Inflation and Supply Chain Issues: Will It Ever End?

With the national inflation rate reaching record-high numbers in recent months, many companies struggle to keep costs low and avoid margin erosion. The annual inflation rate reached 8.6% in May of this year, and coupled with an already sensitive supply chain, it is critical that companies take action to keep their profitability positive while retaining their staff in an extremely candidate-driven market.

Over the 2 years since the pandemic began in March 2020, inflation and supply chain woes have become important economic factors for individual businesses and economists to keep an eye on. With service-sector pressures and a scarcity of goods that are in high demand, economic growth worldwide has stagnated from 2021 to present. The global supply chain has already been rocked by several issues such as:

  • Coronavirus-related manufacturing plant closures
  • Limited operations of seaports to receive goods
  • Unfilled positions
  • The war in Ukraine

Global Supply Chain Impact

China’s stringent COVID-19 lockdowns have seen manufacturing facilities close dozens of times in the last two years, which has diminished the ability of the US to receive imports necessary for computer and tech-related goods. The US typically imports $380+ billion in integrated circuits and microassemblies from China. With the drop in seaport productivity in China, the US has experienced extreme congestion in our ports due to fewer available workers. This prohibits domestic companies from receiving materials to produce goods and causes a supply shortage, which in turn drives up the prices for necessary consumer products.

Price Increase of Basic Necessities

Gasoline and food prices have also increased because of the war in Ukraine, which saw the abandonment of Russian oil imports globally. Production costs and scarcity have passed the burden on to the consumer, and prices at the pump have skyrocketed throughout 2022. Wheat imports from Ukraine have also taken a dip, which has passed on scarcity costs to consumers at the grocery store. Combining these three economic factors of scarcity, supply chain woes, and limited availability of essential workers, inflation was bound to rise to this level worldwide.

What Mold Makers Can Do

In a recent article published in Plastics News, editor Don Loepp examines how manufacturing companies, more specifically molders, can help cope with inflation and supply chain disruptions.

Loepp interviewed various mold-making companies to learn firsthand how they are personally combatting soaring prices. “Learning to pick the right customers is a key to remaining profitable and successful,” Loepp states. Continuing to do business with the customers that are being reasonable about recent production cost increases and severing ties with the ones that are not is one of the examples that a mold-maker gave. Taking an analytical approach to forecast the future can help your company be set on a long-term profitability plan. It was also mentioned in the article that mold-makers have very little pricing power in their markets, which in turn has caused many companies to be operating with no profits or even losing money, according to recent Manufacturing Association for Plastic Processors (MAPP) data.