What Your Manufacturing/Distribution Business Needs to Know About Inflation

Inflation Impact Distribution Business

Manufacturing and distribution businesses are currently experiencing unique challenges as inflation continues to impact the economy. 

Their day-to-day looks much different than before and they are being asked to make even tougher decisions to keep their business afloat.

However, with a few adjustments, it is possible for business owners to stay ahead of inflation.

Inflation Impact Manufacturing Business

Inflation’s Overall Impact 

As purchasing power topples, inflation rises, making it increasingly difficult for business owners -in any industry- to keep up with the quickly changing economy. 

Inflation leads to higher prices which, in turn, force business owners to:

  • Pay more for their goods and shipping costs.
  • Adjust their prices.
  • Pay their employees more.
  • Make difficult budgeting decisions. 

Consumers also feel the effects of inflation in their day-to-day lives. They are:

  • Being asked to pay more for goods and services.
  • Experiencing shipping delays.
  • Adjusting their buying decisions.
  • Reconfiguring their budgets in an attempt to live within their means. 

 

While quickly rising inflation rates create issues for both businesses and consumers, steady inflation is actually a sign of growth in the economy. It allows businesses to charge more for products without much pullback from consumers, considering they are able to afford the upcharge. The key is making adjustments to match the ever-changing economy. 

For your manufacturing/distribution business, inflation creates unique challenges. However, with the right adjustments, your business can keep up with inflation and still see success.

How Inflation Impacts Manufacturing/Distribution Businesses

Because of the nature of the manufacturing and distribution industry, inflation’s impact leaves a heavy weight, adding an extra layer of complexity to business operations. 

Here are some examples of industry-specific impacts: 

  • Uneasy purchasing patterns
    • As inflation increases and consumers are more willing to purchase products, demand skyrockets. However, if there isn’t enough supply to meet demand, it creates issues. 
    • Inversely, if consumers adjust their buying habits because they aren’t being paid enough to purchase goods, it creates an abundance of supplies.
  • Increased costs
    • Inflation can cause prices to rise meaning you’ll be paying more to create products, replenish inventory, and move your products from one place to another.
  • Labor issues
    • Workers are demanding wages that align with inflation, however, if you aren’t providing what they need, they’re finding work elsewhere. 
    • If your business doesn’t make the adjustments to keep up, it can lead to labor shortages and decreased productivity. 

While these problems can be detrimental to a business, there are multiple strategies to help you avoid being negatively impacted.

Manufacturing Business Inflation Impact

Preparing Your Manufacturing/Distribution Business for Inflation

Being prepared and adjusting to rising inflation is the only way to ensure your business continues to see success. 

Here are a few tips to keep your manufacturing/distribution business on track: 

Adjust your prices

Whether you are selling to customers directly or to other businesses, you will likely have to raise your prices to match inflation. To set the right prices, you’ll want to take into account the cost of production and your customer’s willingness to pay, among other things. 

Cut costs 

With a little effort, there are plenty of ways to cut costs. Whether it be for materials, operational needs, or even letting go of employees, get creative to find ways to limit your spending. 

Increase productivity

Consider incorporating new technology, adjusting processes, or creating new incentives to boost productivity. Increased productivity can help offset labor issues and uneasy purchasing patterns.

Let an Experienced CPA Guide You

Navigating inflation is not an easy task, especially for business owners in your industry. 

However, at U-nique Accounting, we specialize in managing inflation and can help you implement strategies to keep your manufacturing/distribution business ahead of the changes in the economy. 


With our help, you’ll be prepared for what’s next. Learn more on our website!

Matt C

By MATT CIANCIARULO

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