Expert Insights on Navigating Supply Chains Challenges and Inflation

Supply chains are the backbone of our market nowadays. Their disruptions, inflation, and impacts on consumer behavior have become critical in the current economic environment. 

PissedConsumer interviewed Dr. Patrick Penfield, a Professor of Practice, Supply Chain Management and Director of Executive Education at the Whitman School of Management, Syracuse University, who shared his expert insights into the state of supply chains, inflation trends, and strategies for managing rising costs. Dr. Penfield also discussed the shrinkflation phenomenon and provided practical tips for consumers navigating these challenging times.

Here are the key points Dr. Penfield discussed in the interview:

• About Dr. Penfield
• How interest rates influence consumer behavior
• Supply chain dynamics and recession forecasts
• The effects of shrinkflation on consumers
• Effective strategies for managing rising costs

About Dr. Penfield

Dr. Penfield:My name is Dr. Patrick Penfield. I'm a Professor of Practice at the Whitman School of Management, Syracuse University, and my expertise is supply chain management. A lot of it started when the pandemic happened, so that's when we started to see things climb. We've got climate change issues, we've got diseases within the food supply chain, and then we've got other anomalies that have been impacting everything overall. The first time we started to see things turn like this was in February 2023. We saw it at 6%.

How Interest Rates Influence Consumer Behavior

Dr. Penfield: They’re trying to damp down inflation, and one way that you can do that is by raising interest rates. The problem we have, though, is that raising interest rates stops people from buying stuff. So your credit card bill goes up by buying any major purchases like a house or a car, people are a little apprehensive to buy because interest rates are so high.

The other thing is you get less of your money. If I'm going to go out and buy a house, it may not be the same house I saw two years ago just because of what's happening with interest rates. So, the other dilemma we have when interest rates go up like this is that demand starts to slow down. As supply chain people see things before economists see them. 

One example is when we started to see more people in warehouses being laid off in trucking. And that's highly unusual because, with trucking, we've had a lot of issues with just trying to get truck drivers and being able to do that. So when truck companies are laying off truck drivers, that's a cause of concern for me because it means things aren't moving and things aren't shipping.

Supply Chain Dynamics and Recession Forecasts

Dr. Penfield: When the interest rates keep going up, people are less apt to buy. It's not only people; it's companies. Companies also have a difficult time getting money, and a lot of times, they postpone projects. So, usually, when this happens, a recession will occur. Its period depends on what industry. If it's a commodity-based industry where it's gas, gas prices are gas prices.

The dilemma is that a lot of times, companies will pass that through as long as there's an increase. If you're in food products and stuff like that, if you raise your cost too much, people are more apt to do something else with their money, buy something else. And so that's the danger when you raise prices.

But in the past several years, we've seen that every link within the supply chain has raised prices. And that's the dilemma. When fuel prices go up, labor costs go up, and ingredients costs go up, it's difficult to make money. You're left to raise prices.

The Effects of Shrinkflation on Consumers

Dr. Penfield: Companies try to keep their costs low, but this is paramount. We've never seen anything like this before where we've seen all these price increases throughout the supply chain, and that's why the consumer's getting hit with all this cost that's gone up. It's kind of tricking the consumer a little bit too. So, in one way, if I can change my packaging, make it a little smaller, and still charge you the same price, you're not going to be upset because a lot of us, unfortunately, don't look at the sizes. Like I don't, and I always buy my box of cookies, and I've never really looked at how many ounces in my mind. I might be thinking, well, maybe my family's eating more of my cookies. They seem to go faster. It just seems like everything is going faster.

Effective Strategies for Managing Rising Costs

Dr. Penfield: Unfortunately, especially with food, the consumer goods folks that make your packaged foods have been doing a lot of this, which is just crazy. I dislike it. I don't think it's fair. I know why they're doing it: because it's easier to shrink the package size than increase the price. So you and I will be upset if the price of our Oreo package goes up, but if it's less, we may not notice much. And that's usually the premise behind why this shrink inflation has been happening. 

I think one of the things that I probably would do is look for the deals. I think what’s interesting about food is there's not a demand pattern with it. Food, it's a constant we all have to eat. So that's why the price drops haven't happened. But I think if I were the consumer, one of the things that you have to do is shop around and look to see where the best deals are.

The one thing I would be concerned about is interest rates. If I'm a consumer, I'd look at your credit cards and see if you can switch to lower interest rates. If you have to have a credit card or have to use credit cards, try maybe to look at postponing big purchases, especially if interest rates are really high. It's difficult when you have a big car payment and a big house payment, especially at the time, but eventually, things will come down. 

What strategies have you found effective in managing rising costs and dealing with shrinkflation? Share your thoughts, advice, and experiences in the comments below. Be sure to subscribe to our YouTube channel to stay updated on the latest expert insights and consumer advice.