Plastics and Innovation

Inflation in the Entire Supply Chain

Inflation and soaring energy prices have dominated since the beginning of the year. The global supply chains are interconnected, when one price soars, others tend to follow. The factors contributing to global inflations are energy, labor, and freight cost. A country’s competitiveness can be impeded by an uncompetitive supply chain price.

Factors causing a rise in freight costs due to rising inflation:

The consumer price index (CPI) transportation is widely used as a macro-economic indicator of inflation, and also a tool by the central bank for targeting inflation and monitoring price stability. The European union CPI transportation data have increased by 13 % since May’21, indicating a substantial increase in the transportation cost.

Figure: European Union CPI Transportation

The effect of inflation on the supply chain will lead to an increase in transportation costs going forward. An increase in the cost of transportation will eventually lead to an increase in the price of consumer goods. The increasing price of consumer goods will lead to low demand from the market. The ongoing geopolitical tension, rising energy cost, and shortage of truck drivers are likely to disrupt the supply chain throughout the year.

Raj Shah

Program-Director Compounds & Specialties