Newsroom

Back to business while battling Covid

The longer we wait to restore broader economic activity, the greater the long-term loss of economic capability. We need to start thinking about 'virus-proof' workplaces and practices, says Rod Oram

So far our physical economy is holding up remarkably well considering the stunning shocks we and the virus are hurling at it. Food, healthcare and other essential goods and services are flowing, albeit with some shortages.

As our needs broaden, the Government is gradually allowing business to do more. The Warehouse, Smiths City and Briscoes, for example, can now sell online essential items for homes and offices. They quickly devised and deployed people-separation in their warehouses to minimise the risk of virus transmission. Courier and delivery companies have done likewise to get the goods to us.

Further up the supply chain, the Ports of Auckland has divided its stevedores into a dozen or so teams. They are unloading and loading ships to keep our imports and exports flowing smoothly. New health and work practices within and between teams will likely prevent people picking up the virus at work.

These are just a few examples of four vital themes revealed in Newsroom’s series of interviews with CEOs over the past two weeks. Their businesses acted with foresight and innovation, which is making them more resilient and confident.

Along the way, their businesses have changed markedly. They believe these experiences will enable them to survive this crisis, and thrive in the very different future a new normality will bring.

We’ll be in deep trouble, given our high dependence on imported parts and products, and plummeting economies in countries that supply them.

But much sooner rather than later our physical economy will succumb to a serious flaw. Each player along its supply chains relies on just-in-time replenishment of the goods they need, whether they be raw materials, components, products, packaging, labels or other items essential to their role.

Here’s one New Zealand example in recent days. The rush to bake at home caused a run on flour in supermarkets. But in trying to meet that surge in demand, one of our flour processors suffered a machinery breakdown. It took a while to fix so supermarket shelves were flourless longer.

But what happens when the parts to fix a broken machine are no longer available and ingenuity fails to deliver a work-around?

We’ll be in deep trouble, given our high dependence on imported parts and products, and plummeting economies in countries that supply them. No, China has not become permanently virus-free. Covid-19 will almost certainly return, causing renewed disruption to the Chinese economy.

Trying to reduced our dependence on global sourcing is neither practical nor desirable. We could only ever achieve superior quality, sophistication, reliability and cost on a tiny range of items beyond those on which we already do. Even achieving that small increase would take a while.

The answer instead is to start restoring activity across the economy as safely and as quickly as we can. This would help us recover some of the capacity, demand, income, purpose and diversity which makes our economy responsive and resilient.

The longer we leave the turnaround, the greater the long-term loss of economic capability. We can’t wait a year or so for a vaccine and then longer to vaccinate everyone in the country to make it safe to work together again. We must begin now to redesign workplaces and practices to keep the virus out.

... it has to shift its mindset from a defining list of essential goods and services to defining virus-proof workplaces.

Rightly last week our Government locked down life in New Zealand because strict social separation is the only way so far we know to halt the virus. Among the rules was a narrow definition of essential goods and services. But within a week the Government realised it had to gradually extend the list and the suppliers by allowing some retailers to sell essentials online for home delivery.

But it seems likely that the virus will persist so the lockdown, at least in some form, will have to last longer than its current term of four weeks; and the range of goods and services deemed essential will have to expand markedly to meet the legitimate needs of people, companies and other organisations.

To respond effectively, the Government has to do broadly two key things. First, it has to shift its mindset from a defining list of essential goods and services to defining virus-proof workplaces. We are gaining a lot of experience in how to design and run those, as the likes of the online retailers, courier companies and others are demonstrating.

The key lesson to apply is from the value chains themselves. They have physically disaggregated themselves into myriad players. Rarely does a company buy raw materials and sell finished products. Likewise we can redesign many workplaces to physically separate people, or at an absolute minimum divide them into very small, duplicated and self-contained teams.

This past week I’ve talked to some small manufacturers who know they can do this, and are very eager to do so.

“Since the end of January, we were anticipating what’s happening now -- but not as fast as it has,” says one of them. “The issue for operations to continue is not essential versus non-essential but Level 4 compliant or not.”

Before the lockdown, his company had already figured out how to separate functions and people on its premises, and how to interact with its suppliers and with the courier company which would, as pre-virus, get finished products to retail customers around the country.

“We are absolutely sure we would be absolutely consistent with zero-contact regulations; and we believe many other small companies can probably do the same.”

Such insights apply more widely to other types of business in for example, distribution and service. However, they wouldn’t work for those dependent on direct customer contact, such as cafes, shops and entertainment venues.

Second, the Government must start working with the business sector on strict regulations for and enforcement of virus-proof workplaces. Allies in this include industry associations, employer bodies such as Business New Zealand, the EMA, unions and health and safety professionals.

It also needs to ensure end-to-end solutions in value chains. For example, it needs to let NZ Post, courier companies and other delivery services carry all goods. Currently, they are restricted to items deemed essential.

Compliance will be a challenge. But we are a small country with relatively high social cohesion. For example, a very high proportion of people are showing a strong commitment to living by Level 4 protocols. We can achieve the same in workplaces if we ensure staff have the transparency, power and recourse to make them and keep them safe.

So far in this crisis, the Government has acted quickly and effectively on the enormous health and financial challenges. But if it fails to respond as rapidly to enable the physical economy to play its role, our suffering will be deeper, our recovery longer and our future poorer.