Who knows if inflation will rise beyond 2013? Once thing is for certain though, and that is that we are not at all certain. In the last few years inflation was not an issue. It is now. This uncertainty is surely enough reason for us to at least consider the possibility.Dynamic ChangeIt has been such a long time since we last had high inflation that many of the current generation will not have experienced its effects. When inflation is low, the playing field is fairly level. However, when it is high, the playing field is full of slippery slides and pit holes, not to mention the goal posts that are constantly on the move.When the value of money deteriorates, the whole dynamic of doing business changes. Staying competitive whilst prices are rising is tricky. Just knowing how much profit you are making, or indeed if you are making a profit at all, is trickier still as the measuring tool that is money is in the sick bay. Timing is all important as any delays can lead to higher costs. Decisions cannot always be carefully considered or debated. Perhaps the hardest thing to get used to is that non-cash assets become far more important than cash itself.If you are in a position to invest in stable commodities then good luck to you. If, however, you still need fiat currency to do business with then you are forced to play the game. So, get ready for a rough time – you might as well make the best of it.StockholdingOne obvious thing to do is to hold more stock. When inflation was peaking in the mid 1970’s it was easier to hold a lot of stock. In fact it was common feature across all sectors. However, in these days of lean supply chains, the infrastructure is not always there for high stockholding to take place. Stock and order systems are geared towards trimming levels and locations will not support any more than a small working stock. The greatest problem, however, is that most companies cannot afford to buy up large quantities of stock and pay out for the storage. To reverse the massive unlocking of funds that has been achieved over the last 30 years of lean chains is simply not possible. Few companies are sitting on piles of cash with which to invest in stock. The best that can be achieved by most players is to gradually gear towards a high stock and low cash environment.So, if you cannot buy your way out of trouble the least you can do is look after what you already have. In a high inflation environment, the non-cash assets you hold become more important than ever. Losing assets is bad enough at any time. Losing assets and then having to pay inflated prices to replace them is far worse.ShrinkageShrinkage is a catch-all term that applies to unaccounted losses of assets. What a convenient word “shrinkage” is! It covers a multitude of sins. It is a let-off for all those that really should be held to account for their actions – or inactions. When assets are lost through theft, is the head of security taken to task? When stock is over-ordered or under-sold to the point at which it becomes redundant are those responsible for stock inventory or for sales chastised? “Well, yes, they are”, I hear at least some of you saying.Yes, it is true that if losses through theft or through poor stock management or sales reach excessive levels, action will be taken. However, in most organisations a generous tolerance is applied before any alarm bells ring. It is this cushion, the catch-all “shrinkage”, that managers fall back on when explaining losses. “Oh that’s just normal shrinkage”. So, that’s alright then. Let’s just accept it. Why pay out for security, stock inventory and sales people when all we need is a generous shrinkage provision? Well, in times of low inflation this argument may even stack up (at least to a point). When, however, the only reliable way of keeping value in your business is through the assets you hold, as opposed to the money in your bank, the good stewardship of those assets becomes more essential than ever.Making a generous shrinkage allowance is an admission of failure. You are saying “we can’t control these losses, so we are going to surrender right from the start”. In times of high inflation, having your head stuck in the sand in this way could kill off your business. Now is the time, now that high inflation is on the agenda, to slash the shrinkage allowance and face up to these losses head-on. Loss of an asset is very serious. This does not represent a loss of turnover or profit. No, this is a chunk of your business falling off. When high inflation is at work, putting it back together is extremely costly.DamagesPerhaps the worst example of asset loss is when stock, fixtures and vehicles are damaged, resulting in repairs or reworking at best, and complete loss at worst. If you boast service levels of just below 100% then you must restock as soon as possible – at your expense. If you do not, then your boast is just a boast and you will lose business in the long term. Once again, through generous advanced provision for damages, many companies manage to ignore the problem. Inflation will have the effect of exposing such complacency. Once again, now must surely be the time when provisions for damage are reduced and this demon is laid to rest – or at least quelled.You may be thinking “damage happens. it is just the way it is”. No No No! Damage to assets is not inevitable. Every time an asset is lost though damage, then either the systems in place were not sufficient (or non existent) or they were not applied. For instance, most responsible companies have training programmes for lift truck operators. Any operator that has more than his share of damages should be given retraining or at least counselled. This is a far more constructive response than “whoops”, or worst still, looking the other way. And that is surely the problem. Generous allowances give way to complacency which then push the allowances up further and thus the vicious circle continuesIt is not just the handlers that should be held accountable. They will often work in an environment where damage to stock is unavoidable. This may be due to unrealistic targets. It could be due to a poorly tuned productivity scheme, such as one that is skewed too far towards speed at the expense of quality. It may be due to a poorly designed work area e.g. where tight turns may cause damage from the back of trucks. In many cases it may simply be that there is insufficient protection. If pallet protection and dunnage is not used; if protection is not found around fixed assets; if loading bays and the procedures employed in them are not designed to avoid vehicle damage – if these factors are deficient – then damage will occur. If product handlers see this happening all around them it is little wonder that it is hard to motivate them to be more careful.80/20If you do slash provisions made for damages then you will need to take this aspect more seriously. Many of the issues described above may require a shift in the culture of your operation. This would be a major undertaking. However, there is no point in you doing all the hard stuff before you do the more simple things. Make sure the pallet loads are sufficiently protected. Make sure that fixtures such as racking posts are cladded. And this one may be the simplest solution of all: before you protect everything in sight; before you launch a major retraining programme, why don’t you look at what is doing a great deal of the damage. Why don’t you fit a set of Sumo Gloves to the forks of the lift trucks? I told you it was simple. Using the old 80/20 rule, straight away you will have solved a big chunk of your problem. The rest will follow. Once the truck operators and other handlers see those bright yellow robust polyurethane cushions fitted to the tips of the forks, they will know that their company is serious about reducing damage. Their symbolic value is nearly as important to the savings they bring. On the subject of savings, the return on investment from fitting the Sumo Glove can often be measured in minutes. It really is a no-brainer. So, before you wheel in the consultants, before you have major showdowns and emotional heart-to-hearts with your staff, before you think the unthinkable, do the do-able and do it now: fit the Sumo Gloves. Then you can achieve the rest knowing that the job is 80% done.Act NowIn times of low inflation, burying asset losses in the pit that is called shrinkage may lead to an erosion of your competitiveness as you raise prices to cover losses. That is bad enough. In times of high inflation your assets are precious. Slashing shrinkage provision now thus exposing asset loss problems for what they are may be one of the best things you could do to prepare for inflation. If the inflation rate does not climb that high after all, you will still be left with a much more healthy business. This way you may even enjoy playing the inflation game: not only surviving it, but winning it as well.