The Strategic Reserves in New Zealand

Almost every country holds strategic reserves to ensure national security and an uninterrupted economy, stabilize market regulation and price, cope with supply interruptions by external and internal shocks, and tackle demand fluctuations.

New Zealand (NZ) has also built up its strategic reserves, including natural gas, petroleum, and medical reserves, for decades.

Despite the vital importance of strategic reserves, there is still no easy answer to the questions such as “What reserves should be kept by the governments?” “how many strategic reserves should be held by the governments?” or “how the government can coordinate with the private companies?”

To comprehensively understand the strategic reserve requirements in NZ, the Centre for Supply Chain Management (CSCM) organized a research program by collecting survey data. The survey asked industries and academics what strategic reserves (items and quantities) should be held and for how long.

We found that:

• Food, Natural gas, Crude Oil, Petroleum, Fossil Fuels, Medicine, Coal, Wheat, Meat, and Grain are the top 10 reserves suggested by the participants.
• All the reserves considered critical to NZ are suggested to be equivalent to 3 month’s amount. For the non-perishable reserves, the quantities are widely recommended to be over 12 months.
• Health (food) and sustainable operations (Oil) are the most critical factors that are considered by most of the interviewees.

We also asked participants about the key factors that might disrupt supply chains in their industry for the next year and the next five years. We found out the following:

• Both practitioners and academics are positive to post-covid impact by considering this impact will be eliminated in the next five years.
• The interviewees are pessimistic about the economic situation in NZ both in 2023 and even in the next five years.
• Policy changes have been the most uncertain factor that may cause the disruption of the supply chains in the next five years.
• Both in the next year and following 5-year scenarios, extreme weather has been considered a critical issue that may disrupt the supply chains in NZ.

Another question in the survey asked participants about other reasons that the NZ government should keep strategic reserves. The key findings are as follows:

• Sustainable developmentØ A coping strategy to the alliance of some countries
• Dealing with natural disastersØ Improving international competitivenessAnd lastly, we asked them if they had any suggestions for the NZ government. Below you can find a summary of these suggestions:Ø Considering labour as an important reserve for NZ
• Keeping stable and moving onØ Constructing a forecasting model to prepare for the interruptionsØ Appropriately managing the perishable reserves and avoiding wastage
• Constructing an inventory managing system for a diverse range of reserves
• Understanding the real needs of industries and setting up reserves managing mechanisms.

Na (Rona) Luo is a post-doctoral research fellow at the University of Auckland.