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What Can Manufacturers Do About Inflation?

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Why is inflation happening now? What can we do about it? And how should manufacturers factor it into their plans for the future? The NAM’s Leading Edge program partnered with management consultant company Bain on a recent webinar that answered these questions and more. Here’s a quick recap.

Why it’s happening: According to Karen Harris, managing director of the Macro Trends Group at Bain, inflationary potential was building prior to the pandemic because of declining workforce growth around the world, underinvestment in energy and production and the concentration of supply chains with very few buffers in place.

  • Today’s inflation, Harris said, is the result of that “inflationary potential” meeting a series of triggers, including the COVID-19 pandemic and Russia’s war in Ukraine—both of which have destabilized global markets and supply chains.

What it means: Jason Heinrich, a senior partner in Bain’s Chicago office, discussed the challenges that inflation poses to business owners.

  • Among these are declining gross margins as costs of goods skyrocket; rapidly increasing labor, energy and input costs; difficult cash allocation decisions; lost sales if product availability decreases; and erosion of customer perception if price increases are too aggressive.

Strategies for success: Bain has analyzed thousands of companies over the past two decades to identify several successful strategies for accelerating performance during periods of disruption and providing future-proof against inflation.

  • These strategies include expanding the CFO role to support the C-suite in navigating turbulent times; enhancing growth through customer engagement efforts; being strategic about price increases; building resilient and growth-focused supply chain operations; scaling and doubling down on automation as wages increase; and investing in building the best workplace to attract top talent in a difficult labor market.
  • “The research that we’ve done over a couple of decades suggests that the firms and businesses that are on their front foot and playing offense in these periods of disruption outperform their peers over a long period of time,” said Heinrich. “These are moments of truths and moments of opportunity.”

Questions to ask: According to Harris and Heinrich, there are a few critical questions businesses should be asking in the current moment to help manage inflation challenges effectively, including the following:

  • How robust is customer demand, and what changes do you anticipate in the next 12–24 months?
  • How do you anticipate inflation will impact your business, and what actions can you take this quarter or over the next four quarters?
  • How are you assessing resilience, and to what extent should you trade off efficiency for resilience?
  • How can you evolve your strategic-planning process to be more dynamic?

Learn more: For more information, check out the full webinar here.

How the NAM can help: If you’re looking for resources to achieve time and cost savings, guard against inflation and help your business solve other current challenges, the NAM’s Inflation Resource Bundle for Manufacturers can help. Click here to find out how.

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