Inflation’s Impact on the Supply Chain

Unfortunately, in the present state of the world, inflation seems to seep into every nook and cranny of our lives, negatively affecting both individuals and businesses alike. From an individual level, we see that it is now costing much more to fill up our vehicles for our daily commutes or road trips, our grocery carts seemingly are filled less and less as the price on the screen rises with each grocery trip, restaurant bills are much higher, and so many other areas of our lives are beginning to be affected by rising costs and inflation at every turn. An aspect of inflation that is crucial to learn more about is inflation’s overall impact on the supply chain. This article will explain how rising costs and inflation have affected the supply chain overall and will detail solutions that can be implemented to reduce costs where possible for a more optimal supply chain design, all while maintaining current levels of service within a business.

Supply Chain Inflation

Overall, the rising price of things is due to, well, the rising price of things. It really is as simple as that. But to explain a little more, the rising price of goods or services is due primarily to the rising prices of the supplies and materials used or needed for the goods or services. The increase in those prices forces those that use those resources to raise their prices as well. While demand has either stayed the same or increased for many things, the supply has been a bit more difficult to source, also driving prices up in pretty much every area. This has rippling effects throughout the entire supply chain.

Wages and Labor Costs

While the cost of living increases with the cost of goods and services, workers are asking for a higher amount of pay to help them deal with the rise in costs. When employees choose to seek work elsewhere, the pool of laborers for a specific industry or niche becomes smaller, which then drives up the cost of labor for the remaining employees. Once this occurs, the price of the goods and services related to these employees then goes up. Once again, this is the ripple effect of inflation.

Fuel and Transportation Costs

It is also very important to note that a rise in fuel costs can lead to an increase in the price of goods that are being transported using this fuel. The rising price of gasoline and diesel as of late has led to an increase in overall transportation costs associated with the transport of goods as well as transportation costs in relation to the services provided. Aside from virtual or electronic goods or services, nearly every other item or service uses fuel or transportation at some point between the supplier and the consumer. Due to this, nearly all sectors have the potential to be greatly negatively impacted by rising costs associated with fuel and transportation.

Network Optimization

Through all of this negativity, however, there is still a great deal of hope in finding ways to combat the negative effects facing us from rising costs and inflation. This can be done through supply chain network optimization. This optimization uses specific software to find the most optimal combinations of factories and distribution centers within the supply chain to lower costs overall while still maintaining service.

The solutions found through network optimization can also determine the least amount of miles covered to lower fuel and transportation costs as well. The programming can run scenarios based on several different factors and then determine the overall most optimal solution based on the various factors involved. The final solution will detail the various actions that should be taken to lower costs as much as possible while maximizing profit and maintaining the level of service. The software uses complex variables such as demand, product flow, stock capacity, and production constraints. Overall, it is a win-win situation with the best possible outcome that is very clearly laid out to be able to follow and succeed.

Conclusion

Overall, yes, the world is certainly in uncertain times. Inflation is affecting us and our businesses. The wonderful news, though is that it doesn’t have to affect us nearly as badly as it has the potential to. Through network optimization and partnering with companies like ours, you have the opportunity to take the future of your business into your own hands and harness the negative impacts of inflation as much as possible. You have the potential now to tackle these negative effects and utilize the essential information provided to formulate the most optimal combination of distribution centers, routes, and more to formulate the best solution possible for your business and its needs.

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