Inflation Rates Ease, But Long-Term Contracts Keep Prices High
With inflation rates easing and shipping costs dropping along with several commodities (not eggs), consumers may be wondering why they haven’t seen a noticeable price difference yet. Blame it on supplier contracts.
A typical procurement practice is shoring up supplier contracts in advance, which means prices could hold for several months.
The longer high prices continue, the greater the risk of consumers tightening their wallets and the U.S. entering a recession. So, it’s a tight-wire balancing act that increased interest rates alone won’t fix. Will businesses begin to pass along price cuts to consumers, or are they looking to recoup profits and take while the getting’s good? The answer may not be so simple.
Edmund Zagorin, Founder & CEO of predictive procurement orchestration platform Arkestro, examined the situation and said several factors might keep high prices around for a while.
Edmund’s Thoughts
“I think the reason that we haven’t seen prices come down for many industries as much as for macroeconomic indicators, things like the price of oil, the cost of ocean freight shipping, is that for many companies actually getting a price decrease and translating that into cost reduction or cost savings is a process driven by people and many procurement and supply chain teams.
Labor shortages or challenges orchestrating or operating on core tasks. And if you have to choose between getting mission critical supply to show up on time and assuring it versus asking suppliers for price decreases, you will do the thing that empowers your business stakeholders and make sure that you are delivering for customers, which are all related to operational supply continuity and supplier relationships. So is the economy leaving money on the table in terms of inflated prices? Absolutely. But I think it’s also being done with an abundance of caution and thoughtfulness where many teams have simply scarce resources to allocate to forwarding communications to their suppliers.
We also see that’s an area of significant interest as recession indicators tick up in the economy as companies are focused on making sure that they’re able to stay profitable while costs are coming down on their sell side. So that’s an area where we’re seeing just a tremendous amount of attention and interest and curiosity coming through.”
Article by James Kent
Latest
Rugged Edge Computing for Tough Environments Follows Shift Away from the Cloud
At ISC West 2023, Premio showcases how Rugged Edge Computing can easily stand up to the toughest industrial workloads in the harshest environments without missing a beat. Many trends are shaping the modern security market with a strong focus on rugged hardware such as smart sensors. There is a shift away from the cloud […]
DTC Brands Struggle to Adapt With 2023 Consumers: Brand Trust and Flexibility is Necessary
Selling directly to the consumer buying your products can be incredibly profitable for a business, so why don’t all businesses sell directly to consumers? The simple answer is that there are many risks and challenges that come with running a direct-to-consumer (DTC) business, and the risks do not always pay off. The success […]
Voice AI: Changing the Sound of Restaurants and Transforming the Ordering Experience
Takeout and delivery are as much the fabric of restaurants today as a room full of diners. During the pandemic, many restaurants may not have made it out the other side without takeout and delivery services. Still, staffing shortages are a significant issue for most restaurants after the pandemic. Finding the balance between handling orders […]