The latest report from Statista reflects that inflation is now above 5%, a rate not seen since 1990. Companies have caught up with rising raw material and component costs, and have implemented price increases on their products. Resilience is now being echoed throughout boardrooms and leadership meetings as companies work to mitigate what was working to something that keeps the business moving forward. The good news today is greater demand is overcoming pricing pressure.
What is great demand today will become less demand tomorrow.
Supply chain resiliency has worked its way to the forefront of companies attempting to mitigate their risk across several fronts. The impact of the pandemic has had far reaching consequences and those consequences are highly visible in the supply chain. As economies opened up after the 2020 shutdowns, surging demand enabled by personal income saved during the shutdowns and uneven start and stops associated with state economies opening up has delivered ebbs and flows throughout supply chains. The results are shortages, shortages in materials and labor produced by unprecedented demand for goods. With demand outstripping production capacity, inflation has hit the general ledger for transportation expense.
As the inflation adjusted cost of goods is positioned in front of the consumer, companies should be looking inward at their ledger for a thorough review of all expenses. Consumer reaction to higher prices can erode sales and market share. Development of strategies to lower expenses should come from GSA, discretionary spending, planned capital projects, procurement, sourcing and optimization of a company’s infrastructure. With transportation expense equating to a higher percentage of expense to sales, deployment of strategies across sourcing, purchasing and customer contracts take on a new sense of urgency.
Five key actions for the supply chain:
We have all seen the impacts of the Suez blockage, rail congestion out of our ports and rail hubs, lack of transport equipment and shortages in raw materials & components to name a few of the challenges met in the last 18 months. Identifying production sources both domestically and in the USMCA trade corridor becomes a gateway to offset risk from APAC countries where freight expense has wiped out all margins on imported goods.
Dedicated truck capacity:
Large shippers are making big moves to secure dedicated capacity. The
payoff can be big, but the cost can also be big. Key focus points center on purpose and economics.
Reduce your supply chain footprint:
Less miles = Less risk. Getting closer to your suppliers with
potential consolidation points or getting closer to your customer through distribution alignment adds
flexibility to your supply chain.
Own your data:
Now more than ever, data is king. Analytics support or defuse the hot ideas circulating
within the organization and illustrates paths to success. Good data leads to the great decisions that
need to be made now.
Leverage with your customer:
Many mid-market companies see customers owning their own freight
terms from the plant, which creates dueling priorities of shippers and shipper customers fighting over the
same capacity. Strategize on how to best serve your customer while leveraging your entire shipment
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Connor D. Wolf, (2021 September). Echo Global Logistics to Go Private in $1.3 Billion Buyout https://www.ttnews.com/articles/echo-global-logistics-go-private-13-billion-buyout
AP (2021 September). Kansas City Southern Picks Canadian Pacific Bid, Transport Topics https://www.ttnews.com/articles/kansas-city-southern-picks-canadian-pacific-bid
The Maritime Executive (2021 September). San Pedro Bay Sets Four New Records in One Day as More Vessels Arrive https://www.maritime-executive.com/article/san-pedro-bay-sets-four-new-records-in-oneday-as-more-vessels-arrive
Hellenic Shipping News (2021 September). U.S. Gulf Coast oil Reiners recovering faster than producers https://www.hellenicshippingnews.com/u-s-gulf-coast-oil-refiners-recovering-faster-thanproducers/
Supply Chain Brain (2021 September). First Autonomous Cargo Ship Faces Test With 236 – Mile Voyage https://www.supplychainbrain.com/articles/33676-first-autonomous-cargo-ship-facestest-with-236-mile-voyage
Statista, (2021 September). Monthly 12-month inflation rate in the United States https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/
Dan Gilmore, (2021 June). Supply Chain Inflation is Here https://www.scdigest.com/firstthoughts/21-06-11_Supply_Chain_Inflation.php?cid=18763