Dealing With Inflation in the Food Supply Chain

Dealing With Inflation in the Food Supply Chain

The state of the economy has made controlling inflation in the food supply chain a paramount concern for businesses. The impact of inflation on the supply chain can be far-reaching, influencing everything from packaging and transportation prices to overall operating efficiency.

In this blog post, we’ll look at the ramifications of supply chain inflation, how it affects businesses, and how to limit its effects. We’ll also discuss how Silo can be the best future-proof solution to combating inflation.

What is the impact of inflation on the supply chain?

Inflation has become a major worry for businesses operating in the supply chain, as it directly impacts their expenses and profitability. 

The Consumer Price Index (CPI) has been recording high inflation rates of around 7 to 8%, which has affected businesses by influencing critical aspects of their operations across the board. Rising prices for packaging, gasoline, and other inputs have all contributed to a rise in total manufacturing costs. 

In dire economic situations, this increased pressure of greater costs has the potential to disturb the delicate balance between risk and return. As the Federal Reserve gradually normalizes interest rates, businesses must brace themselves for lengthy periods of high inflation. 

A careful approach to running your business is a must to minimize the negative effects of inflation in the supply chain.

How to limit the effects of supply chain inflation

Here’s how you as a business can limit the effects of inflation.

Use financial metrics to balance risk and reward

In the face of inflation, financial metrics and key performance indicators (KPIs) are critical to balancing risk and reward.

Monitoring KPIs means being able to better anticipate future difficulties and mitigate the effects of cash flow challenges. Businesses can foresee cash flow issues and be proactive in solving them by concentrating on leading indicators.

Key KPIs for businesses include: 

  • Current cash on hand vs. planned minimum balances

  • Customer accounts receivable aging

  • Inventory turnover rates

These indicators provide useful information on efficiency and business liquidity. Improving these metrics can assist in predicting and preventing possible cash flow issues before they become a significant problem.

Ensure effective cash flow management

Supply chain and inflation can be a bad combination, and during these times, cash flow management becomes crucial. After all, the most serious risk faced by businesses is running out of cash, as it impedes their ability to pay for inputs and supplies, compensate employees, and meet consumer requests.

It’s therefore crucial to develop cash flow management techniques and implement the right tools to predict cash flow and manage working capital.

Creating financial models and employing forecasting systems can help in properly projecting cash flow requirements. This allows businesses to evaluate the effect of different investments on liquidity and establish minimum liquidity criteria for long-term operations.

Make use of modern solutions over traditional funding

Dealing with supply chain inflation can also mean acquiring the proper amount of capital to withstand cash flow shocks.

Traditional sources of funding, such as bank loans, are often used for large-scale investment projects that require established banking ties. However, there are a lot of downsides to these traditional methods. The approval process can be lengthy and require a lot of documentation.

This is where alternative financing solutions come into play. Alternative financing solutions allow for quicker and simpler access to working capital. These elements of responsiveness and flexibility can be incredibly useful in emergency situations, especially when dealing with the unpredictability of the economy.

Future-proof your business and combat inflation with Silo

Food supply chain inflation can create serious challenges for businesses. To effectively navigate these obstacles, companies must reassess how they handle cash flow management and financing.

Silo Capital is an innovative solution that provides financing to businesses, with services customized and tailored to individual needs. Businesses can successfully fight inflation and rising interest rates by making use of Silo's capital offerings, which allow for swift access to working capital.

As we continue to feel the effects of inflation in the supply chain, businesses will find themselves having to seek out alternatives to ensure financial security and development opportunities.

Staying ahead of the curve by adopting new solutions is critical to effectively manage inflation during these unpredictable times. With Silo, you can ensure that you always have the resources on hand to manage unexpected cash flow needs.

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