easing for export businesses.

The study showed that 79 per cent are taking advantage of the benefits FTAs have to offer, while 44 per cent concur that the agreements are very important to their operations. These businesses will also likely anticipate growing export revenue in the coming year.

The most popular FTAs utilised by Australian businesses include ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) used by 67 per cent of exporters, China-Australia Free Trade Agreement (ChAFTA) by 61 per cent, and Australia-United States Free Trade Agreement (AUSFTA) by 60 per cent.

Despite the broad industry use of FTAs, many export businesses were unaware that an agreement was in place for their main export market. A quarter (25 per cent) of companies trading with the USA indicated that they were not aware of the existence of AUSFTA, while 21 per cent trading with China did not know about ChAFTA.

“Businesses looking to optimise their international export strategy are encouraged not to overlook the benefits of free trade agreements,” said Gary Edstein, CEO and Senior Vice President, DHL Express Australia.

“Research the agreements Australia has signed with your target market via the Australian government’s FTA Portal, check if the raw materials or manufactured goods you’re trading are included, and the customs documentation needed to satisfy the eligibility criteria for the preferential tariff rate,” he said.

With the re-opening of the country’s international borders in February 2022, the number of businesses still impacted by restricted international travel dropped from 43 per cent in 2021 to just 10 per cent at the time of the study.

Over the past year exporters took measures to diversify their supply chains to mitigate supply chain risks.

Some of the most common diversification strategies implemented include sourcing from multiple or different suppliers undertaken by 47 per cent of businesses, increasing stock levels (46 per cent), sourcing products or raw materials from alternative markets (30 per cent), and manufacturing or sourcing more domestically within Australia (23 per cent).

Attesting to the benefits of diversification strategies, businesses that reported engaging in such actions are more likely to predict an increase in their 2023 export sales revenue.

Recent global events, according to Edstein, have highlighted the interconnectedness of supply chains and the critical importance of logistics in ensuring the continuity of trade flows and supply of vital goods.

“Although pandemic-related export challenges have remained on the scene in 2022, Australian exporters have assessed potential risks to their supply chains and business operations, strategically implementing a range of actions to mitigate disruptions,” he said.

“With 70 per cent of businesses indicating they are confident their export orders will grow in the next year, this signifies the steps taken to diversify supply chains have put them in a strong position for 2023.”

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