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If there’s one thing facility managers can say about the past two years, it’s that it wasn’t dull. First, they had to strategize and execute critical activities to maintain a safe environment against COVID-19. They learned new technologies to facilitate better air filtration, installed digital thermometers and hand sanitizer stations throughout the facility, and ensured their facility management plans were aligned with CDC recommendations. 

While the pandemic is not over, facility managers have made significant progress to keep facilities safe and protect against COVID-19. Still, they face great challenges, and rising costs are on top of the list. Inflation has hit every industry and household in some capacity, and it has left facility managers with some tough decisions to make.

In this short guide, we will explain the Why’s and How’s of inflation and what companies should do to keep costs as low as possible while maintaining the highest level of facility management. It won’t be an easy adjustment, but we will guide you on ways to weather the inflation storm and come out of the other side more vital than ever before. 

What Causes Inflation?

Inflation refers to the reduced purchasing power of money. In short, it takes more money to buy goods and services than it may have in the past. According to the latest CPI inflation report, prices climbed over 6% year-over-year, and the areas with the highest jump in the prices included energy, shelter, and automobiles. Still, most goods and services are priced higher now than they were last year.

So, why is this happening? In short, economists believe there are several reasons why inflation is on the rise, and the pandemic has exacerbated them. The pandemic created the perfect storm for inflation because of several factors.

Increase in demand

Eighteen months ago, many parts of the country were under lockdown. Some consumers put off purchasing high ticket items, like automobiles, because there were so many uncertainties in the market. Unemployment went from 3% to 15% overnight. 

In response, the government passed several stimulus packages designed to help Americans stay afloat and stabilize the unemployment insurance system. As consumers grew more confident in the economy and their situations, they started buying.

Disruptions in the supply chain

High demand is acceptable if you have the supply to meet that demand. Unfortunately, many supply chains were significantly affected by the pandemic. Many facilities were shut down or forced to operate at a limited capacity at the beginning of the pandemic because of health and safety restrictions and other factors. 

It takes time for supply chains to restart after being shut down, and they haven’t been able to catch up just yet. For example, we are seeing this with the current chip shortage limiting the production of everything from automobiles to cell phones and televisions. When demand far exceeds supply, prices will rise. 

Labor shortages

We’ve written about how the labor shortage has affected our industry as companies look for skilled technicians to replace outgoing technicians who are retiring or moving on to new careers. Manufacturers who were forced to lay off or furlough workers in the first few months of the pandemic now find that they cannot rehire or recruit new workers to help them ramp up production to meet demand. Today, the labor-force participation rate is 1.7 percentage points lower than before the pandemic, which means there are fewer workers to increase supply.

How Does Inflation Affect Facility Managers?

Facility managers have seen higher prices across the board. Equipment and utility costs have gone through the roof because of the rising prices of raw materials and parts, crude oil demand, and supply chain bottlenecks, among many other factors. Even everyday paper products, like toilet paper and paper towels, have increased in price. 

As companies spend more on equipment and goods to keep their facilities running, they also pay more for labor to run their facilities. There is a labor shortage, so the best technicians and facility managers will command higher wages to stay put or be swayed to join a new company. Again, it’s supply and demand. 

Where Are Companies Paying More to Run Their Facilities?

What Can Your Company Do to Weather the Inflation Storm?

Uncertainty is not something a facility manager, COO, or other key stakeholder wants when budgeting and forecasting for the New Year. And we are not sure when prices will stabilize and our supply chains catch up to meet consumer demand. Even the Fed has cautioned against referring to this period of inflation as transitory as there is no set road map out of it. 

The best thing companies can do is reduce their risk as much as possible and develop strategies for gaining more insight into how they’re spending their facilities budget and whether there are ways to reduce excess expenses without affecting operations or COVID-19 sanitation protocols. 

If there is a way to implement strategic cost-cutting that trims the fat but doesn’t hurt operations, this would be a way to weather the inflation storm.

Outsourcing: How Berman Can Provide Stability to an Unstable Environment

Developing a viable strategy to offset inflation and optimize facility management takes significant time, effort, and expertise. If you need a solution now to help you ride the current storm, it might make sense to turn to the experts at Berman. 

Over the past two years, we have been walloped by the pandemic and inflation, too, and have adjusted how we approach facility management through our experiences. We have learned a lot, and we would love the opportunity to apply what we have learned to help you in your facility management planning. 

We can design a program and fee structure that stabilizes your facility spending and gives you greater certainty over what the next year or more will look like. At the same time, our facility management experts can identify ways to transform your facility to comply with best practices and facilitate future growth. 

From equipment installations and repairs to providing skilled technicians and staff to run the day-to-day operations of your facility, Berman can be your trusted partner to help you weather the storm. Let’s talk today to discuss how we can help.