Lisa Anderson, manufacturing and supply chain expert and president of LMA Consulting Group states in this article for AWCI Construction Dimensions, there are operational and supply chain priorities required to be ready to absorb additional sales. One of the most important components is to have planning and scheduling processes required to be ready to absorb capabilities.
“Inflation has taken root. Businesses everywhere are dealing with annualized cost increases of nearly 7%—the fastest pace in 40 years and significantly higher than the 1.8% average of the past decade. The resulting upticks in operating costs can cause serious damage to the bottom line.
Experts don’t see relief any time soon. They point to a number of root causes, one of which is energy.
Of all the steps businesses can take to mitigate the bottom-line effects of inflation, the most important is better management of cash flow. Inflation tends to accelerate the drain of money from company coffers, and throttle the flow that comes in. If left unaddressed, these battling trends can gut profits and threaten business survival. Experts advise looking at the coming months with an eye toward estimating what will happen to cash balances.
Historic data, of course, may provide a less than reliable foundation for future forecasts. Whatever the estimates for what lies ahead, businesses can avoid cash squeezes by accelerating accounts receivable and stretching accounts payable. For the former, experts advise running regular aging reports. How much do customers owe in increments of two weeks, 30 days and 60 days? Any growth in the numbers over time might indicate a steady deterioration of cash flow.”