In this Smart Industry article, Zilliant CEO Greg Peters shares four strategies to combat inflation. Read the full article.
Supply chain disruptions and resurgent demand from reopening global economies are causing prices to soar, along with concerns of prolonged inflation. Inflation has an obvious impact on consumers, but the upstream effect on distributors and manufacturers is just as profound. Their ability to respond smartly and swiftly is more critical than ever.
B2B companies continue to scramble to source steel, lumber, copper and other materials that are trading at premium prices. Companies that have continued to rely on manual processes and gut-feel decisions in their approach to pricing will be put at a short-term and long-term disadvantage as margins are likely to suffer.
When inflation hits, it’s critical to first quantify the full impact to your finished goods (if a manufacturer) or stocked inventory (distributor) and then work backward. If you manufacture products with complex formulations, some ingredients will be hit harder than others. Therefore, it’s necessary to quickly understand which formulations are affected and by how much, and account for all labor, freight, and other variable costs related to your final product.
Strategy 1: Take price up
If a company is a leader in its industry, this type of visible price increase in inflationary times is preferable. It presents less risk, and competitors are likely looking to the leader to provide air cover. If the leader doesn’t take price up, the industry as a whole begins to leak margin.