UNDER
PRESSURE

NET INFLATION EXPOSURE

Understanding the inflation impact on COGS and the cost pass-through-ability is the first step to start mitigating margin erosion.
Based on transparency a mitigation program to reduce net inflation exposure is set up.

Simplified Net Inflation Exposure Grid

IMPROVEMENT
IMPACT:

REDUCTION
NET INFLATION EXPOSURE
-2%

THIS IS
HOW
IT IS DONE...

CUSTOMER SIDE: ENHANCE PASS-THROUGH-ABILITY

  • Exposure management with contract heatmap - capturing contractual flexibility (duration, CPI clauses, last time re-negotiated) and potential (customer relationship strength, competitive positioning)
  • Negotiation preparation with playbooks for prioritized customer contracts
  • Centralized negotiation tracking and cost pass-through performance measurement

All contracts can be renegotiated

Some you might just not have to!

SUPPLY SIDE: ENABLE MULTI-DIMENSIONAL COST AVOIDANCE

  • Exposure management with material impact model to identify significant cost drivers
  • Formation of cross-functional agile teams to go through significant cost drivers with high price increases – develop hypothesis regarding
    • Commercial/Legal – Reaction to price increases, hedging
    • R&D - substitutes, cost-redesigns
  • Prioritize hypothesis for implementation and develop implementation plans

BREAK
STANDARD
STRUCTURES!

KNOW YOUR POTENTIAL &
IMPLEMENT!

Make yourself ready – don’t crack under inflation pressure!

Inflation exposure also has significant impact on your long-term-planning.
Challenge your strategic initiatives – are they meeting the new economic narrative?