How Inflation Impacts the Entire Supply Chain
There’s a perfect storm going on in the supply chain and its inflation that’s driving it. The overall effect is causing severe disruption. That’s due to increased production costs. These include higher wages and the increased price of raw materials, energy and transportation.
Businesses, including those involved in warehouse supply, need to act now to become resilient to this new reality. So, what can they do to mitigate the risks that inflation is causing in the supply chain?
Read on to find out how our range of warehouse logistic services could help you and your business.
Some of the Key Drivers of Inflation
People’s purchasing power has diminished. They can pay for fewer goods and services with the same amount of money. Supply constraints across the board have in part driven the rise in inflation over the past year.
It’s a major shift from the dominance of “demand drivers” that had been typical in the many decades before. Changes in consumer habits like the online shopping boom have led to supply chain congestion in some industries. There’s been overcapacity in others. This has contributed to pushing inflation ever higher.
All this is challenging for global supply chains. Stakeholders need to improve their stock visibility. They should tighten up their logistics planning and cut production costs to stay competitive.
Due to the interconnections within the global supply chains, if one price goes up, another tends to follow. 3 factors, in particular, contribute to inflation:
- Increases in wages
- A rise in the price of goods and services
- Energy costs
How Tough Yakka is Part of the Solution
When increased costs get passed on to the buyer, demand will typically fall. Suppliers may need to produce and offer fewer goods or services. Sales and Operating (SOP) processes will have to become sharper and more detailed.
A planning approach that allows for greater agility is going to need support from all stakeholders in the supply chain. That includes sales and marketing departments, warehouse supply teams and warehouse logistic services.
Wages are arguably one of the key drivers connected to inflation. It would therefore make sense to only have your workers on site when you actually need them. For some businesses, this is clearly not possible. For others who rely on warehouse labour, it can be a very different story.
Warehouses have a golden opportunity to reduce costs by bringing in teams “on demand.” The key warehouse services Tough Yakka can supply relate to:
- Pallet wrapping, scanning and labelling
- Putaway and cross-docking
- Storage Preparation
Tough Yakka’s reliable, qualified, motivated and hard-working staff can be there the moment you need a job done. It’s a cost-effective solution because there’s no wasted effort involved. You’re in control and can call the shots as demand requires.
How Supply Chain Teams Can Mitigate the Impact of Inflation
Logistics planning is part of the effective strategy you need to reduce the consequences of inflation on the supply chain. Businesses that don’t plan ahead and overlook keeping tight control of their stock face a troubling future.
They’re likely to make unplanned purchases. That could drive up logistics, transportation, and production costs even further. To shore up resilience and flexibility in the supply chain businesses need to focus on:
- Greater flexibility
- Tools that allow them to see end-to-end supply chain issues
- Simulating potential scenarios for improved responsiveness
Taking action in these areas will enable a company to be more creative in finding alternative logistics networks. For those who run warehouses, this will allow them to adapt their resources to the current reality.
Being able to see exactly what’s going on in the supply chain at any given moment lets them detect errors and make efficiencies more quickly. And, time spent coming up with a variety of plans for the unexpected will reap dividends further down the road.
Digitising logistics operations also means a warehouse operation can track the performance of the supply chain. That allows them to spot improvement opportunities.
For instance, if a supply chain manager identifies a rise in the price of certain raw materials, they can try to find a supplier closer to them in order to reduce transportation costs.
Building Resilience
When times are uncertain, organisations need to take a collective approach to manage supply chain risks.
They should stress test supply chains by taking a detailed look at critical value chains. Businesses need to understand their key cost drivers and where there could be considerable losses due to higher costs or an inability to supply.
All this helps to identify potential gaps and allows the right strategies to become embedded for increased resilience.
Companies should take a close look at their current supply chain resilience. That includes the financial health of their critical suppliers. Inflationary pressure can cause financial distress where you least expect it. It’s therefore vital not to get caught out with the issues a key supplier may be having without having any kind of contingency plan.
Businesses should carry out a thorough risk assessment of their critical suppliers and their sub-suppliers. This will allow them to spot which risks could have an impact on their supply chain and business resilience. Companies should also sharpen up some of their internal working practices. These could include:
- Closer alignment and better communication with their finance department
- A digital platform that records all transactions in real-time
- Tying in external data sources and supply chain networks
Ultimately, what all these actions boil down to is a drive towards increased efficiency, a reduction in waste and a lowering of costs.
Talk to Tough Yakka Today!
If you’re in the business of warehouse supply along with the loading and unloading of goods, we are here to help. Tough Yakka is a fully licensed warehouse labour supplier with a reputation for excellence. We play a crucial role in the supply chain by specialising in unloading and loading services in the Brisbane area.
Let us become part of your inflation-busting strategy. We’ll be there when you need our services and not a moment longer. Talk to one of the team today about the warehouse logistic services we can offer. We look forward to partnering up with you.