Although economic indicators may be improving, distributors continue to face economic challenges. A hearing by the U.S. House Committee on Small Business on July 10 examined the economic realities for Main Street and small businesses and included testimony from a representative of the distribution industry.
J.D. Ewing, chairman and CEO of COE Distributing, detailed for the committee how distributors are managing through continued supply chain disruptions, potential tax increases and today’s regulatory environment. Ultimately, these issues are preventing distributors from investing in their workforces and building inventory, said Ewing, who is also chairman of the National Association of Wholesaler-Distributors’ Institute for Distribution Excellence.
Speaking of the supply chain, Ewing said that many of the challenges faced during the pandemic, including port congestion, are beginning to reemerge. This has caused shipping costs to triple in the past 90 days, he explained, while delivery times are again getting longer. “Shipping and trade impact small businesses even more than big businesses because we don’t have the liquidity or scale to absorb or pass along dramatic increases in shipping costs or tariffs that larger companies might have,” he said in his statement.
While distributors are facing higher supply chain costs, many are also facing a significant tax increase unless Congress takes action. Like many distributors, COE Distributing is organized as an s-corporation and it would be impacted by the sunsetting of the 2017 reduction in individual tax rates that are scheduled to expire at the end of 2025. “This tax cut helped us reinvest in our workers by giving us more resources to hire, raise wages and provide benefits as well as devoting more resources toward expanding the business and contributing to our local communities,” Ewing said.
Finally, small businesses are struggling to manage the time and cost of keeping current on overly burdensome regulatory requirements, Ewing explained. “When we are forced to comply with new regulatory requirements it takes away from other needs of the business,” he told the committee. “Added costs in one place may take away from employee development opportunities or new equipment to make the business safer and more efficient.
Ewing’s full written testimony is available here and the complete hearing can be viewed at this link.