Price Inflation Concerns Are Real. Are OEMs Ready for the Fallout?

Although price inflation is a risk that can be seen on a micro level with individual components, there is a growing amount of evidence that a broader inflation trend may be on the horizon. A large number of consumer-facing companies and wealth investors — including Warren Buffet — have already experienced shortages of critical inventory such as steel, lumber, cotton, as well as tech-based inventory such as semiconductors and other electronic components, and many market analysts are expecting significant inflation in the next year.

In a recent survey of money managers by Bank of America, rising prices and the potential for a central bank response were ranked as their highest current concerns, Bloomberg reports. On the federal level, the U.S. Treasury Secretary has also recently mulled publicly that rates will likely increase in a response to high levels of government spending expected to be as high as $10 trillion this year alone. These remarks were later clarified that they were not indicative of any future action. The immediate effect will be an increase in the price of consumer goods and services, but it could also lead to consequences on business such as declining employee benefits and a reduction of open positions.

For businesses who operate in the manufacturing industry, this means that inventory costs across the board might see a substantial increase. In order to minimize disruption, this should spur manufacturers to immediately search for alternative inventory sourcing strategies that can mitigate, or even avoid entirely, the brunt of price inflation.

One such solution can be found at Partstat. With the value proposition “We buy inventory so you don’t have to” at the core of its Inventory Ownership Solution, Partstat has the ability to offer original equipment manufacturers the ability to leverage their working capital to purchase the inventory needed to complete their builds. Crucially, this strategy allows manufacturers to acquire inventory needed three, five, or even up to 10+ years into a production run at today’s prices (or, in some cases, less than today’s prices given the increased potential for bulk purchase discounts). If early signs of long-term inflation are being seen in the market, this pre-emptive inventory strategy could save manufacturers thousands or even ten of thousands in total costs when supporting long-term platforms.

Price inflation is not the only risk an Inventory Ownership Solution avoids. For example, this strategy all but eliminates the need to be concerned about escalating lead times, and through Partstat’s ability to store the inventory in their own facilities, customers can save up to 42% on annual inventory carrying costs.

According to Bank of America, “Mentions of ‘inflation’ are now up nearly 800% compared to the year-ago first-quarter earnings season.” With signs this apparent and widespread, it’s not too early to plan ahead.