Inflation reaching record highs affects every segment of the modern supply chain. Labor shortages, supply chain disruptions, and economic uncertainties compound this challenge. In this current environment, digital technologies and tools are growing in importance for businesses.
Data analytics, AI tools, and other cutting-edge MRO technologies help organizations harness the most value from their data to make better decisions, automate key processes, and reduce operational costs. Let’s explore how businesses can combat the effects of supply chain inflation by incorporating technology into their workflows.
Impact of Inflation on the Supply Chain
Before we learn how to mitigate inflation through technology, it helps to understand how inflation affects the supply chain. Economists define inflation as a gradual increase in the prices of goods and services that results in a reduction in purchasing power for consumers and businesses.
Procurement becomes more complicated during periods of inflation. Due to reduced consumer purchasing power, demand for products and services can fall. Therefore, organizations must be agile and accurate when predicting demand and analyzing consumer behavior to remain competitive in the market.
Inflation also causes a domino effect on prices, driving up the cost of raw materials, labor, energy, storage, and transportation. Because running supply chain operations is more expensive, businesses must learn to optimize their procurement processes to reduce spending. Often, this means improving the company’s logistics planning, stock visibility, and ROI.
Inflation places procurement under a microscope. With reduced organizational purchase power and higher costs, procurement teams must conduct rigorous cost-benefit analysis to make the right purchasing decisions. Depending on a small range of suppliers can make your organization more prone to operational disruptions, which is why it is crucial to spread and diversify your risk across vendors during inflationary periods. One of the best ways to do this is by joining a group purchasing organization.
How to Mitigate Inflation in Procurement Through Technology
While there is no one panacea to combat inflation, leveraging the right technologies can help businesses manage it with greater success. MRO technologies and tools, such as AI and predictive analytics, increase supply chain visibility and efficiency to help procurement teams understand market demands and make better decisions. Below are key technologies that can help organizations mitigate supply chain inflation.
1. Use of Data Analytics to Optimize Spending
Data analytics tools enable procurement teams to produce spending reports, analyses, and profiles to assist them in making informed decisions. These solutions come with configurable dashboards and templates to help organizations see around the corners of their operations and identify savings opportunities. Unlike traditional spreadsheet files, modern analytics tools feature a centralized database where procurement teams can access real-time information.
2. Better Forecasting Through Predictive Analytics
Anticipating customer demand is important when learning how to mitigate inflation. Powerful predictive analytics allows businesses to forecast optimal inventory levels to prevent overbuying and overstocking. This solution uses the power of artificial intelligence (AI) to analyze data sets about customer behavior and purchasing habits to forecast future demand. Organizations can further improve their procurement strategies by pairing predictive analytics with inventory financing software that can speculate on future prices based on current inflation rates.
3. Cloud Solutions for Improved Inventory Visibility
Cloud-based inventory management solutions are integrated with RFID tracking tools for quick inventory visibility. Thanks to this technology, the location of containers, vehicles, and products can be traced in real-time. With this information, procurement teams can track surplus inventory, facilitate transfers when necessary, and improve delivery outcomes. This improves response times and reduces operational costs, which is essential to combating the effects of inflation.
4. Preventing Supply Chain Disruptions With AI/ML
AI and machine learning (ML) can simulate supply chains and provide alternatives to anticipated bottlenecks and slowdowns. By feeding AI/ML models real-world data, they can analyze supply chain systems and discover potential issues before they happen. This helps businesses adjust to market changes and make better logistics decisions in inventory management and product shipment.
5. Robotics and Automation to Streamline Workflows
Robotics and digital cloud solutions bolster organizational productivity and efficiency by automating physical and administrative tasks. For example, organizations can use robots to perform mundane and repetitive tasks in facilities and warehouses, eliminating the risk of human error. In addition, automated processes drive down costs in MRO procurement and free time for purchasing teams to focus on more strategic initiatives.
CenterPoint Group Can Help
Organizations learning how to mitigate inflation in their supply chains should recognize the importance of incorporating technology into their procurement strategies. MRO technologies and tools alleviate key challenges in the inflationary environment by improving visibility, enhancing forecasting accuracy, and reducing costs.
CenterPoint Group is a group purchasing organization that helps businesses leverage the industry’s cutting-edge technologies to improve procurement processes. We combine the power of data analytics, technology, and negotiation to help our members get the best deals with suppliers and improve cost savings. Our unique process provides an in-depth analysis of your company’s price increases and expenditures so you can make better procurement decisions and identify savings opportunities.
Request your free pricing analysis today, or contact us to learn how we can help.
