New Zealand businesses, large and small, are finding labour and materials shortages are severely impacting their recovery from the pandemic.

Small businesses in particular are facing cost pressures as a result, and this is ultimately affecting customers.

The material world

With much of the world still facing restrictions, overseas materials required to keep New Zealand running are delayed, limited, or even unavailable. The shortages have seen major price hikes, especially for raw materials, such as timber.

Material shortages created by pandemic-affected supply chains have especially impacted the New Zealand construction industry.

According to research from the Construction Sector Accord, more than 50% of New Zealand construction businesses say shortages of materials and supplies are affecting their ability to deliver on time and to budget.

It’s not just affecting the big construction jobs. Building homes is becoming a problem. Record housing construction and renovation, and housing demand, compounded by Covid, is increasing pressure on supplies and prices nationwide of timber, steel, board products, roofing materials, paint, and other building materials.

International supply chains have been severely affected because of reduced production overseas as well as significant delays of inbound freight from Asia. Some medicines, appliances, fitness equipment, bicycles, hardware, clothing and some homeware items have been in short supply, particularly those sourced from China and other Asian markets.

Wait times for certain products have been affected with delays of up to four months.

Small businesses which rely on materials and components from overseas to produce their products are struggling to fulfill orders.

And you may have noticed some of our supermarket shelves are a little bare or missing that brand you wanted, with delays in shipments and freight.

Many retail businesses are seeing sales rising above pre-Covid levels as customers fuel their consumer hunger after lockdowns. But rising power bills, labour shortages and shipping costs are affecting profitability.

 

Sales have been strong because of strong consumer demand. But the top line spending is masking some of the challenges businesses are facing. Costs are massively up, squeezing margins

Retail NZ chief executive Greg Harford says while sales have been high, profitability was slim. “Sales have been strong because of strong consumer demand. But the top line spending is masking some of the challenges businesses are facing. Costs are massively up, squeezing margins,” he says.

Wanted: People

It’s not just materials New Zealand is short of. It’s employees, particularly skilled.

Border restrictions virtually halted immigration and businesses across a range of sectors are crying out for overseas workers as they struggle to fill roles locally.

Also, predictions the pandemic would severely damage our economy proved unfounded with the economic bounce seeing an increased demand for labour and skilled workers.

In particular, there are shortages of people for roles in IT, management, accountancy, and legal areas.

Consequently, there’s strong competition for key talent and labour. This has seen wage increase in a number of roles.

Businesses are willing to pay above market rates to attract skilled staff. This is easier for smaller businesses that are recruiting for standalone roles and can pay above the market for such skills. Larger businesses may see a snowball effect if they raise salaries in one area and other employees demand equality.

But just throwing money at people isn’t the complete answer to overcome skill shortages.

There are several ways you can attract staff.

 For example, going digital with your recruiting efforts is a cost-effective strategy that offers many benefits to small-business owners. Social media platforms such as LinkedIn and Twitter can be used to engage potential candidates, promote your company’s culture and expand your recruiting network.

Marketing your business should not just aimed be at your customers – it can be used to attract much-needed staff too.

Also, can some of your staff be upskilled or retrained for areas you are lacking? Invest in training - it’s likely to be easier to train existing staff than to take on new employees.

Maybe bring back some retirees who often have a lot of experience and knowledge still to be tapped into. Don't forget the older worker – many are adaptable to change and returning to the workforce.

It’s important not to forget your existing staff in these shortage situations. You can’t afford to lose the knowledgeable workers you already have.  That doesn’t just mean paying them more.

 In these turbulent times you need to ensure you have a culture that encourages your people to stay. It means looking at flexible working conditions, a strong team culture, and other areas that will keep your employees motivated.

And the future is ...

The salary/wage battle, coupled with the material shortage cost pressure, has seen customers become the losers in this situation. They are noticing they are paying more for their goods and services - and are not happy.

And the shortages businesses and the community are facing now are not going away overnight. While we seem to be reaching some resemblance of “normal” in the new world with pandemic restrictions lifting or sub-sizing, the shortages will continue to impact on New Zealand and most countries for some time.

But adversity and challenges often bring out new ideas and solutions, especially for small, agile businesses.

 A healthy sign is we have seen a flourish of start-ups appearing in New Zealand.

Businesses, small and large, as well as governments, may learn some lessons and look at new ways to not fall into the shortage traps. 

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