Like it or not, the question isn’t if we will see increased inflation and interest rates but how high they will go and how long will it last.
Their causes and contributions to the current environment are many: Covid-19 and related disruptions in the productivity of businesses, labor shortages, pent up demand that is straining already stretched supply chains, a shortage in microchips, lumber and materials..
The case for higher-for-longer inflation into 2022 often rests on the trillions of dollars being pumped into infrastructure projects globally in a low-interest rate atmosphere, most notably in the U.S. That has supercharged a rally across raw materials, as major economies recover from the pandemic amid growing signs of shortage across several markets.
The Bloomberg Commodity Spot Index, which tracks 23 raw materials, has risen to its highest level in almost a decade. That has pushed a gauge of global manufacturing output prices to its highest point since 2009, and U.S. producer prices to levels not seen since 2008, according to data from JPMorgan Chase & Co. and IHS Markit. JPMorgan analysts also estimate non-food and energy import prices in the biggest economies rose almost 4% in the first quarter, the most in three years.
In light of this uncertainty, wouldn’t it be helpful if you could review all your Capex projects, both approved and in the idea stage, for the next twelve to eight months? With your priorities set and modeling in hand, you could easily share your data with your procurement and supply chain teams, and then be better empowered to work with vendors to mitigate price increases by agreeing to terms now. Lock in prices and delivery.
For most organizations, getting that portfolio view with consistent evaluation metrics is difficult, or even impossible. With Finario, the first enterprise software solution purpose-built for capital planning, you’ll have a single source of the truth that connects budgeting, approvals, and reporting/forecasting. You could easily, for example, pull together all Replace/Renewal projects that are approved but not started, in flight (in the approval process), and in the idea/budget stage. This list would then let you know what vendors to reach out to and negotiate contracts with and mitigate price increase impacts.
You can’t stop investing in your business just because the climate is uncertain. This uncertainty means it’s more important than ever to know where you are spending now and where you need to spend in the future. If you are still managing your capital investments with email and spreadsheets, then your ability to gather information quickly and make informed decisions is limited at best. Implementing Finario would pay for itself in cost avoidance and make your capital planning faster, simpler, and more user friendly all at the same time.