Supply chain issues: can you bring things closer to home?
14 November 2022
Global supply chain challenges are changing the reality of doing business. It’s increasingly tough to source raw materials, supplies, and products in the right quantities. And when your supply chain breaks down in this way, that can have serious consequences for your business.
So how do you combat the supply chain problems, while also tackling the additional issues of increasing costs, rising inflation, climate change, and a forecasted global slowdown? One way is to de-globalise your supply chain, as we’ll explain.
What’s causing these supply chain problems?
It doesn’t take much to throw a spanner in the works of a smooth-running supply chain. A scarcity of a particular raw material or ingredient can quickly de-rail an efficient chain of supply, causing delays to deliveries, raising demand, and pushing a rise in prices.
We are currently facing a perfect storm:
- The COVID-19 pandemic – very few industries were prepared for the massive impact of the COVID pandemic. Many sectors and key industries were forced to shut down completely. Staffing levels dropped as employees fell ill. And a large number of businesses were faced with falling revenues and poor cash flow. Some sectors are still not functioning at full capacity, which is holding back production and slowing down deliveries.
- The problem of globalisation – cheaper air travel and improved freight conditions for shipping has turned the world into one giant global market. You can buy bananas from Costa Rica, lamb from New Zealand, and gas from Russia. During normal conditions, this works fine. But faced with the growing threat of climate change, and the huge carbon footprint of a global supply chain, global exports are no longer a sustainable option. To combat this, many sectors are aiming to de-globalise their imports and exports – but the infrastructure that’s needed for a whole industry to de-globalise won’t appear overnight.
- Geo-political issues in key territories – with so many global supply routes still in place, any unexpected geo-political changes can have a profound effect. The Ukraine/Russia conflict may have been brewing for years, but no-one was expecting out-and-out war. This terrible conflict is costing lives, but it’s also having a damaging effect on world trade. As a major supplier of oil and gas, sanctions against Russia are pushing up energy prices. And with Ukraine being a key exporter of corn, the Russian blockades in the port of Odessa are reducing grain supplies and pushing up prices.
In business, we crave stability. Uncertainty, and surprise threats, are the enemy.
A move to local supply chains and greener operations
De-globalising your supply chain and ‘going local’ with your providers is one key option.
By de-globalising your supply chain you can:
- Switch to local suppliers – review your current supplier network and gauge how reliant you are on international and overseas providers. Where possible, build a local supply chain that removes some of the key problems of being reliant on an international supplier network.
- Cut down on delivery times – If you can find suppliers who are based closer to you, you might be able to cut down on delivery times, and speed up the efficiency of the whole supply chain.
- Reduce the cost of logistics – shipping, air freight, and logistics costs can all be slimmed down if you’re working with a local supplier. The additional logistics costs of being part of a globalised chain can be significant. Choosing a local supplier removes some of these costs entirely, and reduces your main delivery expenses.
- Simplify your tax and customs costs – When you import and export across borders, you’ll almost certainly find yourself paying customs fees, and some form of goods & services tax (GST) or value-added tax (VAT). If you can find a national supplier within your own region, you simplify the whole customs and excise process, and reduce your liability to cross-border taxes too.
- Reduce your carbon footprint – one of the big drivers of going local is the business focus on becoming greener and more sustainable. By going local, you reduce the air miles that your supplies cover. This cuts back your logistics-driven carbon footprint, and helps you meet your sustainability targets. Which is good for marketing too!
Talk to us about going local with your supply chain.
Dismantling your existing supply chain is a big task. But after a decade or so of ‘offshoring’, it might be worth looking at options to bring supplies and production closer to home.
How to attract great people to your business and how to keep them. Three tips to help you rise to the challenge to become an employer of choice.
As an employer, there are several obligations and expectations set by the Inland Revenue Department (IRD) that you must adhere to. Understanding these requirements is essential for maintaining compliance and avoiding any potential penalties. Let's take a closer look at what the IRD expects from you as an employer. Register as an Employer Before you hire your first employee, you are required to register as an employer with the IRD. This is a crucial first step in ensuring that you can meet all tax and payroll obligations. Accurate Record Keeping The IRD requires you to keep accurate and detailed records of all employment-related transactions. This includes: Employee personal details Wages and salary paid Payroll dates and methods PAYE deductions and remittances Details of benefits or allowances provided to employees Maintaining proper records helps ensure that you are reporting and remitting the correct amounts to the IRD. Deduct PAYE Tax You are responsible for deducting PAYE (Pay As You Earn) tax from your employees' pay. This involves calculating the correct amount of PAYE and ensuring it is deducted from each employee's salary or wages before their net pay is provided. Pay Employer Contributions In addition to PAYE, you may also be responsible for contributing to your employees' social security and retirement benefits, depending on the country you operate in. These contributions are typically paid in conjunction with PAYE tax. Issue Statements and Forms At the end of the tax year or upon employment termination, you should provide each employee with a statement showing their total earnings and PAYE deductions. Additionally, filing the appropriate end-of-year PAYE schedules with the IRD is required. File Employer Returns Employers are required to file regular returns with the IRD, which could be monthly, quarterly, or annually, depending on specific regulations. These returns should accurately report all payroll activities, including PAYE deductions. Handle Tax Codes and Changes It's crucial to apply the correct tax codes for each employee's circumstances. Any changes in employment status or tax code must be updated promptly to ensure accurate tax withholdings. Comply with Audit Requests The IRD may audit your business to ensure compliance with employer obligations. As such, being prepared to provide all requested information and records in a timely manner is vital. Adhering to these expectations from the IRD is not just about compliance; it's about fostering a transparent and trustworthy relationship with your employees and the tax authorities. If you need assistance with understanding or managing your obligations as an employer, consider reaching out to a professional accountant. Our team is here to help you navigate these responsibilities seamlessly, ensuring peace of mind and allowing you to focus on growing your business. Feel free to contact us for further information or assistance.
Thinking of starting your own sole trader business? The Sole Trader Toolkit from the Ministry of Business, Innovation and Employment has all the basic advice you might need.
To discuss all your account matters please call us on 09 438 1001
