Substantiating Supply Chain Disruptions

**The following information does not constitute tax/legal advice from ERC Specialists. However, it may prove useful. Please share it with your tax/legal professional for their expert advice.**

The literature seems to suggest that substantiating supply chain disruptions is the task of the company claiming it. There does not seem to be a consensus on how this is done, or even official forms from the IRS. However, the following info might prove helpful.

Relevant Substantiation Info

Question 67: May third-party payers rely on client employer information regarding the employee retention credit?

Answer 67: Yes. If a third-party payer (such as a CPEO, PEO, or other section 3504 agent) is claiming the employee retention credit on behalf of the client employer, the third-party payer may rely on the client employer's information regarding the client employer's eligibility to claim the employee retention credit.

Source: N-2021-20

Supply Chain Disruption

COVID-19 is not a typical risk event. The scale of its impact eclipses anything most supply chain leaders will have seen before. The speed of the escalation requires continuous end-to-end assessment, optimization and monitoring. Companies need to respond rapidly and confidently to shape and execute a short-term tactical plan that will mitigate the risks to human health and protect the functioning of global supply chains. In doing so, strong data and analytics capabilities are crucial in understanding complexity, anticipating potential disruption, and quickly developing a response.

You are not alone:

94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19.
75% of companies have had negative or strongly negative impacts on their businesses.
55% of companies plan to downgrade their growth outlooks (or have already done so).

Source: Accenture

Assess mid-term implications

As manufacturing facilities in affected regions slowly come back on line and the information gaps begin to fill, companies will start to address the broader implications to their supply chains. This will likely include the following:

Quantifying the virus’ impact relative to supply and demand disruptions — both today and longer term — and future market performance
Performing an operational risk assessment on critical business functions
Accessing critical supply chain data across all tiers to properly assess the potential damage
Preparing to set up a temporary inventory recovery and evaluation process, where applicable, and pursue alternative sourcing strategies
Communicating with key supply chain stakeholders on supply volume and changes to demand volume for the next few quarters
Conducting scenario planning exercises to understand the operational implications — financial and non-financial.

Source: PricewaterhouseCoopers

Mapping Your Supply Chain

"Surviving a supply chain disruption means making sure you still have suppliers and a steady flow of parts and materials. Sheffi recommends finding out how your supply chain works through supplier mapping. This includes plant locations (the headquarters may be elsewhere), what each plant makes, and the criticality of different parts..."

Source: MIT Management Sloan School

Resources:

Advanced Supply Chain Collaborative - The University of Tennessee Knoxville - "The Advanced Supply Chain Collaborative is an initiative of the Global Supply Chain Institute, working with faculty from the Department of Supply Chain Management and other departments in the Haslam College of Business at the University of Tennessee, Knoxville. ASCC works as a collaborative think tank, engaging industry experts with UT faculty to explore advanced concepts in supply chain management."
COVID-19: Operations and supply chain disruption - article from PricewaterhouseCoopers (PwC) is an international professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounting firms, along with Deloitte, EY and KPMG.
Mapping Your Supply Chain - "Events like the COVID-19 pandemic upend global supply chains and leave companies scrambling. From internal decisions to how to work with suppliers and customers, here’s what to do now." - MIT Sloan management school is part of the world’s leading research institution.
Supply Chain Disruption - Accenture plc is an Irish-American, professional services company based in Dublin, specializing in information technology services and consulting. A Fortune Global 500 company, it reported revenues of $50.53 billion in 2021.
The White House Supply Chain Disruption Task Force - 100-Day Review Outlines Steps to Strengthen Critical Supply Chains.
U.S. Dept. of Transportation - Transportation Supply Chain Indicators
2022 State of Third-Party Logistics Industry Report - 3PL Central, An Extensiv Company - "With well over a decade of working with top-performing 3PL warehouses, our entire team is dedicated to building supply chain warehouse management software based on 3rd party logistics best practices. 3PL Warehouse Manager, one of the leading cloud-based WMS systems, makes it easy for warehouses to manage inventory, automate routine tasks, and deliver complete visibility to their customers."

Date:7/8/2022