Inflationary Pressures Impacting Global Supply Chains

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Identifying & Creating Supply Chain Resilience to combat rising inflation

With inflation at an all-time high in decades, companies across the world are struggling to grapple the impact of rising prices on their operations and supply chains

Supply chain shocks, in combination with too loose monetary policy, are the underlying cause of the current inflation surge, but the worst effects of this crisis could have been avoided if businesses would have prudent practices in understanding and improving their supply chains. Lack of resilience and redundancy embedded into supply chains, encouraged by too much complacency, helped make the supply-chain crisis much worse than it needed to be.

Fighting inflation is not cheap. Solutions typically require alternative supply channels and larger buffer inventory. However, holding larger inventories also means tying up valuable cash at a higher financing cost due to increased interest rates. This will directly impact the cash conversion cycle and thus, the end user may have to pay more. This may seem like a vicious cycle, but by localizing the supply chain, some of these costs may be eliminated. Coupled with lowering the expectations on cost benefit ratios and margins would further help navigate through the extended inflationary environment.

Even though profitability is the key, inflation’s impact goes far beyond just income. Therefore, it is imperative to carefully evaluate the entire business cycle, as any disruptions in the cycle can have catastrophic consequences. With lack of inventory, volatility of commodity prices, higher shipping costs and higher production and servicing costs, optimisation of supply chain costs would be key. Reliance on the local suppliers, regular audits, identifying new and cost-effective sourcing channels for raw materials, increase inventory sizes and access to flexible, cost effective innovative financial solutions are some of measures companies need to look out for.

With the central banks globally having to raise interest rates more than ever, the severity of the issue is evident, as markets now anticipate inflation over the next five years to be 1.5% – 2% percent higher than the 2010 – 2019 average for the United States, the United Kingdom, and Germany put to together.

To defeat inflation in the medium and longer-term, and to avoid second and third round inflationary effects, it is mission critical that organisations learn the lesson of the current crisis urgently, instigate a detailed audit of their supply chain and introduce more resilient system in place. With supply chain resiliency, the impact of rising inflation on businesses would be less severe.

We at Alpha Bridge, are committed to work with companies to help identify their supply chain bottlenecks, assisting them to have an access to the most optimal financing solution that will help create stronger, robust and cost-effective supply chains. Our team of dedicated professionals take great care to understand the issues in hand, and with our network of financiers, we help businesses address those issues, with right kind of financial solutions around it.

If your business is looking to create a resilient supply chain solution to combat through the rise in global inflationary pressures, then get in touch with us and our team is here to create the right opportunity for you!

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