Recessions require businesses to adapt fast. As consumer demand drops, companies face the dual challenge of declining sales and rising operational costs. In Australia, where wage increases are outpacing inflation in many sectors, the pressure on margins is more intense than ever. The question is: how can businesses protect their bottom line when both demand and costs are working against them?
The double hit: lower demand and rising costs
During a recession, it’s not just about shifting consumer spending. Companies experience a cascade of challenges that can erode profitability if left unchecked:
- Falling demand: As consumers tighten their budgets, demand for non-essential goods drops sharply, shifting the market focus to necessities.
- Rising costs: Wage increases continue, especially in sectors where skilled labour is essential, which squeezes profit margins.
- Supply chain instability: Fluctuating demand and tight budgets lead to inconsistent freight volumes, driving up logistics costs and complicating inventory planning.
This combination puts a significant strain on business models that rely on predictability. To stay competitive, companies need strategies that reduce cost volatility, streamline logistics, and keep operations running efficiently, even with reduced demand.
Price stability: an often-overlooked key to recession resilience
At Saving Point, our international supply chain team sees the impact of economic downturns on supply chains every day. One of the most effective strategies we implement to help clients manage these challenges is price stability – secured through international freight tenders.
Here’s how it works:
- Freight tenders: Running a formal tender for international shipping helps businesses lock in competitive rates, providing cost predictability even when market conditions are volatile.
- Favourable contract terms: With a well-executed tender, businesses can secure terms that guard against sudden freight cost spikes, reducing financial risk.
- Improved operational efficiency: Stable shipping costs allow for more accurate budgeting and forward planning, limiting the need for costly, last-minute decisions.
For instance, we recently worked with a retail client during a downturn. By conducting an international freight tender, they secured stable shipping rates despite lower sales volumes, allowing them to maintain efficient logistics without breaking the bank. When the economy rebounded, they were well-positioned for growth – unlike competitors still struggling with volatile costs.
Preparing for prolonged economic uncertainty
If you’re navigating economic headwinds, now is the time to build strategies that safeguard your supply chain and set your business up for future growth. Here are three ways to strengthen your supply chain during a recession:
- Prioritise price stability: Working with freight partners who can offer predictable pricing through fixed contracts or tenders allows for more consistent budgeting and smoother cash flow.
- Focus on resilient service providers relationships: Building partnerships that offer flexibility and reliability ensures that your business can withstand market fluctuations.
- Think long-term: While the current market may strain margins, optimising your supply chain now will give your business a solid foundation to capitalise on the eventual economic recovery.
At Saving Point, our expertise in managing freight procurement and supply chain optimisation is designed to help businesses thrive in uncertain times. If you’re concerned about the challenges of a prolonged recession, our international supply chain team is here to help you develop a stable, resilient strategy.
