Business Strategies for Battling Inflation
We see it every day. The national news cycle is saturated with coverage of the effects of inflation – on our households, our businesses, and our communities. It’s natural to view this phenomenon as something that happens to us – a worrisome event impacted by forces beyond our control. And in a business setting, inflation can be a killer.
But it can also be managed – through smart preparation, planning and investment. This work starts long before a supply chain disruption or economic downturn actually hits. That said, it is never too late to pivot.
The key to battling inflation is starting early, investing appropriately, and maintaining standards continuously so you’re equipped to do battle when inflation rears its ugly head. We recommend clients start with these strategies:
Fine-tune your spending visibility. Just as you would sharpen your oversight on spending for your family’s household in times of economic challenge, so too must you take a closer look at the most granular numbers for your business, continuously and especially in preparation for inflationary times. This may sound simple and obvious, but too few leaders take the time to establish repeatable, end-to-end, nuanced visibility into spending across categories, processes, functions and business units. Well before the next period of economic downturn, and preferably on a quarterly basis, invest serious time and energy into analysing your spend at a line-by-line level. Where are dollars being wasted? Where could investments be better allocated? Are there places where spending actually needs to be increased in order to make more over the next several years? This work can feel tedious, but it’s absolutely vital to preparing your business for the future impacts of external market forces.
Re-examine your management of materials and products. Specifically, reconsider and assess your current strategy for moving, protecting, storing and managing your company’s core products and materials. While a reassessment of your material handling practices may seem intimidating given the technical moving parts and safety implications, this is one of the most significant untapped opportunities we see for client organizations to reap serious cost savings. It’s often a neglected or forgotten component of the operations model, and there are many ways to streamline and optimise material handling that you may not be aware of. Especially in the realm of telematics and the importance of data transparency. For example, knowing when to replace some of your aging forklifts, power sources and equipment in times of plenty, so that replacements don’t need to be found in the midst of rampant supply chain disruption, could help keep you up and running when times are tough for your competitors. Looking into your practices, brainstorming around how to improve them, and implementing changes can safeguard your team’s precious uptime when inflation and economic disruptions inevitably occur.
Name a spending ambassador. According to a recent Harvard Business Review article on combating inflation, one global healthcare company worked the problem by naming and empowering a “spending czar” to break down company silos and make spending decisions across the organization, leading to more than $300 million in annual cost savings. Entrusting a skilled individual to special oversight of consumption practices can open your eyes to problems and inefficiencies you had no idea were there. Not only could this individual lead the spending visibility work I outlined in my first strategy, he or she could also take the lead on influencing the rest of the organisation to follow suit and make incremental changes that ultimately lead to big results. Even if it means hiring additional headcount, this allocation will be well worth the investment.
Move spend categories into a variable spend or “as a service” purchase model. Some customers do this with their third-party logistics providers, paying a variable amount based on how many shipments they make through the 3PL. This aligns your higher spend with higher revenues. You can do similar things with carriers–this is actually a good time to negotiate as carrier loads are dropping rapidly. Instead of buying higher-cost equipment such as on-the-road vehicles, production equipment, automation equipment, etc, work with companies willing to provide “as a service” offerings where you pay as you go or pay per use.
Inflation can be a real business killer, but it doesn’t have to be. With these strategies in place, your business will have a much better shot at maintaining steady revenue, even in the face of news-making and unprecedented economic uncertainty.
If you have questions in relation to the above, or any other matters, please do not hesitate to contact our office on 1300 620 345.