Why supply chain issues are ruling our economy, and how to stop them causing your business problems down the line.
Supply chain issues. It’s a vague, flat, wall of a phrase that’s crept into our vocabularies via newspaper headlines, notices above bare supermarket shelves, and discussions over Zoom meetings or ever-more-expensive flat whites.
It seems to at once explain the problem, and not explain it, brushing away any hope of solutions without actually revealing what the problem was.
Coupled with record inflation (5.9% as of December 2021), and petrol up 31% from this time last year, businesses are struggling to keep prices in check. And behind much of that are (you guessed it) supply chain issues.
We’ve seen New Zealand-wide shortages of everything from toilet paper to Guinness to brown sugar. And as disappointing as it is for us as consumers to see rising prices or a bare shelf with a shortage notice in place of something you were hoping to buy, from a producer perspective, the reverberations of supply chain issues throughout your business can be devastating.
“It’s a long, knock-on effect that starts right at the raw material mark and flows on to you and me, the consumer,” says Greg Wertheim, a business development manager for Scotpac.
“Things that we may have expected to get in a week’s time we’re now being told we’ve got to wait months as opposed to weeks. And those issues are across the board for consumables.”
And what’s causing that?
The idea is that businesses get some breathing space to keep ahead of their bills, adjust to the current climate, and even see some growth.
“You can literally say the pandemic. Labour shortages put pressure on companies when we go into lockdown or isolation and then you don’t have the labour to produce the raw materials. Then it’s a knock-on effect.”
The lack of labour on factory floors here in New Zealand, in China, Europe, America or wherever else they may be, means the goods take longer to produce. The lack of labour (and backlog of goods needing to be shipped from the lack of labour) in the transport industry means that it takes longer to receive your goods – what took a week five years ago could now take a month. What took a month could now take five. The longer transport times mean it takes longer to receive money from the goods you’re selling, or even that you ship them at less-than-ideal times and lose out on revenue. Even then, once your goods are in the shop, it can take longer to get them into the hands of consumers because of lockdowns, isolations, and labour shortages in retail sectors.
And your debtors are having the same issues with their supply chains, so they take longer to pay.
It’s a headache for businesses to say the very least.
Thankfully, here in New Zealand lockdowns won’t be rearing their ugly heads (touch wood) to exacerbate this problem again, but Covid-19 and the war in Ukraine are still looming causes of concern that add an element of uncertainty into everyday life for us all. For consumers and businesses alike, that might mean a tightening of purse strings to save for a rainy day.
“I think the biggest challenge of Covid-19 is basically that it’s an unknown,” says Greg. “There’s no real handbook of ‘this is what happened last time’ because there was no last time. It really is the unknown.
“So, for things to go back to normal, the so-called-experts are talking late 2022 or early ‘23, but the honest answer is that no one really knows.”
It all sounds pretty grim. But Scotpac have figured out a way to help businesses weather the storm.
“Our strength is that we can make working capital available to businesses really quickly,” explains Greg. “In the normal world the business would be waiting for their debtors to pay them. And with all the pressures and supply chain issues, companies are taking a bit longer to pay. What we can do is, once the company has received that invoice, unlock that invoice by funding up to 80% and provide them with working capital pretty much straight away, essentially easing their cashflow pressures.
“By unlocking a business’s account receivable, we’re helping them get a bit of a head start with us and saving a bit of money. It gives them some peace of mind. So, that’s been very popular.”
The idea is that businesses get some breathing space to keep ahead of their bills, adjust to the current climate, and even see some growth.
“And right up till the end of June, we’re also offering businesses that start an account with us three months interest free,” says Greg. “It literally is interest free, there are no hidden costs – even I was thinking ‘what’s the catch’, but there really is none.
“We call it the Bounce Back Fund. It’s our way of helping businesses experiencing cashflow pressures and it’s been really well received.”
With costs rising as delays with shipping and payments grow longer, Scotpac’s solutions really are a golden light of hope for businesses.
Even if the end of Covid-19’s economic issues are in sight, with so much bad news, price hikes and delays caused by those dreaded supply chain issues, it’s nice to know that someone has our backs.
Greg Wertheim, Business Development Manager
021 334 324 wertheimg@scotpac.co.nz
