b'BUSINESS MANAGEMENT Continued from page 7balanced against operational expenses such aswill the increase be steady or erratic? The wrong the need to pay higher prices for goods when aanswers can result in a pile up of inventory or lost company scrambles to fill customer ordersorrevenues and customers. The risk is especially lost revenues when an unhappy customer jumpsgreat for consumer and business goods requiring ship for a competitor. As they balance such costs,long lead times where businesses cant easily many companies are viewing higher cashflowturn the supply chain spigot on and off, says on the shelf as acceptable. Risk mitigation hasHannan. become more important than efficiency gains,Thesolution,saysHannan,istodevelopa says Manzella. playbook to address possible disruptions and Furthermore, three historic costs of inventories evaluate risks up and down the supply chain, interest, obsolescence, and shrinkageno longerthen develop a plan to address those risks. And universally apply. The interest rate you get formanagement must grapple with other unknowns having cash in the bank now is approximatelysuch as whether the recent surge in the price of diddly squat, says Conerly. And obsolescencemanufactured goods can be passed along to the wouldonlybeanissueifsomethingwereconsumer. expected to go out of fashion. Many productsAll this may soften profits until everything shakes in short supply today are the same products asout. Revenues will probably hold up or even last years model and they are not going to goincrease because of higher demand, but margins obsolete. Shrinkage, he adds, is not an issue inwill likely be hit because of increases in the costs some industries and in others can be controlledofrawmaterials,labor,andinventory,says with requisite security steps. Palisin. Its a very unusual situation where all of Cheap or not, inventory storage must be allocatedthese cost increases are happening at onceand selectively. Companies need to be thinking, whatat a time when tariffs are still in place. Companies might be in short supply when we try to ramp upjust cant pass along everything to customers.our production? says Conerly. They may wellAsfortheroadahead,Conerlyanticipates buy a years supply of a relatively cheap itemagradualimprovementintheoperating that is a small part of what a company uses butenvironment. Now that people are able to travel, is vital to producing a finished product. they may well return to spending on vacations Despite the inventory mind shift, business ownersinstead of home improvements as they did in feel that a return to the days of warehouses2020 when demand for household furnishings bulging with expensive inventory is not in theandbuildingmaterialschallengedthewhole cards.Everybodyhasbecomeaccustomedsupply chain, he says. Consumers who have to reducing costs by minimizing touch points,already completed their projects will be spending movinggoodsfromtheshipstraighttothetheir money elsewhere.distribution facility and on to the customer, saysIndeed,manyoperatorsfeelthatwiththe one operator. Indeed, cooperative efforts withpandemic coming to an end, now is the right time suppliers and customers may well help bring backfor businesses delivering quality service to gain a greater emphasis on JIT.I believe that themarket share.Says one: Were assuming the economy will eventually get back to that just inworst and hoping for the best. Our overriding goal time concept as market disruptions lapse and theis to protect the health of our people and service continued collaborative partnerships with vendorsour customers. Those things havent changed a and suppliers remain a priority, says Hannan. bit. And well do what it takes to get it done.The road aheadBusinessesfaceaconundrumastheworld emerges from the pandemic: How quickly will demand increase for products and services, and 8 www.mrca.orgMidwest Roofer'