Supply chain in inflation
Global supply chain is connected in all aspects. If prices in one country goes up it tends to affect all other countries as well. Increase in labor, energy and transport costs are contributing to inflation all over the world, posing difficult policy changes.
Covid 19 Effect
As we know, it is one of the sharpest economic contractions in history. After covid 19, countries are rebounding rapidly and anticipating a new post covid future, because of this inflation. The supply chain and demand are strained during the process of bouncing back from the impact. As a result, there is a substantial increase in shipping costs and delivery lags. Furthermore, inventories are diminishing and firms are facing challenges to obtain production inputs.
Impact of Inflation on small scale Industry
Some small companies may not see the impact of inflation in the short term but it will eventually create an impact on their businesses. Inflation is undermining the purchasing power and increasing the cost of borrowing. Therefore, this results in shortages of finished goods as cost associated with raw material has increased. Now more than ever, businesses have to make right strategic decisions to determine and manage the effects of inflation by constantly evaluating different parameters of business such as geographical markets, supply chain processes, manufacturing needs.
The true reason for increase in inflation is commodity prices and commodity prices are increasing because of increase in oil and transportation cost. It’s a true phenomenon that prices increase because prices increase. According to the World Bank, commodity prices are now above pre pandemic levels, food prices have increased by up to 3.5% and global shortages like semiconductors have put an extreme pressure on companies’ cost of goods sales. This coupled with transportation costs has started threatening a business’s survival. It has also divided business into two categories, one that can afford new prices and other who can’t.
Ways to Survive Inflation
The only way to survive this inflation is to have an integrated approach towards supply chain techniques. Companies have to adopt a strong operational strategy with a combination of financial planning and demand forecasting. For example, businesses have to anticipate disruptions, volatile labor markets, increase in wages, and other external factors that may hinder the flow of supply chain processes. All these anticipation will lead to deep understanding and analysis of the company’s supply chain process. This method will help improve business oversight that ultimately will help companies in making better business decisions.
In conclusion, supply chain businesses are the most constrained with many challenges and will only thrive if they make significant changes in their business. Companies have to identify opportunities and threats during this time and find a proper solution.