It is true that there is nothing as constant as change, and our economic future will require a lot of adaptability on the part of the next generation of business owners, leaders, and managers. The economic landscape will provide challenges for which they have no experience and have received little, if any, education or training. This chapter provides tomorrow's leaders and investors with ideas and information they will need to succeed.
What Owners and Managers Must Do
The industrialized world has not seen systemic inflation since the early 1980s. That means an entire generation has grown up without feeling its effect or knowing how to manage through it. They cannot conceive of a consumer price index reaching 5 percent, 7 percent, and then 10 percent; as a result, they are not ready to lead their companies and employees through these inevitably tumultuous times.
They're also going to have to look at contracts differently. A number of price indexes can provide a useful metric for negotiating contract escalators. We covered this subject more extensively in Chapter 5. For now, we'll simply remind you that multiyear contracts that utilize the proper producer or materials price index will make the difference between profitability and losing money.
You also need to manage inventory differently during periods of inflation. A just-in-time approach may not be in your best interest as inflation heats ...