While there is much talk in the media about the ongoing cost of living crisis, another crisis is playing out in parallel, that being the cost of doing business. In the same way that households are feeling intense pressure as a result of rising interest rates and energy bills, firms across the country are being confronted by rapidly rising costs of vital raw materials, fuel, wages and, of course, energy.
A shift caused, or at the very least, accelerated, by a combination of the pandemic, Brexit, and global political uncertainty, the stark impact of rising costs has driven a more urgent need to look at other levers for easing costs and boosting margins.
Pandemic-induced interruption to global supply chains, stalled manufacturing, and incidents such as the Suez Canal delays, have resulted in ramifications which are ongoing and which we’re likely to see for years. And when you consider that cost pressures have worsened very recently by the conflict in Ukraine, and continued lockdowns in China, the extent to which prices will change in the future is uncertain.
In the absence of a magic wand to stem these pressures, or a pot of gold at the end of the rainbow, most industry experts concur that digital represents the most dominant lever in protecting margins and the bottom line.
In order to cope with substantial cost increases, firms need a firm handle on every detail of their expenditure as it happens. Out of control cashflow or unexpected bills simply aren’t viable in the delicate current climate, particularly when it comes to energy bills which feel a little like an unknown entity in light of shifting goalposts and a lack of certainty on what the future holds. While passing costs on to customers is an option for some, it isn’t for others, and in either scenario, it requires transparency on the numbers and clear communications. For the majority, absorbing some, if not all, of the additional costs is necessary.
Digital transformation initiatives can deliver the visibility, agility and decision-making power to mitigate risk, offset costs and seek out opportunities for increased profitability.
Through investing in capabilities which can help deliver a real-time, dynamic understanding of precisely what is coming in and going out of the business, combined with additional insights from which to apply context and create understanding, the best planning position can be secured.
While efficiency was once the end game of business software investments, modern ERP elevates what is possible through helping to capitalise on new opportunities, react to new market dynamics, identify threats quickly, and mitigate risk. Collectively these capabilities can deliver cost and profitability benefits which can be offset against rising costs and help to ringfence profits.
Superior insights can also identify where rising costs can be reduced, whether it’s through better procurement; supplier management; cashflow; or optimising throughput or equipment availability on the production floor to reduce energy waste. And of course, where digital capabilities can free up time, for example in shrinking month end, the available resources can then focus on applying intelligence to challenges, looking at creative ways in which departments can make dents into cost bases.
There’s absolutely no doubt that the world is changing, and rising costs seems to be a shift which is here to stay for the time being. But through embracing the benefits of digital as part of a strategy to mitigate these costs and create dynamic, informed strategies, businesses can have confidence that they are in the best position versus their competitors to survive the storm, and ultimately win market share.
Posted On: November 24, 2022
