Understanding the Impact of Inflation on Supply Chains
Coming up on 3 years post-pandemic, ongoing inflationary pressures continue to cause supply chains to struggle. Rising costs and changing dynamics seem to be par for the course. Carrier capacity constraints and increasing demand are just the tip of the iceberg. While workforce turnover rates have finally slowed, organizations continue to struggle with higher operational costs associated with not being able to meet talent demand in certain supply chain sectors and industries. And only within the last quarter have parcel shipping rates begun to dip as volume slowly increases.
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Strategic Responses to Inflation in Supply Chain Operation
So how should middle-market companies respond to these inflationary pressures? We offer these solutions for consideration:
Operations Improvement:
– Simplify product offerings to eliminate non-essential features, reducing costs and complexity.
– Shape demand through product substitutions and trend-based assortment narrowing.
– Postpone product deployment for greater flexibility and reduced capital investment.
– Utilize advanced modeling tools for pinpointing operational inefficiencies.
– Implement computer-aided design to minimize waste and enhance efficiency.
– Explore selling spare operational capacity, including storage and inventory management services.
– Adapt to remote work models, part-time roles, and varied shift patterns to increase capacity.
– Invest in automation like RPAs and advanced picking technologies to counter labor shortages and wage hikes.
RELATED READING: Manufacturing Shift Scheduling: A Complete Guide
Transportation Solutions:
– Explore alternatives to mainstream carriers: Intermodal shipping, local couriers, and regional carrier networks.
– Optimize shipping frequencies and container sizes.
– Implement transportation management systems for efficient mode-order matching.
– Use retail operations as a pick-up option, reducing overall shipping costs.
RELATED READING: Alternatives to Maritime and Road Transport
Procurement Strategies:
– Conduct thorough audits to ensure adherence to contract terms.
– Partner with Group Purchasing Organizations for improved pricing and service levels.
– Redesign packaging for cost-efficiency.
– Engage proactively with suppliers for process improvement and efficiency.
Pricing Adjustments:
– Rethink pricing thresholds and discount policies.
– Implement “Cost to serve” models for a deeper understanding of customer profitability.
– Consider strategic pricing adjustments in response to market conditions.
RELATED READING: Is It Time to Rethink Your Pricing Strategy?
Long-Term Supply Chain Strategies for Inflationary Times
– Move operations closer to customer bases or consider nearshoring options.
– Explore co-location with complementary businesses for shared operational benefits.
– Evaluate 3PL options to leverage economies of scale while maintaining control.
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Custom Solutions for Inflationary-Induced Supply Chain Challenges
Inflation’s impact on the supply chain is multifaceted while organizational needs are complex, often requiring a customized approach. While there’s no universal solution, the strategies above provide a starting point for adapting to these challenging times.
For organizations seeking to refine their supply chain strategies amid inflationary pressures, Fisher Management Partners offers comprehensive assessments and tailored solutions to enhance supply chain efficiency and resilience.
Contact us to explore how we can help you navigate these complex challenges and support your growth.
We’re Your Partner to Grow.
About Pete Beckwith
Pete Beckwith is a partner with Fisher Management Partners, and he leads its Supply Chain Solutions Practice. He began his career at Andersen Consulting and later joined Arthur Andersen’s Business Consulting Practice, where he led Supply Chain solutions for Central Ohio. After Andersen, Pete was the Director of Business Integration and IT Strategy at Cardinal Health, a Fortune 20 company in the global healthcare distribution industry. He later served multiple executive roles at Cardinal Health, including as VP within Merger Integration and Operational Excellence, until he joined Fisher in 2015. Pete has successfully delivered large domestic and international supply chain projects. His areas of expertise include supply chain management, business integration, Lean Six Sigma and continuous improvement. You can reach Pete at pete.beckwith@fishermp.com.