March 24, 2022 | Supply Chain Software Blogs
Higher prices are here, and they may be around for a while.
U.S. households and companies are grappling with the effects of rising inflation on food, fuel, and commodities.
One-year forecasts for inflation have risen to 6% in February after the U.S. government released data showing inflation running at around 7%. As a result, the U.S. Federal Reserve announced an interest rate hike by a quarter percentage point on March 16. The Fed must balance its efforts to curb inflation with the desire to avoid inducing a recession in the U.S. economy.
Current geopolitical and economic events compound the problem. The Russia- Ukraine war has stoked the rise in prices, particularly in commodities and minerals, and the COVID-19 lockdowns in Shenzhen, the port that handles China’s second-most amount of foreign trade, have dealt a blow to already reeling supply chains.
As disruptions complicate supply chain and procurement teams’ efforts to manage risks and control costs, how can companies guard against the effects of rising inflation?
Too many enterprises in 2022 are still relying on outdated legacy solutions and methods. Investing in digital transformation by creating a unified database to aggregate and analyze spend data enables companies to do things they couldn’t in an Excel spreadsheet. Like tracking year-over-year prices or purchase price variance for multiple business units to gain a holistic view of spend.
Moreover, a unified platform allows companies access to the most accurate, real-time data through dashboards that are configurable to the business’ needs and processes. With up-to-date marketplace and vendor information, category managers can make better decisions to help mitigate supply risks and control costs during periods of inflation.
The result is that the company can derive greater value from its data, make more accurate plans and forecasts and respond faster to disruptions or vulnerabilities.
With rising inflation driven by higher commodity prices, organizations that adopt digital technologies to manage their supply chain and procurement operations will be more agile in coping with the challenges of supply pressures and changing market dynamics.
A unified, cloud-based platform that can aggregate, normalize and analyze all enterprise data provides the cornerstone for increased visibility into category and spend data. Category managers can get greater insights into KPIs to evaluate criteria that are increasingly crucial to their organization’s bottom line and brand image, such as supplier sustainability and diversity.
As companies are experiencing in 2022, the new normal is uncertain and chaotic. Supply chain and procurement teams can help manage the complexities of a volatile marketplace with the next generation of digital transformation tools.
Learn more about managing spiraling costs, get our bulletin — 3 Essential Supply Chain Tools to Combat Inflation.