And what is cost-push inflation, anyway?
Cost-push inflation is also known as wage-push inflation, and it develops when overall prices start to increase due to the escalation of the wages costs and raw materials. It means that when the cost of production gets higher than usual, it can decrease the amount of the total output in the economy.
However, the demand for goods hasn’t changed lately that much – so, having all this in mind, it is clear that the increased production price is passed onto consumers, hence creating cost-push inflation.
Understanding Cost-Push Inflation
To begin with, inflation can be defined as a measure of the rate of price increase in an economy. However, it goes both ways – and it erodes a consumer’s purchasing power if salaries do not increase enough to keep up with rising prices.
When a company’s costs rise, an additional fee must be passed onto consumers by raising the product price. If that doesn’t happen, and production costs keep on increasing – the company’s profits will decrease.
Tough times ahead for telco
The entire circle within the telco industry will face some severe challenges in the times that come. And we mean the whole circle – customers, employees, and suppliers, as inflation drives price hikes, CAPEX and OPEX control, and ongoing workforce reductions.
Even though the telecom service kept somewhat stable throughout the Covid-19 pandemic (due to the people’s need to communicate, entertain and exchange information while being confined to their homes) – some new circumstances changed that position. The accelerated inflation and a boost of benchmark interest rates by the central banks will create slower economic growth in the next few years. This will affect the telco, as well.
This forecast can still be regarded as optimistic, but it is expected that growth rates will be lower. This means that we are entering an era where the impact of inflation in the telco industry will stretch over the next couple of years.
In the middle of this price surge, tech and telecom prices have seen small increase compared to other goods and services. Therefore, it is of utmost importance to cut the cost and wait to be prepared for what is to come.
Is digital transformation the key to cost savings?
It could easily be.
Inflation did hit on material and increasing job costs, from the angle of increased hourly rates and, at the same time, material increase. However, the industry still stands tall but still… So let’s see what should be done and what are some strategic ways to protect your business from inflation.
Of course – reducing costs is always GOOD.
When supply costs rise significantly and material shortages are increasingly common – it is time to find some alternative sourcing strategies. The first thing to do is organize.
Teodesk might be just what you are looking for in times like this.
Understanding, monitoring, and controlling costs across your value chain can help you make more informed and correct decisions.
Teodesk financial module lets you control and follow every little thing concerning revenue and costs at the project level. Teodesk is highly flexible and adaptive to your needs, so you define the costs you want to follow. Also, you determine what and how something can be imported in terms of expenditures and revenues – crew cost, material, third party…
By setting the proper categorization of the costs – you will provide a clear path for monitoring and comparing the actual cost data – past, current, and future (using predictive analysis).
Teodesk helps you import all cost data and track them during the project – Allocation types of pre-defined costs allow you to track everything when it comes to the costs at the location level.
Within each location, you can enter which costs were planned for and which were realized. Also, Teodesk automatically shows unplanned costs by showing you whether the set limit is broken.
When it comes to revenue, you can follow the planned and realized revenues through the purchase order received from the client.
If for any reason, costs increase – for example, due to the larger volume of work, at all times, you can monitor changes and approve the unexpected costs. The system is the same for every location.
PNL analysis – The profit and loss monitoring
PNL analysis is a visual representation that pulls data from cost management, offering you a clear graphical display so you can always “see at a glance where you are,” in to order to react quickly if needed. The visual analysis is created with different colors, showing you the distinction between what is earned and what is spent.
Among other ways to reduce costs is to increase productivity. The best and least harmful way to enhance productivity is by improving throughput. Optimize labor usage and engage your employees in the rapid adoption of digital technology.
When you align streamlined operations – digitalization and employee efficiency are the paths to sustainable productivity improvements.