The link between supply chain struggles and price increases

There is no doubt that a large number of the existing businesses within the restaurants, cafes and hospitality sectors depend heavily on international brands (Key brands) that have a solid market presence. Usually, These brands get imported from the United States, Canada, Europe and other countries around the world through supply chain operations linking the East with the West. These chains could easily get affected by different factors in each region, including natural factors such as weather conditions and volcanoes, and other human factors such as wars, political tensions, piracy operations at sea, etc.

These factors have direct effects on the nature of the work of manufacturing companies and their ability to empty their warehouses of goods according to monthly/quarterly plans on the one hand, and the ability of companies to import these goods on the other hand. Let us take the current tensions in the Red Sea as an example. These tensions have disrupted the supply and scheduling plans of a large number of companies that depend on Bab al-Mandab Strait, which resulted in a cost increase applied by insurance companies per container. As a consequence suppliers raised prices of products in response. Such fluctuations in prices are considered an inevitable reality, but the method of responding to such increases may differ from one project to another, such decisions may reduce or increase the impact on projects. Here are some tips to reduce these impacts on your existing businesses:

1. Reconsider your approach: If the imported brand is an essential part of the dishes you serve in your restaurant or café and there is no way to abandon or replace it in any way, then you must reconsider your focus strategy by calculating the expected increase or the new reality (usually an increase of 5 %-15%) on these products and compensate the difference by reducing the project’s marketing budget, for example, during the impact period until the circumstances disappear and prices return to normal. Acting early is essential in such cases.
2. Local Brands: If you are able to replace the high-priced imported brand with another product without affecting the nature and quality of your service, then it is recommended to consider local alternatives, as this option is considered more sustainable in terms of price and availability compared to imported products, especially during uncertain political and economic periods in your region or around the world. This strategy can be adopted for a limited period ending with the disappearance of the circumstances or permanently based on conditions surrounding your decision making process.
3. On-Demand consultation: If your project is exposed to a price increase, be sure to obtain immediate consultation through the sector experts so that you can organize your thoughts and speed up the decision making process. Delay in making a decision is usually costly for any project.
4. Be prepared: The sustainability of any project depends in a big way on the level and speed of reactions and decision making processes in cases where any change occurred affecting the way you work, And or the way your suppliers and service providers work, or even the behavior of customers at any given moment. A good loud example to take into account is the massive shift in customer behavior post pandemic compared to the customer behavior pre pandemic days. Businesses that applied changes and adapted to the new reality were more sustainable compared to others.