Trying to catch a thing as it’s falling, only to see it continue to fall…or trying to hold down a thing that’s rising, only to watch it continue to climb.  Clichés are overused idioms, and the word inflation has been bandied about in phrase a lot lately.  Don’t make the mistake of identifying the latter as the former; inflation is not a cliché.  Inflation seems to be here now, if not everywhere very soon.  You may find your input prices climbing, and you may find yourself trying to pass rising costs on to customers. 

        Whether inflation is “transitory” (the Fed) or “persistent” (Mohamed El-Erian – CNBC video), you shouldn’t ignore it. 

         But while the talking heads pontificate on inflation from a macroeconomic perspective, what in the world does a small business owner do?  …and what does Just-In-Time (JIT) have to do with anything?

 

       

       While we’ve previously shared some thoughts on Dealing With Inflation In A Small Business, we wanted to highlight an action item within two areas to focus on: revenue growth, and cost controls vis-à-vis the growing JIT cliché.

        Revenue growth.  While you’re fighting cost inputs being driven higher by inflation, you should also work on growing revenue to offset those negative effects.  You’re thinking that’s obvious enough.  Sure is.  One can make up for shrinking margin percentages by growing their absolute take.  Finding efficiencies is also always front of mind.  But less obvious in the moment may be to spend more to fight inflation – unleash your people with new financial incentives to grow and increase their output whether that’s on the manufacturing floor or in the sales pipeline.  Your employees will be fighting inflation at home as well and they’ll appreciate the opportunity to further succeed at work.  

        The growing JIT cliché.  We live in a world where JIT everything has become the norm.  Amazon delivers your personal at whim orders in a day, and your business inventory arrives when and where you need it, sometimes from the other side of the world.  From a cost perspective, if you can stockpile at low input prices now, versus placing your orders as you go at the spot (and rising!) rate, you should consider caching some materials.  Fighting inflating cost may be a factor in retooling your supply processes, but you’ll also be building some stability against the unpredictable into your business.  The JIT model is being strained.  You won’t be the only one rethinking things (WSJ):

Toyota Motor Corp. is stockpiling up to four months of some parts. Volkswagen AG is building six factories so it can get its own batteries. And, in shades of Henry Ford, Tesla Inc. is trying to lock up access to raw materials.

The hyperefficient auto supply chain symbolized by the words “just in time” is undergoing its biggest transformation in more than half a century, accelerated by the troubles car makers have suffered during the pandemic. After sudden swings in demand, freak weather and a series of accidents, they are reassessing their basic assumption that they could always get the parts they needed when they needed them.

“…spend more to fight inflation – unleash your people with new financial incentives to grow and increase their output whether that’s on the manufacturing floor or in the sales pipeline.  Your employees will be fighting inflation at home as well and they’ll appreciate the opportunity to further succeed at work.”

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