Last September, October, and November, we published a series of blogs focused on preparing for 2022, providing several actions for thriving in the coming year. How well you prepared for the increasing uncertainty with alternate plans will likely answer our title question. (Hopefully you are not currently operating an airline!)
Countering uncertainty and increased rates of change requires resiliency, analytical tools, and data. Lots of data with frequent measurement. The omicron variant shows that “normal” is now continuous interruption of our lives. Many companies had hoped to bring all employees back to the office/plant, but this is not happening. How well you manage a hybrid working environment will be with you through 2022.
Increasing your technology infrastructure was the wise thing to do in 2020 and 2021, and is still needed in 2022. All indications are that supplies and people are in a high demand that is not likely to be met soon. With 2022 and 2023 GDP projections being historically strong, it’s necessary to have multiple plans for sourcing. Are you on the offense or defense with your plan?
The 2022 economy is starting out with substantial inflation across the board, which is likely to be a factor in planning throughout 2022. The Fed has ramped up their inflation control tools, but only slightly, and it’s not likely to make much change. Consensus among investment managers is that the prime borrowing rates will likely not increase more than 1% this year, leaving borrowing costs still historically low. This supports adding inventory and technology to your business.
Last year, many companies diversified their supply chains and outsourced support functions where hard-to-find new hires proved very difficult. We had clients outsourcing HR, accounting, logistics, and IT to keep up support and in some cases reduce fixed costs. This is likely to be the continuing environment into 2023. Is this an option for you?
Expectations on the rate of inflation are causing a great deal of confusion as managers try to keep profit margins from greatly declining. Some are increasing inventory with the expectation that they will continue to raise prices as competitors do and with a fixed-cost inventory they can increase gross margins. If you are in a services business, the process is one of catch-up as you are increasing prices to cover the pay increases that were necessary in order to keep your staff. If GDP growth is 4.5%-6% in 2022 as projected, these plans may hold true. Are you being proactive or reactive in your plans?
In summary, there is no one solution to these complex issues. Planning is now the most important part of your production cycle, but you must act! Alternate plans with alternate suppliers are now the long-term goals and absolute low cost is no longer the driver. Your competitors are suffering the same shortages, and everyone will raise prices. It is hard to gain market share if you can’t deliver to your customers, so focus on stabilizing what you can deliver for customer goodwill. With the current business environment, concentrate on incremental steps that can be accomplished in 30 days. This keeps your team focused on solutions and avoids complacency. Hope is not a strategy!
C Squared Solutions provides interim or fractional CFOs, COOs, and CEO advisors in nearly all industries. We analyze and advise on these issues frequently through sophisticated modeling and experienced management. Give us a call and we can offer more information and details. We have been there and done that! Ask us what key solutions we have implemented in our own and our clients’ businesses.