The 2020 Mid-Year Economic Update_long

Higher Costs Probably Here to Stay

According to a recent survey by RSM McGladrey, manufacturers and wholesale distributors are not optimistic about the direction energy, raw material and transportation prices are heading. Nearly half of the responding companies expect energy and raw material costs to increase by at least 10% in the coming months; more than half expect the same drastic increases in transportation costs.
 
The advice from Tom Murphy, executive vice president of manufacturing and wholesale distribution for RSM McGladrey? Get used to it.
 
This inflationary surge is not an anomaly -it's a sign of a new, long-term global cost environment. It's paramount that companies change the way they do business to survive now and thrive in the future,"Murphy says.
 
That's not saying that ...

According to a recent survey by RSM McGladrey, manufacturers and wholesale distributors are not optimistic about the direction energy, raw material and transportation prices are heading. Nearly half of the responding companies expect energy and raw material costs to increase by at least 10% in the coming months; more than half expect the same drastic increases in transportation costs.
 
The advice from Tom Murphy, executive vice president of manufacturing and wholesale distribution for RSM McGladrey? Get used to it.
 
This inflationary surge is not an anomaly -it’s a sign of a new, long-term global cost environment. It’s paramount that companies change the way they do business to survive now and thrive in the future,”Murphy says.
 
That’s not saying that nothing can be done to help offset the price increases. Rather, the point that Murphy is getting at is that companies need to begin looking at changes for the long-term rather than just being reactive to the volatile markets.
 
Strategic planning is key.
 
Here are some things that RSM McGladrey suggests as long-term options:

  • Turn to export markets as an alternative for growth.
  • Source products in ways that reduce import and material costs while maintaining product quality. This could include reconsidering domestic suppliers, which may be attractive options due to escalating transportation costs.
  • Implement lean processes. (Read an MDM article on the topic: Lessons Learned on Lean)
  • Curtail unnecessary expenditures.
  • Take advantage of government programs and tax incentives.
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