Inflation creates challenges far beyond rising prices. It affects cash flow, inventory investment, customer pricing, supplier relationships, and profitability across the supply chain. In this article, Lisa Anderson shares practical strategies for navigating inflation by balancing working capital, inventory, and customer service while positioning businesses for long-term success. Supply Chain Brain explored how manufacturers and distributors can respond to persistent inflationary pressures while protecting profitability and maintaining customer service. Read an excerpt below.
“Inflation has taken root. Businesses everywhere are dealing with annualized cost increases of nearly 7%—the fastest pace in 40 years and significantly higher than the 1.8% average of the past decade. The resulting upticks in operating costs can cause serious damage to the bottom line.
The challenge is all the greater for its unfamiliarity: It has been 30 years since inflation was much of a player in company planning.
Experts do not see relief any time soon. They point to a number of root causes, one of which is energy.
Of all the steps businesses can take to mitigate the bottom-line effects of inflation, the most important is better management of cash flow. Inflation tends to accelerate the drain of money from company coffers, and throttle the flow that comes in. If left unaddressed, these battling trends can gut profits and threaten business survival.
Experts advise looking at the coming months with an eye toward estimating what will happen to cash balances.”