Boosting supply chain productivity

Productivity lies at the heart of economic performance, shaping a country’s competitiveness, living standards, and long‑term prosperity. This article amplifies some ideas Chris presented at the CILT Annual Forum last year. New Zealand’s productivity challenges are widely talked about, and indeed are a critical priority for the government, but are often not well understood, and worse, reduced to simplistic concepts such as “working smarter not harder” with few actionable insights and a clear plan to move forward. The freight and logistics sector is a key part of the New Zealand economy, where improved productivity would genuinely increase national wellbeing. But the issues holding us back are baked into the way we do things and require government, firms and workers to make genuine changes to how we’ve traditionally done things to improve outcomes for all.

Why productivity matters

At its core, productivity measures the relationship between outputs—the goods and services produced—and inputs such as labour, capital, land, and technology. While this concept is simple, its implications are profound. Higher productivity enables organisations to create more value with the same or fewer resources, improving profitability and enabling reinvestment. At a national level, productivity underpins wage growth, fiscal capacity, and social wellbeing.

Productivity in supply chains is not merely an economic statistic but a behavioural and strategic focus. The challenge for leaders is to identify levers within their control and build the conditions for sustained improvement.

The five big challenges in NZ supply chain productivity

There are five structural challenges that constrain New Zealand’s productivity performance:

1. Distance to markets compounded by geopolitics

New Zealand’s geographical isolation is not new, but contemporary geopolitical volatility intensifies its impact. Freight disruption, shifting security alliances, and fragile global trade patterns expose exporters and importers to greater uncertainty. The OECD estimates that our distance to market imposes a 10% penalty on New Zealand’s GDP.

For a nation that relies heavily on international trade, long shipping routes and limited proximity to major markets impose inherent costs. Productivity improvements must therefore focus on operational efficiency, port performance, digitalisation, and transport optimisation to compensate for distance‑related disadvantages.

2. Lack of capital intensity

Investment in capital, namely equipment, infrastructure, machinery, and technology, is a key driver of productivity.

Low capital intensity means workers often operate with outdated or insufficient tools, limiting their potential output.

New Zealand, relative to other OECD countries, has had some of the lowest capital intensity rates, since the early 1980s. Major events in the last 20 years such as the Canterbury earthquakes (where insurance payouts would have allowed for modernisation) and the pandemic (where technology investment became even more critical, have barely shifted the dial on our capital investment rates. Worse, in the last 2 years we are investing less than we have in past 50 years, as shown in the graph below.

Modernising plant, digitising logistics systems, building intermodal freight connections, and automating routine tasks represent opportunities to close this gap. However, achieving sustained improvement requires long‑term investment appetite and policy stability.

3. An ageing and highly competitive labour market

New Zealand’s freight and logistics workforce is older than the national average. Transporting NZ undertake regular monitoring and their most recent data is sobering:

• 10 per cent of truck drivers are over 65
• Up to 25 per cent of staff will retire within five years
• The average age is 46
• The industry is currently short around 3,500 drivers

This creates productivity vulnerabilities that impact cost, capability, and continuity. Labour scarcity forces firms to compete aggressively for talent, leading to wage pressure and operational challenges. The freight and logistics sector in 2026 has deep structural constraints in matching labour supply to economic demand.

Workforce renewal will require training pathways, immigration settings that recognise acute shortages, better working conditions, and technology adoption that reduces physical strain and increases job attractiveness. Without intervention, demographic trends will continue to suppress productivity.

4. Rising input costs

The freight and logistics sector like most parts of the NZ economy has faced rising cost pressures, particularly around fuel and (as noted above) labour. Rising fuel expenses affect everything from domestic freight to international air cargo, challenging operators to find efficiency gains elsewhere. Fuel price volatility from the war in Ukraine to the current conflict with Iran will likely continue in the medium term.

Persistent cost escalation pressures logistics firms to embrace:

• Route optimisation
• Fuel‑efficient fleets
• Modal shifting
• Predictive maintenance
• Contractual arrangements that anticipate volatility

5. Sustainability and Scope 3 Emissions

Sustainability is increasingly central to supply chain productivity. Customers, regulators, investors, and global partners are demanding decarbonisation, transparency, and emissions reduction—particularly for Scope 3. These expectations reshape procurement, asset planning, and freight choices. Firms must integrate sustainability into their operating models or risk losing access to markets, capital, and social licence.

Rising to the productivity challenge

One of the most pragmatic issues when talking about the productivity challenge is it sounds big. It sounds like something that governments, public servants and industry bodies like CILT and Transporting NZ worry about when they think about tax policy or trade agreements or environmental and labour market regulation.

But for companies, operators and workers, the productivity challenges are something experienced every day, in real time. They aren’t abstract concepts to be debated in the halls of power. So, what are three key actions those working in the logistics and transport sector can take to shift the productivity?

1. Focus on the things you can control

Rather than becoming overwhelmed by structural limitations, look to identify areas where you can exert influence—process design, technology adoption, workforce development, and organisational culture. By narrowing the scope to controllable factors, firms can make meaningful gains even within a challenging environment.

2. Take time and space to think and plan

Strategic reflection is often sacrificed to short‑term operational pressure. There is a “price of inaction” that we often don’t realise. It’s also important to recognise failing to plan can be costlier than making imperfect decisions. Building structured time for scenario planning, investment evaluation, and innovation is fundamental to improving productivity.

3. Don’t do it for your country, do it for you

Productivity is not a patriotic duty but a business imperative. Improving performance strengthens organisational resilience, profitability, and competitiveness. Firms that approach productivity for their own benefit—rather than as a national obligation—are more likely to commit to sustained improvement.

But there’s no need to start from scratch: What are the key global trends reshaping the productivity investment landscape?

It shouldn’t be lost on anyone in the sector that change takes time and money – so, in the short-term, rising to the productivity challenge actually implies a short-term drop in productivity.

A key message for NZ in the freight and logistics sector is the need to fight to remain competitive globally, because even fighting to keep up entails a step change in productivity and capital investment compared to what we are doing now.

With that in mind, the key global trends from EY Pathenon’s global freight sector scan follow.

Road transport trends

In road, there is increasing rapid deployment of automation, digitalisation, and predictive analytics in modernising logistics systems. Key themes include:

1. Carrier detection and tracking
2. CO₂ emissions calculations
3. Shipment notifications
4. Load optimisation

Automation tools are freeing up labour capacity, reducing costs, and enhancing speed and reliability. The data suggests that global investment in emerging road technologies, such as advanced telematics, supply chain control towers, and autonomous vehicles, is accelerating, with clear benefits for visibility and decision‑making.

Rail transport trends

The rail we see four global trends:

1. Enhanced signalling
2. Digital train inspection
3. Positive train control (PTC)
4. Predictive maintenance using Artificial Intelligence and Machine Learning

Data shows rail intermodal freight expected to grow significantly, driven by lower emissions and congestion‑reduction benefits. New Zealand’s rail network, while smaller than those in major markets, stands to benefit from adopting similar digital innovations.

Shipping trends

In shipping, the growing dominance of large alliances and the trend toward consolidation, a process long underway, continue to be the key trends. By merging or collaborating, shipping lines have captured scale efficiencies, reduced operational costs, and enhanced market reach.

The evolution of average vessel size across major alliances shows substantial increases, reflecting investment in capacity and the pursuit of economies of scale. These developments influence port requirements and reshape global freight flows.

Final reflections: Shaping the future with confidence

In a world defined by volatility, supply chain productivity becomes a central determinant of resilience and long‑term success. With that in mind:

• Productivity is not abstract. It is a strategic choice.
• Global trends show what is possible with investment and innovation.
• New Zealand faces structural constraints, but none are insurmountable.
• Leaders must cultivate the space to plan, invest, and adapt.

By focusing on controllable levers, embracing global best practice, and committing to sustained improvement, New Zealand freight and logistics, as a sector can rise effectively to the productivity challenge.

Chris Money is the New Zealand Transport Leader and Economics Leader for EY Parthenon