Home » Will better supply chain decisions mitigate inflation?
Supply chain decisions relating to inflation have become increasingly important in the global economy and goods market. They link producers and customers worldwide. Inflation is being observed, but its causes and effects are rarely amply considered.
Shortages may raise inflation fears among Asia or Pacific manufacturers. They must be agile and able to adapt to a dynamic goods market and continue to render business revenue. This is in order to meet customer wants and comply with environmental standards.
“This can be achieved with prudent strategic planning and close collaboration with ecosystem partners, “IDC Manufacturing Insights Research manager Wai Yee Lee stated.
Lee added that manufacturers must recognize the value of having an ecosystem-wide synergy in connectivity, visibility, and traceability for short- and long-term sustainability goals and other new opportunities for the business.
The importance of supply chain management
Recent studies have pointed out that supply chains managed by professionals can help reduce price hikes, even in times of difficulty. Such was apparent in Brunei, where inflation remained at a low 2.5% despite worldwide challenges. Whilst Myanmar and Laos experienced far higher rates at 16.2% and 15%.
The Bruneian government has rolled out its Economic Blueprint. This is to promote diversification beyond oil and gas as well as manage their economy well. It ushers the creation of a good business environment through better trading and export activities.
Disruptions to global supply chains can have a massive effect on pricing. Particularly in sub-Saharan Africa, where spikes in food costs are often caused by limited access to upstream suppliers during international crises.
“Absolutely, inflation has peaked if you look at the data that’s already indicative of that. More importantly, going forward, we think you should see downside risks to inflation,”Chetan Ahya of an investment banking firm spoke to CNBC.
Widespread goods shortages raise inflation by driving up the prices of raw materials and goods. With such circumstances on the rise, businesses need to prepare themselves.
“Supply chain drives inflation; inflation drives change in the supply chain,”shared by Accenture, a global professional services provider.
Accenture also noted its understanding of the inflation-disruption cycle that renders the role of supply chain management and logistics in facing the impact of inflation. To prevent the drastic effects, creating a durable supply chain based on versatility and cloud-based technologies is crucial.
Asian countries with condition
Numerous countries in Asia have reached remarkable success in facing inflation through various measures. Such include better supply chain management decisions, logistics, and goods processing.
To stay updated on the inflation of various Asian nations, Trading Economics provides a table with current and past figures, including record highs and lows. In recent years, there has been notable progress in fighting the said problem through effective supply chain management issues in these countries.
Indonesia’s supply chain goods market is experiencing growth and development. It is being boosted by government support and technologies. It has enabled businesses to reconfigure their supply chains quickly, helping manufacturers on production and distribution practices in a way that can reduce pressure.
Statistics Indonesia reported a drop in the Consumer Price Index (CPI) annual growth to 5.28% in January. Such is compared to 5.51% recorded in December 2022. Month-to-month figures showed that CPI rose by 0.34% from 0.66% the previous month.
Likewise, Vietnam is another Southeast Asian nation that has shown remarkable success in handling its rate over the past year. Annual core inflation in Vietnam dipped to 4.96% in February 2023, the lowest recorded figure in three months. It was following an all-time high of 5.21% registered in January.
Companies in Vietnam can enter various trade agreements with countries such as the European Union and the United Kingdom. Said agreements render benefit from reduced inflation rates due to tariff removals and access to expand export markets, ultimately leading to better economy pricing means.
In addition, streamlining supply chain management operations using data management or inventory optimization rapidly increases margins and keeps inflation levels low. As a result, supply chain efficiency and sustainability have been instrumental against the rising pressures in Vietnam.
As to China, the COVID-19 lockdowns lessened consumer spending and caused economic growth to slow down. China has recently experienced a steady decline in inflation. This is due to its strong global industrial chain and skills for supply chain management alongside prudent monetary policy.
By January 2023, China’s annual inflation rate was 2.1 percent. Despite this, China’s increased production, work, and sales following the spread of COVID-19 have significantly aided in cooling prices worldwide.
Lastly, inflation in Malaysia had a lower rate than the expected 3.7% in January 2023. The number marked the lowest reading since June 2022. A key effort the government made was its recent collaboration with the United States (US) on a Memorandum of Cooperation.
It focuses on “Semiconductor Supply Chain Resilience” that can bolster investment security, transparency, and trustworthiness. Hence, the agreement promises greater benefits as it helps reduce inflation rates over time.
Significant means of alleviation
The global food supply chain is of crucial importance when it comes to handling inflation across all countries. Any challenges within these chains can lead to surges in Asian food market prices, putting an immense burden upon consumers.
Better inventory management that optimizes storage space, supplier collaboration, and delivery times for goods and services examples is a must in fighting inflation. Additionally, real-time data monitoring within the supply chain helps achieve stability while handling the threat of potential price spikes.
Also, technological advancements such as blockchain provide opportunities for further cost savings by tracking products throughout their journey and reducing loss or theft in the goods market. It enables businesses to streamline their supply chain management operations, ultimately lowering costs and improving pricing stability.
Notably, by forecasting demand based on historical data, firms can plan for peak seasons. It’s also a must to order supplies accordingly, avoiding possible challenges caused by late ordering or stock-out scenarios. Such allows them to take advantage of lower prices instead of high-level pricing through timely bulk orders while preventing stock shortages and remaining competitive.
IMF suggests that macroeconomic policies, such as monetary policy changes, should monitor global supply chains before their disturbances cause significant issues for inflation and output levels, especially in light of its rate predictions.
By using better supply chain decisions and management measures that consider local availability and source means within their decision-making process, the economy pricing strategy can be stable, and overall inflation rates across the goods market could become lesser.
“We’re seeing those supply-chain problems significantly mitigate, inventories are being built, shipping costs have come down,”US Treasury Secretary Janet Yellen stated.
Effective supply chain decisions such as in goods processing and inventory management, can help curb inflation. They can prevent storage issues, delays, and constant changes in prices. By knowing and using each nation’s capabilities, businesses can ensure future sustainability and growth while surviving soaring inflation.