Productivity to slump under higher costs and skills crisis

• Earlytrade data indicates productivity will slump, as the cost of operations and growth rise
• Leaders must navigate higher costs, more concentrated supply chains, and a national skills crisis
• Strategies for growth to encompass whole-of-supply-chain thinking, productivity-focused innovation, and supplier collaboration

Executive summary from the Earlytrade Supply Chain Scorecard FY2022

As the Earlytrade liquidity marketplace has grown, so too has the richness of insight we can extract from the 1.6 million business-to-business invoices we track between 80,000 buyers and suppliers each year.

Over the next six to 12 months, we see productivity slumping under the weight of higher costs, a higher concentration of supply chain activity towards medium and large suppliers, and the unfolding national skills crisis.

For leaders, simply maintaining a business’ current pace of operations is becoming an incremental investment decision.

As the nation emerged from lockdowns, we watched prices jump upstream (Producer Price Indices, 4.9%) and downstream (Consumer Price Index, 5.1%), putting the cost of growth out of reach for many.

Alarmingly, new research released by the ABS shows that nearly half of Australia’s businesses had already pulled resources away from innovation activities to bolster core business operations during the pandemic.

The further that decision makers allow their businesses to recede from productivity-driving innovation, the more burdensome the cost to grow will become.

Doing more with less is now an imperative

Naturally, this report offers a particular focus on the construction and infrastructure sector where Earlytrade spends a lot of time consulting with leaders in the industry, and where these factors are being felt more severely.

The latest productivity data for construction shows -0.7% growth for 2019-20, which was underpinned by deteriorations in almost all contributing factors: labour, energy, and materials. To state the obvious, these inputs have only deteriorated throughout 2021-22.

Right now, business leaders need to be asking their teams for innovative thinking and winning strategies to drive productivity at the many points of production in corporate supply chains.

Adjusting to higher costs and low growth

To help narrow the focus, we’ve leveraged Earlytrade’s proprietary marketplace data and official statistics to scope three trends that capture a degree of certainty in an uncertain market:

• New cost of business, and growth
• Skills crisis bottlenecking supply chains
• A growing pool of ESG capital

Our analysis focuses on liquidity as the lifeblood of businesses and as a barometer for stress and growth in supply chains.

We believe supplier access to fair and affordable liquidity is an antidote to many supply-side problems faced by corporates today.

Whether cost trends continue upwards or have peaked, we should view them as baked-in. They are not going back down and holding our breath until it is all over isn’t a viable strategy.

So, how do you grow and how do you win in this higher cost environment?

– Guy Saxelby, CEO & Co-founder at Earlytrade