Inflation is Here: How Resilient is YOUR Supply Chain?
Inflation is here: Understanding the inflation-disruption cycle
Inflation is a fact of economic life for consumers and businesses – high and continuously rising Inflation is not. The US and Europe have experienced low levels of Inflation for decades. Recent economic turbulence, market uncertainty, and pandemic upheaval have manifested in runaway inflation and affected the economic, social, and political landscape.
What is Inflation, and What Does it Mean for Supply Chain? Inflation measures how much more expensive a set of goods and services become over a specific period. Supply chain operations are both a significant source and recipient of inflationary impacts. Any shocks to the supply chain, such as natural disasters, pandemics, and economic instability, directly raise Inflation by creating a shortage of materials, leading to an increased cost of procuring and producing goods, eventually increasing prices. The current environment, including the pandemic, has caused significant disruptions in supply chains, accelerating Inflation across the globe.
Why Should Supply Chain Leaders Care?
Inflationary pressures have a disruptive impact on Supply Chains, causing production inefficiencies, higher costs, delays, and supply scarcity, leading to more Inflation. Understanding inflation is crucial for Supply Chain Leaders. They need to take specific actions to mitigate Inflation's impact on their supply chain.
Band-Aid Approach: Short-Term Actions Supply Chain Leaders Need to Take
To contain the impact of Inflation on their supply chain operations, leaders can take several steps:
- Assess their price exposure; while this was not an issue in times of low Inflation, today, they have to assess their commitments to price and spend on critical elements and materials to understand the degree of impact.
- Assess their suppliers, capabilities, and prices, and if needed, source alternate lower-cost suppliers to address Inflation.
Yet, these are only short-term reactive measures. To strategically fortify against inflation, leaders must adopt a Supply Chain platform that is optimized, has built-in resilience, agility, and enables growth.
Supply Chain Optimization: Criticality and Key Characteristics
An optimized supply chain operations platform is critical for a business to thrive, especially with rampant inflation. Optimized supply chains provide essential capabilities to supply chain leaders who must adopt platforms that embody these key characteristics:
- Resilience: Inflation negatively impacts source materials, product, and suppliers alike. A resilient platform enables rapid identification of alternative suppliers, logistical networks, and product designs, helping leaders be resilient, proactive, and able to adapt quickly. It allows access to supply chain information in minutes versus hours and days and can identify and address supply issues before they become shortages.
- Agility: Agile platforms are another essential ingredient of optimized supply chains. They make a digital copy of all supply chain elements, collect signals from various systems, sensors, and locations, and enable insight into the performance of any function in the supply chain operations - driving unsurpassed agility to supply chain leaders.
- Growth: An optimized platform that is resilient and agile not only serves as a powerful tool to address disruptions caused by inflation, but it is a platform for innovation and growth for the business. These advanced platforms can also embed and orchestrate leveraging AI/ML, enabling leaders to drive real-time decisions, enabling automation and collaboration across the entire ecosystem. They can now continuously align plans and execution using their whole supply chain as an engine for business growth.
Summary: Supply Chain disruption and Inflation go hand in hand. Increasing inflation rates require an immediate response to address the impact on an enterprise's operations, financials, and customer satisfaction. An optimized and resilient supply chain is a must for companies to fortify their business by managing Inflation; such platforms will also help enterprises thrive through innovations that drive new sources of growth.
Want to learn more?
- Download our complimentary report: Criticality of a modern, optimized supply chain: essentials to embrace, pitfalls.
Contact us at www.ParkourSC.com.