Productivity Problems Nag the Nation

December 10, 2021

There’s a strong candidate for word of the year: inflation. 


And for good reason, as we’re seeing a higher rate of inflation than we’ve seen in decades. Let’s unpack what it all means, and why it matters for businesses like yours. 

It’s common to only think of the phenomenon when our bread and milk prices increase, but inflation impacts everything throughout the economy and our supply chains. Of course, we’re going to pay whatever the going rate is for bread and milk, but discretionary purchases may be delayed or cancelled. It puts pressure on companies to find savings if their customers (or customers’ customers) are unwilling to tolerate price increases. These changes in buying behaviors can have significant ripple effects upstream. The consumer price index (CPI) showed a 6%+ increase in October and is expected to be in that ballpark again for November when the report is released. And in a bombshell of a report, the Bureau of Labor Statistics reported Q3 unit labor costs surged nearly 10%. On top of that, productivity, one of the most effective means of offsetting inflation, declined by more than 5% — the biggest quarterly drop in six decades.


According to the Wall Street Journal, companies are planning for larger wage increases in 2022 than in any year since the Great Recession, driven by a tight labor market and expectations of persistent inflation. Now that cheap labor and materials are out of the question, companies are left searching for productivity gains. For a long time businesses have invested in what they do; finally, it’s time for them to invest in how they do it. But what does that even look like for businesses, especially distribution companies operating with fixed margins? 


For starters, evaluate your processes. Better yet, partner with a third party to evaluate your processes. Sometimes you can’t see the forest for the trees, and that just means you’re too close to the problem. Redundancies and inefficiencies plague most businesses, not because they’re bad at what they do, but as businesses grow, many of the processes that served a purpose years ago don’t scale well. As a result organizations will hire more people, not realizing some of the work is duplicative or slower than necessary. This can cause businesses to languish when more adaptive competitors refine workflows and improve with scale. 


After a thorough process evaluation, consider tools that can be used to simplify work. Cloud-based systems exist for nearly every use case imaginable, yet many businesses are stuck in email, spreadsheets, shared drives and even filing cabinet hell. If you’re a software novice, partner with organizations who work closely with their customers and avoid the low-cost, “off the shelf” band-aids that will be rejected by the very people who need to use it. Adopting new technologies can be hard, but it sure as heck beats going extinct when more progressive businesses gain an edge!


Between cleaning up legacy processes and updating systems, your organization should realize meaningful efficiency gains. Then it’s time to think about the A-word: automation. This isn’t a dirty or scary word, though; in fact, we’ve been automating things for as long as humans have been on this planet. (Yes, passenger pigeons count.) Automation can be as advanced as a fully autonomous robotic assembly line or as simple as an “if this, then that” shortcut. Besides, in the wake of the Great Resignation, it’s harder than ever to find employees willing to do monotonous, repetitive tasks which can be automated. Free up your employees to focus on the most meaningful work possible that’ll help them and your business grow! And if you don’t, they’ll look for greener pastures. We’re already seeing this with the Great Resignation, contributing to the labor crunch and leaving businesses vulnerable to high turnover and all of the problems that come with it. 


Automation, efficiency and productivity-boosting investments are no longer nice-to-haves; the companies which think and act progressively will thrive over the next decade, while those who cling to the way things used to be will struggle or fade away entirely. So what are you waiting for? Look inward and see what you can do to set yourself up for the future of work. (And if you get stuck, Vsimple is here for you!)