How to Keep Up with Rising Supply Costs

 

As a business owner, you are likely always looking for ways to save money and keep your business running efficiently. Unfortunately, rising supply costs can make this difficult. Here are some tips to help you battle those rising costs and insight into what the future holds business owners.

Why are supply costs steadily rising?

There are a number of inflationary pressures that have been building over the past few years, leaving many businesses struggling to keep up with the additional expenses they are facing. The main drivers of inflationary pressure are:

• Labor costs– Wages have been rising steadily for the past few years as the economy has continued to improve. This has put pressure on businesses to raise prices to cover their increased costs.
• Raw material costs– The cost of raw materials, such as steel, aluminum and copper, have been growing due to increased global demand. This has led to higher prices for products that use these materials.
• Tariffs– The United States has imposed tariffs on several imported goods over the last few years, which has led to higher prices for businesses that import these goods.
• Interest rates– The Federal Reserve has been gradually raising interest rates– with several increases planned for 2022 alone– and this has led to higher borrowing costs for businesses.

The sum of these pressures has led to supply costs continuously climbing, which puts business owners like you up against a challenge many have not faced before.

Six strategies for dealing with rising supply costs:

1. Review your expenses– Take a close look at your expenses to see where you can cut costs. While this may seem obvious, having a good understanding of where your money is being spent can help you make more confident decisions when navigating these tough times.
2. Negotiate with your supplier– If your supplier is charging you more for their products, try to negotiate a lower price. This can be done in a couple of different ways. You can offer to purchase your supplies in larger quantities or negotiate an agreement on future orders. For example, if you run a restaurant, purchasing ingredients in bulk is always less expensive in the long run.
3. Find new suppliers– If your current suppliers are raising prices and not willing to negotiate, you may need to find new suppliers that can provide the same goods at a lower cost. This can be a time-consuming process, but it may be necessary to keep your business running.
4. Find ways to improve efficiency– The more efficient your operations are, the lower your costs will be. There are a number of ways to improve efficiency in your business. One is to streamline your processes. Look at each step of your process and see if there are any ways to simplify or eliminate it. Another way to improve efficiency is to use technology where it is applicable, as it can help you automate tasks and keep track of data more effectively. Finally, make sure your employees are properly trained and they understand your processes.
5. Rethink your products– Take a deeper look at your product line with the cost of every individual piece in mind. Are there changes you can make to any products that would improve your overall profitability? For example, one box company decided to modify the way their best-selling box opens and closes, meaning the company was able to slightly reduce the amount and shape of cardboard used. In the long run, small changes like this can add up and help bolster your bottom line.
6. Get creative when cutting costs– You can always attempt to lower your costs by reducing staff or cutting expenses, like marketing. However, this could have a negative effect on your business in the long run. Instead, get creative with your problem-solving. Have some open conversations with your staff members– they know your business and could come up with some cost-saving measures you missed. Consider outside-the-box ideas like bartering with other businesses, using social media to market your business organically or even looking into government grants and subsidies.

Is there an end in sight?

The answer is maybe. We can't be sure when the rising cost of supplies for business owners will stop, but we can hope it's soon. In the meantime, there are a few things you can do to ease the burden. By following the strategies above, you can help your business weather the storm. With a little bit of luck, the cost of supplies will soon stabilize, and we can all get back to business as usual.