Supply Chain Cost Increases

The latest PPI data suggest substantial cost-push inflation is brewing far upstream in the supply chain. Two charts below show data through May. Thoughts: •The top chart shows the PPI for basic chemical manufacturing, which in 2023 shipped $284 billion of products (https://lnkd.in/gUbDyDze) . Prices as of May jumped 15% from 2025 and 16% from February 2026. Such increases will affect prices of resins, plastic products, other chemicals that use basic chemicals as feedstocks. Price increases in those downstream sectors will start to materialize over the coming months as inventories of basic chemicals procured at lower prices are consumed and more expensive replenishments are used as feedstocks. •The bottom chart shows the PPI for alumina and aluminum production and processing, which in 2023 shipped $41 billion of products. While prices are up 11% from February, they are up a staggering 38% from the 2025 average. They are up a whopping 64% compared with the 2024 average. These higher prices are already making their way over to goods with extensive aluminum content like aluminum can manufacturing (prices up 11% from a year ago: https://lnkd.in/g9txdCkd) and truck trailers (prices up 10% from a year ago and sharply accelerating https://lnkd.in/g5SqMshx). •We see similar dynamics in sectors like plastic resins and artificial fibers (NAICS 3252), an industry with $121 billion in shipments in 2023 where output prices have surged 20% since February and are up 19% relative to 2025 (not pictured because the dynamics mirror basic chemicals). Implication: sharp rises in output prices in industries far upstream in the supply chain will be filtering down to producers of “final demand” products destined for use by consumers, the government, and private capital investment over the coming months. Budget accordingly.

Are you aware of the hidden costs in your product's raw material? : : Accurately calculating raw material costs is a cornerstone of should-cost modeling. By effectively identifying the materials required, determining the cost per unit, and accounting for potential waste and additional costs like handling and transportation, you can develop a comprehensive and reliable cost model. Key Parameters for Should Cost Process in Material Calculation: # Raw Material Identification: ·  Material type and grade ·  Material source/origin # Material Quantity: · Required quantity (per unit or batch) · Packaging units # Material Cost per Unit: · Supplier quotes · Market prices · Historical data · Discounts and bulk pricing # Material Waste or Loss: · Scrap/waste factor ·  Defects and rejections # Handling and Storage Costs: ·  Material handling · Storage costs (rent, insurance, utilities) · Inventory management # Freight and Transportation: ·  Shipping costs · Delivery method (air, sea, road) ·  Customs and tariffs # Lead Time and Order Frequency: · Lead time variations · Order volume # Supplier Terms and Conditions: · Payment terms · Return and warranty policies · Exchange Rates (For Imported Materials) # Material Substitution and Alternatives: · Substitute materials ·  Material optimization # Environmental and Regulatory Factors: · Recycling or sustainability initiatives · Regulatory compliance # Operational Overheads Related to Materials: · Processing costs · Energy costs ------------------------------------------------------------------------------------- # Ask Yourself: -> Did you consider the net weight and gross weight calculation properly? -> Did you consider scrap weight and scrap cost in your estimation? -> Do you have access to the global raw material index and recent material price database? -> Have you asked your supplier about the raw material cost per kg as well as the scrap cost per kg? -> Do you consider Manufacturing overhead (MOH) and inventory cost (raw materials)? -> What about the scrap cost percentage based on different commodities? -> Did you optimize material through strip layout, nesting, cavity, and other techniques? -> What’s your strategy when the supplier asks for material cost increases due to market fluctuations? -> Did you consider the volume/batch/MOQ impact, as well as regional cost impact, in your calculations? -> Did you consider any coating and primary requirements in the raw material stage? -> Commodity-Specific Considerations, etc.

As the conflict in the Middle East and disruptions to the Strait of Hormuz move into their third month, oil prices are above $100/barrel and diesel prices remain well above $5/gallon. Food moves on diesel, and this shock is now moving through the food supply chain. The chart below shows how exposed different food‑at‑home categories are to higher energy, fuel and transportation costs. Each bar represents the share of every domestic food dollar going to energy and to transportation & storage in 2024. These figures should be treated as illustrative of each category’s true energy exposure. Other parts of the supply chain, particularly food processing, are also energy‑intensive, so the actual energy and fuel‑price footprint may sit higher than what’s shown here. In the coming months, price pressure is likely to show up first in perishables and products that travel longer distances. Fresh eggs (15.6%), fresh vegetables (12.1%), poultry, and fresh fruits all sit well above the 9.5% food‑at‑home average. Cold‑chain logistics like refrigerated trucking, frequent shipments, and short shelf lives make these categories especially sensitive to diesel‑price increases. #FoodEconomics #FoodPrices #FoodInflation #FoodSupplyChain #EnergyMarkets #OilPrices #StraitofHormuz #Diesel

𝗖𝗠𝗢’𝘀 𝗣𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲: 𝗖𝗮𝗻 𝗖𝗣𝗚 𝗯𝗿𝗮𝗻𝗱𝘀 𝗽𝗿𝗼𝘁𝗲𝗰𝘁 𝗺𝗮𝗿𝗴𝗶𝗻𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗻𝗲𝘄 𝘁𝗿𝗮𝗱𝗲 𝗿𝗲𝗮𝗹𝗶𝘁𝘆? (Welcome to 2nd Trump Tariffs Era) Tariffs are back, and they are hitting the bottom line harder than ever. With new trade barriers on China, Canada, and Mexico, CPG brands face a triple threat: rising costs, shrinking consumer demand, and disrupted supply chains. But here’s my question: Are we playing defense, or are we strategically pivoting? From what I can see, data tells us a clear story. Historically, high tariffs = lower trade competitiveness. Let's take a look at the U.S. Average Tariff Rates (1821-2016) and trade balance trends: ✅ When tariffs were high (pre-1940s), trade was limited, and the U.S. maintained a surplus. ✅ Post-1945, lower tariffs (via GATT & WTO) fueled economic expansion and trade growth. ❌ After the 1971 Bretton Woods collapse, trade deficits deepened as low tariffs persisted. 🚨 Today, reintroducing high tariffs could lead to cost-driven inflation, supply shocks, and loss of global competitiveness. ++ 𝗪𝗵𝗮𝘁 𝗧𝗵𝗶𝘀 𝗠𝗲𝗮𝗻𝘀 𝗳𝗼𝗿 𝗖𝗣𝗚𝘀 & 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗖𝗼𝗺𝗺𝗲𝗿𝗰𝗲 ++ - Higher Input Costs → Tariffs on raw materials (aluminum, steel, packaging) increase COGS, cutting into margins. - Consumer Price Sensitivity → Higher shelf prices = lower demand. Consumers switch to private labels, local substitutes, or DTC (Direct-to-Consumer) models. - Erosion of Market Access → Retaliatory tariffs make U.S. brands more expensive abroad, favoring European and Asian competitors. - Disrupted Global Supply Chains → Companies must rethink sourcing, warehousing, and last-mile logistics. ++ 𝗖𝗠𝗢 & 𝗖𝗙𝗢’𝘀 𝗣𝗹𝗮𝘆𝗯𝗼𝗼𝗸 𝗳𝗼𝗿 𝗡𝗮𝘃𝗶𝗴𝗮𝘁𝗶𝗻𝗴 𝗧𝗮𝗿𝗶𝗳𝗳𝘀 ++ 1️⃣Pass-Through Pricing? Be Selective. Don’t just raise prices. Instead, optimize pack sizes, value-tiered offerings, and bundling strategies to maintain affordability. 💡Data-driven pricing elasticity is key—test price sensitivity before making abrupt hikes. 2️⃣ De-Risk Your Supply Chain Nearshoring & Friendshoring → Reduce tariff exposure by shifting suppliers to Mexico, Vietnam, and Eastern Europe instead of China. 💡Dual-sourcing strategies ensure supply continuity amid trade wars. 3️⃣ Digital Commerce is the Safety Net DTC & eCommerce are the antidotes to tariff turmoil. 💡Selling via Amazon, Shopify, or localized fulfillment centers avoids tariff-heavy distribution routes. 💡Localized production + micro-fulfillment hubs = reduced cross-border shipping costs. 4️⃣ Work Capital & FX Strategy Matters More Than Ever Hedging currency risks & cash flow forecasting is critical when tariffs disrupt inventory costs. 𝗧𝗼 𝗮𝗰𝗰𝗲𝘀𝘀 𝗮𝗹𝗹 𝗼𝘂𝗿 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗼𝗹𝗹𝗼𝘄 ecommert® 𝗮𝗻𝗱 𝗷𝗼𝗶𝗻 𝟭𝟯,𝟱𝟬𝟬+ 𝗖𝗣𝗚, 𝗿𝗲𝘁𝗮𝗶𝗹, 𝗮𝗻𝗱 𝗠𝗮𝗿𝗧𝗲𝗰𝗵 𝗲𝘅𝗲𝗰𝘂𝘁𝗶𝘃𝗲𝘀 𝘄𝗵𝗼 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲𝗱 𝘁𝗼 𝗲𝗰𝗼𝗺𝗺𝗲𝗿𝘁® : 𝗖𝗣𝗚 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗚𝗿𝗼𝘄𝘁𝗵 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿. #tariffs #CPG #FMCG #CMO

💰 The Biggest Procurement Mistake? Looking Only at the Purchase Price. Early in my procurement career, I believed that negotiating the lowest price automatically meant I had secured the best deal. I couldn't have been more wrong. A supplier may offer the cheapest quotation, but what happens if: Delivery is consistently delayed? Quality issues increase rework and warranty claims? Transportation costs are unexpectedly high? Inventory sits in the warehouse for months? Poor supplier performance disrupts production? Suddenly, the "cheapest" supplier becomes the most expensive. This is why world-class procurement organizations don't focus on Purchase Price alone—they focus on Total Cost of Ownership (TCO). 📌 Procurement costs extend far beyond the supplier's quotation. They include: ✅ Purchase Price ✅ Transportation & Freight ✅ Order Processing Costs ✅ Inspection & Quality Costs ✅ Inventory Holding Costs ✅ Administrative Costs ✅ Compliance & Duties ✅ Maintenance & Lifecycle Costs ✅ Hidden Costs such as delays, supplier failures, rework, and lost business opportunities. One lesson I've learned is that procurement creates value by asking a different question: > "What will this supplier really cost the business over the entire lifecycle?" That shift in mindset changes procurement from a cost-saving function into a strategic business partner. I've created this hand-drawn infographic to simplify the different Types of Costs in Procurement and highlight why understanding them is essential for every procurement and supply chain professional. 💬 I'd love to hear your thoughts: What procurement cost do organizations most commonly underestimate? Is it: Inventory Holding Cost? Transportation Cost? Quality Cost? Or the Hidden Cost of poor supplier performance? Let's discuss in the comments. Your experience may help others make better procurement decisions. #Procurement #StrategicSourcing #SupplyChain #TotalCostOfOwnership #TCO #CostManagement #SupplierManagement #ProcurementExcellence #Purchasing #Operations #Logistics #Negotiation #SupplyChainManagement #ContinuousLearning

The Hidden Supply Chain Costs Quietly Draining Your Profitability Supply Chain Management is a constant balancing act between efficiency, cost control, and customer satisfaction. But here’s the catch: the real cost killers are often invisible until they erode your margins. Let’s break them down 👇 Key Cost Components 1️⃣ Supplier Mapping & Risk Assessment Costs start long before production; supplier evaluation, onboarding, negotiation, and audits. These ensure reliability but can silently inflate budgets if overdone 2️⃣ Production / Manufacturing Raw materials, energy, labor, QC, and scrap all add up. Kaizen thinking can transform these from cost centers into value engines 3️⃣ Transportation & Warehousing Freight rates, fill-rate, fuel volatility, and inventory levels quietly eat into profitability. Optimized fill, routing and better warehouse utilization can turn the tide 4️⃣ Delivered Cost Shipping, handling, customs, and last-mile delivery impact both costs and customer satisfaction. Streamlining this delivers a double win 5️⃣ Installed Cost Costs don’t stop at delivery; assembly, testing, training, customer integration also matter 6️⃣ Operating Cost Obsolescence, returns, repairs, and service operations. Lifecycle thinking and predictive maintenance help minimize expense leaks 7️⃣ Cross-Category Costs Labor, technology, insurance, real estate, compliance, sustainability affect every stage. Visibility here is key to managing total spend. Insights for Cost Optimization ✅ See the “true” Cost‑to‑Serve Build a cost‑to‑serve view by customer, channel, and SKU to expose where you earn vs. where you bleed ✅ Design segmented supply chains Create different flows for stable vs. volatile demand and premium vs. standard service instead of a one‑size‑fits‑all model ✅ Automate hidden manual work Target planning, warehousing, and order processing for automation to cut errors, lead times, and “just in case” buffers. ✅ Tune inventory across lifecycle Align inventory policies with product life stage and variability, using multi‑echelon logic instead of blanket safety‑stock rules. ✅ Turn suppliers into cost partners Shift from price haggling to joint cost roadmaps, VMI/SMI, and long‑term agreements focused on total landed cost ✅ Make cost a governance topic, not a project Embed cost KPIs into S&OP/IBP, with clear ownership, link decisions to margin and resilience ✅ Embed Total Cost of Ownership Integrate TCO into sourcing, make‑or‑buy, and network design so “cheapest” and “best” stop being different answers. Supply chain cost management isn’t cutting expenses. It’s building resilience in a world shaped by volatility and disruption. By understanding hidden costs and applying right strategies, leaders safeguard profitability while sustaining high service levels. What cost optimization lever is working best for you right now : visibility, analytics, or process standardization?

In food supply chains, every extra day in inventory is a cost… and sometimes a loss. Food manufacturers are operating under extreme pressure today. Demand swings are sharper, shelf life is shorter, and visibility is still limited. Industry estimates show that up to 30–40% of food is wasted globally, and a significant portion of that loss is linked to poor inventory planning and lack of real-time tracking. At the same time, out-of-stocks in grocery categories can reach 8–10%, directly impacting revenue and customer trust. The core pain point is simple but critical you can’t manage what you can’t see. Most organizations still rely on delayed data, batch updates, and historical trends. By the time a demand shift is visible, the damage is already done: excess stock expires in one region while another location faces shortages. This imbalance increases write-offs, logistics costs, and working capital pressure. This is where technologies like RFID and digital twins are starting to change the game. Companies adopting RFID are seeing inventory accuracy improve from ~70% to over 95%, enabling real-time tracking of products across the supply chain. Digital twins take it a step further by allowing businesses to simulate demand and supply scenarios before execution, helping reduce waste, optimize replenishment, and improve service levels. The shift is clear food supply chains are moving from reactive planning to predictive and simulation-driven decision-making. The question now is not whether these technologies are valuable, but how quickly organizations can adopt them to stay competitive. Because in this industry, every percentage of accuracy gained is revenue saved… and waste reduced. #SupplyChain #FoodIndustry #RFID #DigitalTwin #InventoryManagement #Planning LinkedIn News LinkedIn News India

🚨 One of the MOST expensive problem in supply chains is often invisible. ❇️ It’s not transportation. ❇️ It’s not warehousing. ❇️ It’s not procurement. It’s the 🐂 Bullwhip Effect. A tiny fluctuation in 📈 customer demand… turns into massive 🏭 operational chaos upstream. Example: Customer demand changes by just 5%. 👇 🚫 Retailer orders jump 10% 🚫 Distributor orders jump 20% 🚫 Factory production swings 40% 🚫 Supplier orders spike 60% And suddenly the entire network is: ❌ Overstocked ❌ Running shortages at the same time ❌ Paying for emergency freight ❌ Fighting service failures ❌ Blaming forecasting teams The real issue? Most organizations think this is a forecasting problem. It’s actually a SYSTEM problem. The bullwhip effect is usually triggered by: 📦 Large order batching 📈 Constant forecast revisions 🎯 Promotions & discount spikes ⚠️ Panic ordering during shortages 🔒 Poor visibility across the supply chain The result? 💸 Higher costs 📦 Excess inventory ⏳ Longer lead times 🚚 Expensive firefighting 😡 Lower customer satisfaction The smartest supply chains today are not just improving forecasts. They are redesigning how information flows across the network. That means investing in: ✅ Real-time demand visibility ✅ AI-driven demand sensing ✅ Collaborative planning ✅ Integrated ERP + planning ecosystems ✅ Faster replenishment cycles ✅ End-to-end digital control towers One powerful idea changed how I think about supply chains: “Disconnected optimization creates connected chaos.” You can have: ✔️ Great planners ✔️ Great software ✔️ Great KPIs …and still fail operationally if every function optimizes independently. The future of supply chain leadership is not just better planning. It’s systems thinking. 🧠 #SupplyChain #SupplyChainManagement #SupplyChainAnalytics #BullwhipEffect #InventoryOptimization #DemandPlanning #SupplyChainAnalytics #AI #DigitalTransformation #Operations #Logistics #SCM #BusinessStrategy #IntegratedBusinessPlanning #IBP #Leadership #SystemsThinking #ERP #Planning #DataAnalytics #SupplyChainAI

Raw Material Prices Are Rising. Here's What the Agrochemical Industry Needs to Know. The global agrochemical supply chain is under significant pressure — and the signals are impossible to ignore. Driven by the ongoing Middle East conflict, basic chemical raw materials worldwide have seen sharp price escalations across the board. This isn't a localized disruption — it's a systemic shock touching nearly every agrochemical formulation on the market. What's Moving — and Why It Matters Here's a snapshot of key raw materials under pressure: Methanol — up ~45% since the conflict began. As a foundational input for the majority of pesticides, this single movement has cascading effects across the value chain. -Yellow Phosphorus— directly impacting Glyphosate and Glufosinate pricing and availability. IPA (Isopropyl Alcohol) — critical for Atrazine, Glyphosate SL formulations, and more. Phenol— upstream of 2,4-D. Ethanediamine — a key precursor for Mancozeb. Bromine, Sulfur, Benzene, Methylbenzene, Bunker Fuel Oil— all elevated, compressing margins across formulation and logistics simultaneously. The confluence is stark: raw material inflation + higher freight costs from rising fuel prices + peak monsoon demand season + speculative buying behavior = a market environment unlike anything we've seen in recent years. Critically, some chemical infrastructure has sustained lasting damage. Even in a best-case scenario where hostilities ease, physical repair timelines mean that normalization of supply chains will not happen quickly. Our Perspective at Scimplify At Scimplify, we believe that supply chain intelligence is a strategic asset — not just a procurement function. Across our integrated platform spanning agrochemicals, biologicals, and specialty chemicals, we are actively: ✅ Monitoring upstream raw material trends in real time ✅ Engaging closely with our manufacturing and sourcing partners ✅ Advising our customers to make rational, well-informed procurement decisions — not panic-driven ones This is precisely the kind of market environment where long-term partnerships, transparent communication, and supply chain depth become differentiators. A Word to Our Partners and Customers We understand that cost pressure at the raw material level ultimately reaches the farmer — and that is the outcome none of us want. Our commitment remains to balance supply reliability with pricing discipline, while keeping our partners fully informed. We welcome conversations with partners across SE Asia, Africa, Latin America, and Europe who are reassessing their supply strategies in this environment.

The Coming Inflation Central Banks Can’t Fix Sumitomo Chemical declared force majeure yesterday, becoming the fifth Asian chemical producer in a single week to do so. The sequence began with Chandra Asri in Indonesia, followed by Yeochun NCC in South Korea. By March 5, the Petrochemical Corporation of Singapore had declared force majeure on 1.1 million tons of ethylene capacity on Jurong Island, and a day later Aster reported its steam cracker operating at only half capacity. The root cause across all five cases is the same: naphtha supply disruption. Naphtha is the key feedstock that steam crackers break down to produce the base chemicals behind plastics, synthetic rubber, packaging materials, and countless industrial inputs. Most Asian crackers rely heavily on Middle Eastern naphtha shipments, and nearly all of those cargoes pass through the Strait of Hormuz. When the Strait effectively closed, feedstock flows were interrupted almost immediately. Five force majeure declarations in seven days signals a significant disruption to the chemical backbone of global manufacturing. Ethylene and its derivatives sit at the base of an enormous industrial pyramid. When ethylene supply tightens, prices ripple through polyethylene, polypropylene, packaging materials, and industrial plastics. Polymer prices are already rising into double-digit territory, and the cost pressure will inevitably move downstream into consumer goods, logistics, and manufacturing. The implications extend beyond industrial supply chains and connect directly with the earlier discussion around fertilizers and food inflation. Fertilizer production relies heavily on both natural gas and petrochemical inputs, while sulfuric acid — largely derived from oil and gas refining — is essential for producing phosphate fertilizers. When energy logistics through Hormuz are disrupted, the shock does not stop at crude prices. It also constrains the chemical inputs required to sustain modern agriculture. This creates a potential cascade. First, oil and LNG prices rise due to the chokepoint disruption. Second, petrochemical and fertilizer feedstocks become scarce or more expensive. Third, farmers reduce fertilizer usage or face higher input costs, which tends to lower crop yields in subsequent planting cycles. Finally, agricultural commodities such as wheat, corn, soybeans, palm oil, coffee, and sugar begin to rise as global food supply tightens. The result is a form of cost-push inflation that tends to be far more persistent than demand-driven inflation. When inflation originates from disruptions in energy, chemicals, and food supply chains, it becomes structurally embedded in production costs across the economy. This kind of inflation is inherently sticky because it reflects physical shortages and supply bottlenecks rather than excessive consumer demand.