With the economic recovery gaining steam amid an uncertain pandemic path, companies are scrambling to deal with increasing commodity prices, supply constraints, and higher wages caused by labor shortages. According to the U.S. Division of Labor Statistics in December, the Consumer Price Index for All Urban Consumers rose 0.5 percent, seasonally adjusted, and rose 7.0 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.6 percent in December; up 5.5 percent over the year.
The last time the world saw a similar bump in CPI was in the first half of 2008, the early months of the Great Recession. Companies that weathered that storm the best took decisive steps to counter rising inflation by pushing through price increases consistent with CPI — but that alone was not enough. The best performers also took significant steps to boost productivity, primarily by cutting costs. Even as many companies deal with inflation by devoting more energy to adjusting prices or finding new sources of growth, cutting costs remains an important part of managing in this economic environment.
This current inflationary period is unique. Labor markets are volatile, consumer demand has not dipped the way it did in 2008, and supply chains are more constrained. As companies prepare for higher inflation in this new environment, they will need to make moves that not only cut costs but also build more scalable growth platforms, positioning them to strategically reinvest in programs that deliver greater resilience and stronger purchasing and pricing capabilities. Here are a few suggested tactics.
Increase Spending Visibility
High-resolution spending visibility is the foundation of any expense management capability. It enables managers to fully understand where money is spent and who spends it. In an inflationary period, it is critical to establish repeatable, end-to-end, actionable spending visibility by cost category, business process, function, and business unit. This is the foundation for all other productivity efforts. It enables the right level of accountability throughout the organization to ensure that all decisions are made knowing the full impact on the P&L.
Reduce consumption
This is often easier said than done. With increased spending visibility and the ability to isolate drivers, companies can tailor their approach to match the inflationary environment. For example, even if companies aren’t able to buy better due to supply chain and producer pricing pressures, they can make sure that they spend better. One way to do this is to set up a spending czar or spending control towers.
Turn To Technology
Technologies like robotic process automation, workflow, and intelligent document processing can free up workers and make each person much more effective at creating value. At retailers, for example, important associates often spend too many hours, days, and weeks manually inputting item and product data when they could be working on more strategic activities, such as analyzing data and generating insights. Manufacturers can increase both yield and quality in the production process utilizing technologies such as robotics and optical scanners.
These are some general areas to look to for improving efficiencies. Cost savings and maximizing operational efficiencies is what we do at Land Link Traffic Systems. Contact us today for a detailed plan on how we can help your company weather the challenging times ahead.
Stay Safe Everyone.
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Author
Michael Gaughan
Technology Officer
Land Link Traffic Systems
Land-Link, a well respected professional organization, has been providing its clients with effective transportation and logistics solutions since 1978.
