Board Converting News, May 2, 2022

Inflation Busters (CONT’D FROM PAGE 26)

tie up cash just at a time when company treasuries need more liquidity. “Businesses need to be thinking about how to manage their inventory better,” said Anderson. “They need to make the right decisions on what, when, how, and where to buy it, as well as where to store it. And they need to manage their supply chain network to maintain strategic inventory stockpiles.” Also relegated to history is the unmodulated “just in time” (JIT) delivery paradigm seen as a strategic hallmark after the great recession of 2008. While JIT helped com- panies maintain good cashflow by trimming inventory investment, the supply chain debacle highlighted the im- portance of moderation. “Businesses have to ask whether it’s better to have too much inventory or to run your cus- tomers out,” said Anderson. Given that neither situation is ideal, Anderson advises maintaining sufficient inventory stockpiles to support key customers while maintaining JIT stock for others. Beefing up stock of critical items can be a smart move even in these inventory-cutting times, said McQuaig. Giv- en the continuing supply chain issues, stocking out of a needed item can result in the loss of important customers. “In construction, for example, even getting the right size water heater can be very difficult right now,” he said. “A lot of plumbers are having to stock units ahead of time, so they have them available.” The decision on overstocking key items must be made

suppliers and develop good relationships with them,” said McQuaig. “What do they see ahead in terms of product availability and price?” There’s another advantage to close contact, notes Mc- Quaig. The suppliers may give you a little more favorable treatment. For example, you might leverage any significant volume you’re doing by asking the vendor to hold inven- tory you would normally keep in stock. You can also ask if a price commitment now will remain firm for the duration of the season. Another cost-saving move is to pursue less expensive alternatives to pricier goods and services. “Domestic in- flation has been higher than in most of the world,” said Conerly. “Some businesses are shifting sourcing to other countries.” Finally, dig deeper into the reasons for suppliers’ price hikes. “Are goods and delivery cost increases in line with inflation?” poses Beaver. “Or are suppliers trying to pad their own margins a little bit, just because they see infla- tion as an opportunity? That sometimes happens.” Trimming Inventory Before inflation appeared on the horizon, businesses responded to supply chain disruptions by purchasing and holding whatever they could get their hands on. Any step to avoid running out of product seemed like a good thing. Times have changed. Now toomany warehouse goods can


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28 May 2, 2022

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