Mrs McKenzie's Marmalade Scandal, and Life in the Middle of Nowhere. Inflation is affecting people and businesses everywhere. Here’s why…

Global Inflation’s Impacts on Local Supply Chains

After decades of living in London, Los Angeles, New York, and Dallas, my wife and I decided to settle down in the Scottish countryside. The “middle of nowhere” is a happening place compared to where we live. On a busy day, we may see a couple of cars (one of which is normally lost tourists looking for where they film “Outlander”), a tractor, and an ATV with a border collie hanging off the back.

Nothing happens here. In fact, not much has happened since 1298 when William Wallace fought the Earl of Pembroke in the woods next to our house. There was a scandal a few years ago, mind you, when Mrs. McKenzie (named changed to protect the guilty) tried to pass off store-bought marmalade as her own in the village fete.

The world doesn’t interfere here, and we like it that way - until recently.

Standing in the line for the checkout at a convenience store, holding a chocolate bar and a litre of oat milk, my mind started to wander. The chocolate bar wrapper seems the same size, but it felt like it contained mostly air. My house is surrounded by fields of oats and barley, but I am sure that the price of my oat milk is about 25% more than I used to pay. Even the car I used to get to the store – did I really pay nearly ￡100 to fill up the car with petrol on my way here?

Because our home is remote, it isn’t connected to gas or water mains. We use wood pellets to power our boiler because they’re supposed to be better for the environment and cheaper than oil. But our local pellet supplier just informed us that while a tonne of pellets used to cost ￡300, they now cost over ￡600 due in part to stopped supplies from Russia, Ukraine, and Belarus.

In our global economy, even my tiny part of the world is still affected by the rest of the world. Global inflation is impacting big corporations, small businesses, families, and individuals – from rural Scotland to New York City.

Inflation is affecting people everywhere. Here’s why…

First, the COVID-19 pandemic caused supply-side and demand-side shutdowns.

Businesses of all sizes are continuing to be impacted by supply chain disruptions caused by the pandemic. According to a March 2022 report published by the U.S. Chamber of Commerce, 26% of small businesses report supply chain issues as their biggest problem, up 8% from Q4 2021. 76% are concerned about the impact of supply chain disruptions on their business. And 65% say it’s difficult for them to manage disruptions to their supply chain.

Second, the Great Resignation happened (and is still happening).

That line at my grocery store I was waiting in? Normally, there’s never a line because there are enough people working to keep customers moving, but not anymore. Labor shortages are everywhere because fewer people want to work. In United States alone, more than 47 million workers quit their jobs in 2021.

Third, as economies reopened, demand quickly rose, and supply shortages appeared.

Intensifying labor shortages have made it harder for companies to meet pent-up consumer demand. Before the pandemic, online shoppers encountered an out-of-stock item once every 200 pages. By early 2022, that number had jumped 235% to?once every 59 pages. And customers at nearly all grocery stores are reporting frustration with more frequent out-of-stock products – even in 2022.

Fourth, gas shortages are widespread in the United States and Europe, exacerbated by the war in Ukraine.

And it’s not just impacting petrol prices at the pump. Everyone is looking for low-cost ways to heat their homes through the winter, which is driving up demand for wood pellets and firewood, even in my area where sustainably managed forests are everywhere.

Fifth, as inflation has driven up the cost of living, people who want to work are demanding higher wages.

Potential hires know their value in the current market and are demanding more pay – as are current workers who want more money to stay. This story is playing out in my little neck of the woods, as evidenced by higher wood pellet prices, and globally, leading to higher costs for customers.

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Now What?

It’s time for businesses to embrace new ways of dealing with inflationary risks and impacts. That’s why I’ll be moderating a webinar,

Outsmarting Inflation: Best-Practice Working Capital Strategies, on Tuesday, November 15, 2022, at 11:00 a.m. EST. Joining me will be three subject-matter experts:

·??????Kevin Permenter, Research Director, IDC

·??????Helen Yu, Founder & CEO, Tigon Advisory

·??????Thomas Mehlkopf, Head of Working Capital Management CoE,?SAP

and a second webinar

Outsmarting Inflation: Best-Practice Supply Chain Strategies, on Wednesday, November 16, 2022, at 11:00 a.m. EST. Joining me will be three subject-matter experts:

·??????Simon Ellis, Program VP, IDC Manufacturing Insights, IDC

·??????Scott W. Luton, Founder & CEO, Supply Chain Now

·??????David Vallejo, VP, Digital Supply Chain,?SAP

I hope you’ll register and join us.