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 often do you get to the end of a working day and wonder where the time went? Perhaps you never got to item 3 (or even item 1!!) on your to-do list. How can you solve this problem without working longer hours? The answer is very simple, but the art in the solution is where the gold is. The answer to free up time is to delegate more – either to existing team members, new people you recruit, or externally to outside contractors. However, if delegation were that easy, everyone would be doing it now, right? So, what is the art of delegation? We say art, because delegation is not an exact science; different approaches are needed depending on who the ‘delegate’ is. Time and effort are required to effectively pass on tasks to others. Often, the time the delegator needs to put in initially is greater than if they did the work themselves – that’s why so many people don’t delegate. The view that ‘it’s quicker for you to do it yourself’ holds you trapped and unable to be more productive and effective yourself. It also stops others from developing better ways to do things than you already know, i.e. if you teach them your way, then they can master that AND add their own value – two minds being better than one. Here are some essential principles to apply to help you to delegate (as opposed to abdicate!): Delegation Assess the task, issue to the right person and support - helps build trust and respect Be specific and crystal clear for greater communication Request they repeat back instructions, so you know you were understood, enabling higher productivity Set a time frame and request clarification that the task has been achieved, ensuring jobs are completed on time and are profitable Both parties to review - opens the door for future work Abdication Issue tasks to anyone and forget about it - shows distrust and a lack of respect Giving unclear and little information results in poor communication Don’t ask if you were understood - results in low productivity Don’t set a time frame – it can mean jobs are delayed and over budget Different expectations can result in disgruntled clients No review results in no future work Delegation is a skill to be learned; applying these principles consistently will ensure long-term success. “No person will make a great business who wants to do it all himself or get all the credit” – Andrew Carnagie Action list: Which tasks am I currently doing that I could delegate to others? What can I do with the time I free up? Who are the best people for me to delegate these to? (Make sure they want to do these as part of their career development). What is the best way to document what is expected and how it should be done? What support and review process is needed to ensure success?
Logbooks are useful records of business expenses relating to work vehicles and this is important when calculating what tax deductions you can claim. Depending on your business entity type, different tax rules apply when you use motor vehicles to earn income, and you might use a logbook to track expenses in different ways. Sole traders and partnerships can claim income tax deductions for motor vehicle expenses if the vehicle is used to help earn income for the business. If you don’t use the vehicle exclusively for business, you can’t claim 100% of vehicle expenses. You need to work out the business use of the motor vehicle to calculate what deduction you can claim. You can do this either by using a logbook to track actual costs or using a logbook over a test period to establish the average business usage. Companies are a bit different. Where company vehicles are used partly to earn income and partly for private use, vehicle costs associated with private use are liable for FBT. Companies can use logbooks to keep track of work-related costs and show either that the vehicles are work-related vehicles which don’t attract FBT where used for work purposes only, or that FBT is accounted for correctly where there is some private use of other vehicles. The logbook becomes a record of work-related use and of private use subject to FBT. Where a company restricts private use of the vehicle, a logbook is used as evidence that employees have complied with the restriction. Whatever type of business structure you have, we can advise you on keeping good records and understanding what you can claim.
Major changes to KiwiSaver were announced in Budget 2025. The KiwiSaver voluntary savings scheme is aimed at helping New Zealand workers save for retirement or buy a first house. But with the rising cost of living, action was needed to make KiwiSaver fit for purpose and more fiscally sustainable as a savings scheme. How will these changes affect your employees and your small business? Let’s take a look at the details of these KiwiSaver changes. Changes affecting your employees First off, let’s outline how the initial changes announced in Budget 2025 will affect your employees and other Kiwi workers: Since 1 July 2025: Younger workers will qualify for government contributions: People aged 16 and 17 will qualify for government contributions, so long as they meet other eligibility requirements. Prior to 1 July 2025, members must be 18 or older to qualify. Government contributions to halve: The government KiwiSaver contribution will halve, reducing the maximum government contribution from $521.43 to $260.72 each year. High earners to lose government contributions: People who earn more than $180,000 of taxable income in a year will no longer qualify for government contributions. No change to 2025 government contributions: There’ll be no change to government contributions for the year ending 30 June 2025. These will be paid in July and August at the current government contribution rate. Changes affecting your small business Next, let’s lay out the KiwiSaver changes that will directly affect your business: From 1 April 2026: Employer contributions will rise to 3.5%: From April 2026, the default KiwiSaver contribution rates for both employers and employees will rise to 3.5% – up from 3%. Employees can choose to remain contributing at 3%: Employees who are members of the KiwiSaver scheme will be able keep their contributions at the current rate. They can apply for a temporary rate reduction from 1 February 2026, if they want to continue contributing at 3% from 1 April 2026. Employers can match the rate reduction: As an employer, you’ll be able to match your employee’s temporary rate reduction. Once your employee moves to a higher contribution rate, you’ll need to increase your employer contributions to the default 3.5% rate. Inland Revenue will notify you of this change. Younger workers will qualify for KiwiSaver contributions: People aged 16 and 17 will qualify for employer contributions. If they contribute to KiwiSaver from their wages, you will need to start making employer contributions. From 1 April 2028, the default contribution rates for employers and employees will rise again to 4% (up from 3.5%). Getting ready for the KiwiSaver changes These amendments to KiwiSaver could have a significant impact for your small business. Increased employer contributions will increase your payroll costs and stretch your cashflow, as will making contributions for younger workers in the 16 to 17-year-old age bracket. You'll also need to update your payroll software and processes, to ensure you’re making the correct contributions for the right people, at the right rates.
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