PPB June 2022

to have things go predictably and smoothly, and when they don’t, it causes stress, tension and distrust.” Neaman adds that supply chain issues put a lot of pressure on costs. “Raw materials, any type of dislocation, pushes time and freight, and gas prices become a big concern. Polyester is a big component because it’s oil-based and everybody is dealing with the same elements. I think the big difference is business vs. consumer, and family-run business vs. private equity.” For Waldorf, the impact of today’s inflation compared with 40 years ago is very different. “The supply chain issue is helping clients understand that we need alternative sources, and sometimes those are more expensive. Clients are happy just to get delivery.” He believes suppliers and distributors are going to have to deal with the supply chain disruptions for the near future, but says clients understand because they are having the same problem in their own businesses. Despite the U.S. dollar growing weaker since last year, the supply chain remains top of mind for most business owners. “There is inflation but, to date, suppliers have been careful to keep things in line,” Geiger says. “We know it’s going to be more and more difficult. We know there’s a likely upward inflationary push for all kinds of reasons. Today, it’s getting the supplier to produce and ship what you thought you wanted to buy from them.” He adds, “Anyone who is in business knows there are supply chain issues, and if you are not flexible or understanding, then you are playing a game. It is life today and it is not going to change drastically. China is a COVID mess, Shanghai is in lockdown, ports are locked up, everyone is scrambling to make their product in other countries and raw material costs are going up. On the other hand, some companies are taking advantage of it, and they are getting price increases beyond what their costs are. Whenever there is uncertainty, companies can take advantage to make extra profit.” The delivery time to receive needed boxes for production is another issue straining Tom Riordan’s business at supplier Maple Ridge Farms. “We buy a lot of set-up boxes made in Wisconsin. It used to take us a month to get delivery, now it takes four months. We used to get corrugated boxes in a week, now it’s four weeks.” He’s also concerned about a related issue: employee wages. Riordan hires 200-250 seasonal workers every fall to produce the gourmet food gifts his company sells. He had to raise his walk-in wage by 30% last year to attract enough workers. In addition, his cost of goods has increased by 15-18%. But despite the challenges, business owners are overwhelmingly optimistic about growing sales during this time. “Demand isn’t slowing down for what most businesses are selling,” says Proforma founder Greg Muzzillo. “Their selling price is going up, and if their margin is staying the same, that means their markets are increasing substantially. So they have more money to spend. No one wants to talk about it, but inflation can be good for many businesses. It’s not good for the consumer, but for business owners and salespeople who are commission-based—it couldn’t be better.” The numbers prove this out: In 2021, pre-tax corporate profits rose to $2.81 trillion, a 25% increase easily eclipsing the 7% rise in consumer prices in the same period, according to data from Axios. Aside from the data points, comparing 1982’s inflation rate to today’s doesn’t reveal many similarities because too many other variables have changed. Four decades ago, distributors received orders from customers by mail and took several days to turn them around before sending the order to a supplier and waiting weeks for the product A recession later this year or early next year is a real possibility—and it could prove to be a much bigger issue than inflation. FEATURE | Rising Inflation 22 | JUNE 2022 |