b'THE OFFICIAL NFBA MAGAZINEhigher prices for goods and services. Extendingby purchasing and holding whatever they could get too far makes you more of a risk, said Beaver.their hands on. Any step to avoid running out of And suppliers tend to give better prices toproduct seemed like a good thing.customers that are less risky. And theres also theTimes have changed. Now too many warehouse dependability of deliveries to consider: Ongoinggoods can tie up cash just at a time when company supply chain disruptions will cause vendors totreasuries need more liquidity. Businesses need to favor deliveries to customers that pay on time orbe thinking about how to manage their inventory early. The cost of not having essential materialsbetter, said Anderson. They need to make the right can be greater than the interest cost required todecisions on what, when, how, and where to buy it, borrow money to bridge cash gaps. as well as where to store it. And they need to manage BUSINESS MANAGEMENTMitigating Costs their supply chain network to maintain strategic In an inflationary environment, suppliers of goodsinventory stockpiles.and services tend to raise their prices. And higherAlso relegated to history is the unmodulated just rates of inflation tend to make the increases bigger.in time (JIT) delivery paradigm seen as a strategic When inflation is 2% everything tends to increasehallmark after the great recession of 2008. While by that amount, plus or minus a little bit, saidJIT helped companies maintain good cash flow by Conerly. But at 7% inflation, say, prices tend totrimming inventory investment, the supply chain increase by that amount plus or minus a lot. debacle highlighted the importance of moderation. Businesses should try to get readings on anticipatedBusinesses have to ask whether its better to have future increases and shortages. This can be donetoo much inventory or to run your customers by maintaining close contacts with vendors.out, said Anderson. Given that neither situation Work closely with suppliers and develop goodis ideal, Anderson advises maintaining sufficient relationships with them, said McQuaig. Whatinventory stockpiles to support key customers while do they see ahead in terms of product availabilitymaintaining JIT stock for others.and price? Beefing up the stock of critical items can be a smart Theres another advantage to close contact, notesmove even in these inventory-cutting times, said McQuaig. The suppliers may give you a littleMcQuaig. Given the continuing supply chain issues, more favorable treatment. For example, you mightstocking out of a needed item can result in the loss leverage any significant volume youre doing byof important customers.asking the vendor to hold inventory you wouldThe decision on overstocking key items must be normally keep in stock. You can also ask if a pricemade on a case-by-case basis. Generally speaking, commitment now will remain firm for the durationits a good idea, said McQuaig. The danger is the of the season. possibility of running out of cash if you do not have Another cost-saving move is to pursue lessenough working capital. Companies can obviate expensive alternatives to pricier goods and services.such difficulties by running the monthly or weekly Domestic inflation has been higher than in mostcash flow forecasts described earlier in this article.of the world, said Conerly. Some businesses areRaising Pricesshifting sourcing to other countries. Asking more for goods and services is another Finally, dig deeper into the reasons for suppliersway to adjust cash inflows. Businesses are very price hikes. Are goods and delivery cost increaseshesitant to raise prices when they dont have to, said in line with inflation? poses Beaver. Or areConerly. And they often get push back from their suppliers trying to pad their own margins asalespeople. But the fact is, buyers are accustomed little bit, just because they see inflation as anto seeing price increases in inflationary times.opportunity? That sometimes happens. Price changes must be carefully communicated. Trimming Inventory Give the white-glove treatment to tier one Before inflation appeared on the horizon,customers by reaching out and explaining how your businesses responded to supply chain disruptionscosts are rising, said Beaver. Communicate to them 42 / FRAME BUILDER - NOV2022'