The interconnectedness of global supply chains directly correlates with market inflation. Increases in labor, energy, and transport costs are contributing to inflation around the world.

With an increase in geopolitical tension, we have seen the return of inflation in most markets. In the U.S., the headlines and ‘dinner table’ discussions are all about inflation continuing to run at a 40-year high, according to the latest CPI reading.

Part of the bigger challenge as overall inflation rises is the cost of living, particularly in democracies. Governments often start to use the tools they have available, such as policies and restrictions, to temper the effects of inflation. A government becoming more directly involved in trying to sure up supply chain issues can lead to a lot of disruption itself, particularly when some of the corresponding policies are unpredictable or they're mired in tight election cycles.

When governments have to make trade-offs between some of the things that they're trying to achieve, particularly in light of the rising cost of living, consumers and companies alike should cast a watchful eye.

How can organizations drive better procurement and respond effectively in this inflationary environment?

Firstly, companies should optimize their procurement processes as governments look at managing supply chains as a national security imperative and shifting the relationships between countries, industries, and markets. To drive better procurement in this volatile environment, companies need to understand their unique risk profile and tolerances. It is crucial to have those guidelines embedded and integrated across the entire supply chain infrastructure, while also considering strategy, process, technology, and data frameworks.

In addition, companies should invest in relevant external data to help them identify early warning signals to mitigate and identify potential supply chain risks. Over the past couple of years, industries have been forced to be more agile, proactive, and risk-orientated.

The days when procurement could simply focus on the best cost options and cost containment are long gone. Today, companies must navigate a complex plethora of cross-collaboration across numerous role players, internally and externally, often with competing agendas. The challenge is now to focus on the extended supply chain picture and manage those activities and concepts to serve the common goal.

To hear our supply chain experts share best practices on how to navigate volatility and certainly, access our on-demand webinar.