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Inflation: The Topic on Everyone’s Mind
Today it seems like you can’t go a day without hearing about inflation and its effects on the economy. No matter where you find yourself on the supply chain, chances are you are concerned about the impact of rising costs and the availability of materials. Now is the time for creative problem-solving and pragmatic proactive steps to help rein in costs.
- Buy in larger quantities: While this may seem counterproductive during a period of high inflation if you can forecast well and you may be able to leverage quantity discounts by placing larger purchase orders. This discount will decrease your total cost and could improve margins.
- Review contracts: If you are convinced that we are preparing for a sustained period of inflation, now is an excellent time to review your supply and service contracts and try to lock in long-term fixed-price agreements.
- Audit and optimize your supply chain cost: Review the efficiency of your supply chain and transportation. Are your materials making several stops in the supply chain leading to multiple touches? Can we streamline the process to optimize the transportation cost? Now may be a great time to review the business technology and invest strategically in new software that saves money by making your operations more efficient.
- Employee retention: Again, this may sound counterproductive when thinking about cost savings, but research conducted by the Society for Human Resource Management (SHRM) estimates the overall replacement costs to be 90-200%. That is not to include the costs of failing to meet customer demands. This is a great time to get creative to create a work culture that retains talent.
- Leverage your relationships: There are times to select supply and service providers based on cost, but reviewing the business relationships you have already created, and past KPI performance is also important. I do not want to downplay the benefits of the lowest cost, but in a time of inflation, you must keep your landed cost in mind. If a service provider has a track record of late deliveries, they are likely to continue that trend which means downtime and higher costs for you. Sourcing teams should utilize a scorecard to ensure they are making the best business decision and not just relying on the lowest cost to make a decision.
This is not an exhaustive list of everything you or your business can do in a period of inflation. But they are principles that will help you get ahead of inflation. Fighting inflation is a challenge for everyone, but there are practical steps you can take to keep you and your business in the fight.
Contributor: Christopher Fink
About Allyn International
Allyn International is dedicated to providing high-quality, customer-centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management, and global trade compliance. Allyn’s clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe, and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, U.A.E. For more information, visit www.allynintl.com.