Supply chain interruptions and inflation

Supply chain interruptions and inflation

Recent news is dominated by stories about inflation and supply chain issues.

The latest surveys focused on the impact of inflation on consumer sentiment, reveal that it has dropped to its lowest level since2011.

While the Coronavirus varieties have driven the index down, increasing inflation and decreasing real earnings are the key concerns of consumers.

Freight expenses are a major contributor to price inflation, despite the fact that they are decreasing. Moving a 40-foot crate from China cost more than $11,000 in September, up from $1,400 at the start of the outbreak. Furthermore, according to recent research conducted by the St. Louis Federal Reserve, the cost of transporting goods from China to the United States increased by more than 72 percent.

There is, however, some good news in terms of shipping and transportation expenses.

Shipping prices peaked in the 3rd quarter of 2021, according to the same Federal Reserve analysis, and transportation costs may be at the top of historical levels, according to another study. Another area where there is a reason for enthusiasm is port backup.

Because February and March are usually slow months for demand, some backlog may be removed.

Last year’s truck capacity was one of the smallest recorded.

When analyzing a couple of indices, this statement looks to be inconsistent. According to the For-Hire Truck Transportation Index, demand in 2021 was comparable to that in 2019. The Number of For-hire Truck Drivers Index, on the other hand, is above pre-COVID levels.  There should be no congestion in truck transportation based on these metrics alone.

The demand was just the same, and there were more workers available than previously. So, what’s the deal with the limited truck capacity?  In years, transportation companies have seen the most dramatic rearrangement of employees between carriers. Heavy trucking cutbacks were accompanied by a hiring rush, resulting in considerable efficiency losses across the industry.

The core question, with all the information about inflation and inventories, is, “What impact does it have on demand?” And, as a result, what to do with the inventory you already have. Neither query receives a prompt response.

Every firm is affected differently by inflation and supply limitations

People, on the other hand, tend to trade over to less expensive stuff when they are under financial duress. According to a recent consumer survey, 57 percent of consumers downgraded from a premium brand, and roughly 40% expect to continue with their choices.

Furthermore, high prices cause people to spend less on non-essential items. In December, 41% of shoppers claimed high prices as a factor for not purchasing.  However, as some CEO statements show, these effects are not seen by every company. Nobody is claiming that these metrics aren’t important. Still, when paired with other demand indicators, the impacts of these indicators might provide insight into one’s specific firm.

This information must be monitored, understood, and used inside the organization.