Been to the supermarket lately? Or a gas station, clothing store? Virtually every good and service these days now costs more. Inflation is impacting U.S. businesses and families. COVID and the continuing issues surrounding supply chain disruption, have caused inflation to soar. Business owners now face real barriers to success because of rising cost of goods sold (COGS) and wage inflation.
COGS represents the expenses required to buy materials for a product, create that product and then sell the product. The total expenses to curate, produce and then sell a product/service is the COGS. There are direct and indirect costs, for example labor and shipping costs are directly related to making the product. Taxes, rent on space, purchases, packaging, utilities, etc., are indirect costs that do not always have a specific impact on the product/service.
Wage inflation also impacts COGS. CNBC recently published a story about the “The Great Resignation” which refers to millions of workers choosing to resign from their jobs. As a result, employers find themselves short staffed and frantically searching for new hires. Like any supply and demand situation, low supply of workers, high demand from employers, results in wages rising. Don’t expect this situation to change anytime soon.
One answer to control COGS is to leverage technology and software as best you can. For example, project management software can help your current staff do more and maybe eliminate the need to immediately hire more staff.
Ian Oxman, Co-owner Software for Hardware LLC based in Atlanta, GA. You can reach Ian at Ian@softwareforhardware.com