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3 Strategic Ways to Protect Your Business From Inflation

High inflation is pressuring business leaders to find solutions that safeguard their organization without alienating customers. Achieving that careful balance requires the right operational strategies and on-the-ground support to empower your people.

Inflation continues to rise in 2022 as supply chain disruptions and soaring energy costs persist. In the United States, inflation hit 8.5% in March, the fastest 12-month pace in over 40 years.1 The European Union reported a 7.4% year-over-year increase in March.2

Across industries worldwide, companies are moving quickly to adapt and protect their margins. Rather than only focusing on implementing across-the-board price hikes, strategic leaders are uncovering what really drives value for their customers and eliminating unnecessary expenses so they can invest in the future.

Proofing your business for inflation—get started or maintain the momentum

Increasing supply costs, labor shortages, and uncertain future market conditions are three key mounting challenges from climbing inflation. While you can’t control the rate of inflation, you can manage economic pressures during inflationary times to improve business performance.

Focusing on these three areas is key to thriving and not simply surviving:

1) Reducing costs

Supply costs have risen significantly, and material shortages are increasingly common. Be proactive by identifying new material mixes and alternative sourcing strategies.

Scenario modeling the impact of different material mix inflation inputs and understanding logistics cost changes across your value chain helps you make more informed decisions to reduce costs.

2) Increasing productivity

Labor shortages are driving the need to enhance productivity by improving throughput. Instead of relying more on machines, often it’s more cost effective to optimize labor usage and engage your people in the rapid adoption of already implemented digital technologies.

Sales and operations planning (S&OP) and integrated business planning (IBP) are critical parts of any inflation-driven risk management plan. Aligning streamlined operations, digitalization, and employee efficiency is the path to sustainable productivity improvements.

3) Stabilizing for the future

Focusing on your optimum viable cost base rather than minimum viable cost base will enable you to compete on cost and value, not simply price. There is no point running the most cost-effective business if it falls over or is constrained to grow.

Managing costs while leading for growth demands constantly looking at the variance between planned and actual performance, then closing the gap through training, coaching, process improvement, and innovation. Remember that digitalization is a great tool but digital alone is not the answer.

people centric leadershi

Nothing moves until people move

Inflationary times call for bold, people-centric leadership. Making plans to reduce costs, increase productivity, and stabilize to fund the future is just the first step. For that work to impact business performance, it must be integrated into the day-to-day operations and embraced by your most important asset—your people.

Start by teaching your team what inflation really is, what drives it, how it impacts your business, how it drives spend, and how each team member can address it

Your people need to understand that a good inflation response plan is not simply cutting costs—it’s being smart about your cost management plans.

Give people a chance to own the changes you are seeking to implement as you work together to combat a new business environment. To do that, engage your people from the onset of transformation, communicate often, and track outcomes.

That’s why Proudfoot engages people across all levels to secure outcomes and results. Coaching on the floor is vital to embed the changes into people so they can become owners of the new way of work.

Upskilling people to improve operations requires face-to-face communication. Active, visible, and aligned leaders enable people to arrive at their own “ah-ha” moment—when they draw their own conclusion that they must and can do something new. That’s what creates change at scale and makes it stick.

Combatting inflationary pressures demands transforming processes and people. That means putting people at the heart of every process to engage them in projects and energize them to achieve.

Chat with Proudfoot to start gaining the on-the-floor buy-in necessary to protect your business from inflation by designing and implementing the right operational strategy fit for your environment.



1 https://www.nytimes.com/2022/04/12/business/economy/inflation-report-march.html
2 https://www.reuters.com/world/europe/euro-zone-march-inflation-revised-slightly-down-still-record-2022-04-21/

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Posted on May 13, 2022

By Proudfoot Team

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