Smart Scale Analytics

Inflation has been all over the news lately – it’s been hittnig everyone from the biggest companies down to individuals and families.  It shows up in everything from the price of a fast meal (looking at you McDonalds – or at least my kids always are!) to energy prices that drive the cost of making and moving goods to little things like the classic 25 cent arcade game being a thing of the past!

However, to truly understand and manage something, I think you need to have a good way to measure it.  The federal government has tons of ways that it measures inflation with the CPI (Consumer Price Index) and PPI (Producer Price Index) being two of the most well-known measures. 

At the company level it’s a fairly simple thing to quantify in practice but more challengning to do in reality.  One approach that I’ve rolled out looks at quantifying how much more (or less) I’m paying for goods and/or services that a company needs to deliver to its customers versus what was paid for that same good or service in the previous year (or other period).  To do this right you need to engage in a few keys steps:

-Check your invoices received data for good standardized data on what goods were received and the quantities received.  Pay particular attention the quantities received over time and that the same unit of measure is being used – this is so important.

-Calculate a change in price per standardized based unit from the comparison period to the current period both in percentage and actual cost change terms.

-Apply this change amount to the number of UNITS that you’ve purchased (or used if you’d rather) and you get a total change in the amount you spent for a particular good or service versus the same price in a different comparison period.  You can also take this total change amount and divide it by your total spend for the current period to get a percentage your spend changed because of the change in what you’re paying for your inputs.

If you’d like more help trying to quantify inflations impact on your business or to understand your procurement/supply chain data better please fill out the form below and I’d love to get in touch with you?

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