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MRV BLOG: Deflating Inflationary Effects

It is generally hard enough to get labor costs, equipment costs, property expenses, and product costs managed effectively for profit. The past couple of years have seen minimum wage rise dramatically and now with inflation rates not seen for more than 30 years, costs of goods sold have risen five and even six-plus percent year over year. And if we consider fuel a significant expense, energy expenses are up more than 30 percent.

Historically, inflationary dynamics are often passed along to the consumer. Yet, in this crazy pandemic age, consumer habits have shifted, either by their own choosing or directed/mandated changes. Those same energy expenses that are fouling up so many bottom lines for businesses are taking a chunk out of consumers’ disposable incomes. The advent of the pandemic led to a spike in unemployment but as government subsidies have waned and with unemployment still high, now more than 50% of America is worried they don’t have sufficient funds for routine expenses further limiting their spending.

Bank of America recently announced that the resultant steep climb in wages for workers poses a threat to margin growth. Wage growth has already risen 4.7% year-over-year through December 2021. Regardless of the expense, supply chain dynamics have been alarming for businesses and consumers, too. BofA continued, “Supply chain pressure could moderate, but a continued rise in wage costs and slowing macro conditions will likely weigh on margins.”

So what’s a business to do? After only one year of the pandemic, more than 200,000 additional businesses above the usual 600,000 closed permanently (Wall Street Journal, April 2021). Others survived with leniency, good luck, flexibility, managing hours, staffing, inventory, service and delivery. Others have taken new looks at how they acquire their products. And many of them have done so with MRV as we help  them improve services and develop better, more profitable dairy programs. Regardless of industry or volume, it is clear that there are savings to be found as one way to thwart the intense effects of inflation.

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