Rising energy costs and their impact on the supply chain
Rising energy costs and their impact on the supply chain
Supply chains and their operators across the world are being faced with an unprecedented number of challenges when faced with the issue of keeping goods moving. Events like the recent pandemic, Brexit, and unexpected changes in the cost of raw materials have left many companies scrambling to maintain profits.
In addition, there are also rising energy costs to contend with which may put an even tighter squeeze on already over-burdened networks, and with inflation rising some businesses may find it impossible to stay afloat. Many companies and leaders have complained that the cost-of-living crisis and surging inflation have placed a higher strain on their business than the issues caused by the events surrounding Covid 19.
A combination of disasters
Growth has ground to a halt and many companies have hit a pause on any large investments for the short term as they continue to run in survival mode. With National Insurance payments rising too, supply chains are being hit from all sides as they increase salaries to help their employees offset the higher cost.
The combination of disasters including the recent war in Ukraine has created a situation globally that is almost untenable. Supply chain businesses that need to turn profits are struggling to not only acquire and deliver on time, but also to keep staff, clients, and shareholders happy.
In a desperate attempt to reduce energy costs and maintain operations, supply chain businesses are using everything in their power to find savings wherever possible. Including assessing energy consumption across facilities, offices, and warehouses. Lighting, equipment, and technology all require energy, and company leaders are tightly monitoring the use of heating and air conditioning and employing money-saving tactics like timed thermostats and well-insulated buildings to minimise spending.
Changes in thing such as LED and fluorescent lighting uses 80% less energy and emits lower heat, reducing the burden on heating and cooling systems. While this may seem extreme to larger organisations, the weekly savings from frugal energy use might make a substantial reduction for smaller or mid-sized companies. As the winter months draw closer these types of cost-saving initiatives could be the difference between continuing to run their supply chain business or filing for bankruptcy.
How energy-efficient software can help
Energy-efficient software can help companies to project and forecast expenses, allowing cost-saving changes to be made. Things like better waste management and improved facilities management all roll up to aggregated savings, especially if the business in question manages multiple locations. Large-scale equipment that ran continuously and consumed a high amount of energy can be switched on and off using an automated schedule, and tools that allow higher visibility are being employed to identify further cost-saving opportunities.
Processes that were already streamlined will be under even more scrutiny as every process and procedure is analysed and reviewed to hunt for further initiatives. Companies whose only remaining option is to cut labour costs may be faced with some difficult choices as they make sacrifices for the greater good.
Many economic experts have declared that the current state of affairs may last until the middle of 2023 and with cooler weather just around the corner, many are worried that the country could be flirting with a recession (source: https://www.rsmuk.com/real-economy/economic-voice/cost-of-living-crisis-likely-to-last-until-second-half-of-2023) .
Lower incomes and higher bills will likely result in lower spending through the end of 2022, but less saving and higher borrowing may mean that, for now, a recession can be avoided. But with economic growth stalled and the situation in places like Russia and Ukraine still unstable, supply chains will be monitoring their energy data closely to watch for even the slightest change in costs as they continue to manage their business operations tightly.
To find out how i2B can help reduce the raising energy costs please get in touch.