Process Excellence lines and how supply chain, inflation and sustainability are intertwined.

Here's what CEOs, CFOs are saying about inflation, supply chain disruptions

BlogBusiness Excellence

Chief executive and financial officers are busy with efficiency initiatives designed to offset higher costs as they bet that inflation and supply chain disruptions have peaked, but won’t recede.

The inflation barometer from executives comes as companies wind down their June quarter earnings. As previously noted, large enterprises are managing through inflation by focusing on processes, supply chain and procurement efficiency and digitization efforts. The following comments on inflation and supply chain are aggregated from dozens of earnings conference calls. 

One of the big takeaways from Celonis World Tour 2022 was that enterprises will have to become more efficient via process mining, execution management and automation.

Here’s a tour of June quarter comments. 

Inflation

Arvind Krishna, IBM CEO:

“In an inflationary environment when clients take our technology, deploy it, leverage our consulting. It acts as a counterbalance to all of the inflation and all of the labor demographics that people are facing all over the globe...A lot of our consulting is around deploying back-office applications, critical applications, supply chain resilience, worrying about cash conversion, worrying about optimization of the costs within our clients.”

What is Procurement? The process and KPIs that matter

Joseph Wolk, Johnson & Johnson CFO:

“We did build-in a healthy assumption to account for inflation in our January guidance, planning for increased costs in labor, energy and transportation. We noted in April, and are doing so again today, that these pressures will continue to impact margins in the third and fourth quarters and into 2023. As such, we continue to pursue mitigation efforts, including cost-improvement initiatives, strategic price increases and contract negotiations with external supply partners.” 

Kevin M. Ozan, McDonald's CFO:

“For the full year in the U.S., we expect roughly 12% to 14% inflation. It's a little higher than that in the second quarter, likely a little higher than that in the third quarter. And then we expect to see it to moderate some in the fourth quarter. Obviously, that's based on what we know today. That's on food and paper. On the labor side, we're probably seeing a little over 10% labor inflation right now.”

eBook: Powering Procurement with Process Mining 

Noel Wallace, Colgate-Palmolive CEO:

“As we enter the back half, we are just beginning to see early benefits from our 2022 global productivity initiative. Over the next 18 months, this program will help drive operating leverage. But we are still dealing with a very difficult cost environment. We now expect $1.3 billion in raw material and packaging inflation with higher logistics costs as well.“

Scott Kirby, United Airlines CEO:

“At current fuel prices, United's fuel bill would be $9 billion higher than 2019. For what it's worth, we're building our long-term plans, assuming that this is the new normal for fuel prices. The good news is that rising fuel costs are something that affects all airlines and at least for United, we've seen this largely become a pass-through event to date.”

Pekka Lundmark, Nokia CEO:

“We are seeing inflation in our business. The semiconductor prices have gone up. There is inflation in pretty much everything that you touch in the world at the moment.  We've been able to mitigate some of that with technology improvement, with productivity improvement and so on. And that's why we've been able to maintain a pretty solid profitability despite the inflation.” 

Kathryn Mikells, ExxonMobil CFO:

“I'd say we feel really good about how we're managing inflation to date. Our overall structural cost savings kind of plan and program is very much on track. As of this quarter, we're now at $6 billion in overall savings kind of relative to 2019. So we're feeling pretty good about that. As we look at our kind of cost on a year-over-year basis, we obviously had a kind of seasonal increase in costs sequentially as we had a little bit more planned maintenance activity, but we feel very good that we're executing consistently with our plans and that we remain on track.”

Jon Moeller, The Procter & Gamble Co. CEO:

“The list of challenges we face heading into our new fiscal year is longer than any I can recall. The progress we've made and our collective commitment to our strategies give me confidence we can manage through these challenges.”

“We've developed a productivity muscle that helps address some of the challenges we face. We remain fully committed to cost and cash productivity in all facets of our business, up and down the income statement and across the balance sheet in each business and corporately. Productivity improvement is a necessity to drive balanced top and bottom line growth and strong cash generation. Success in our highly competitive industry and in this dynamic and challenging environment requires agility that comes with a mindset of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. In the current environment, that agility and constructive disruption mindset are even more important.”

Supply chain

James Fitterling, Dow Inc. CEO:

“We have accelerated modernizing and automating our warehouse management systems, and we improved our supply chain planning process using new digital capabilities, enabling us to consolidate multiple customer shipments, lower costs and reduce our carbon emissions. We also improved the customer experience through enhanced real-time delivery tracking capabilities across all modes of product shipping. These digitalization improvements are particularly valuable when global supply chains are as dynamic as they are today.”

Carol Tome, United Parcel Service CEO:

“In the second quarter in the United States, we were able to manage hours in line with volume levels, and we optimized our trailer loads by eliminating 1,600 loads per day compared to the same time frame last year.” 

“We are also working on another big efficiency opportunity, and that's how to improve delivery density. We are approaching this differently by attacking density upstream and fulfillment. We recently completed 2 pilots, and we're really excited about the results.” 

Webinar: Process Excellence Unlocked: 5-Part Series on business and use cases | Webinar: Process Transformation in Supply Chain

James Foote, CSX Corp. CEO:

“Although macro uncertainty is clearly elevated as we enter into the second half, we still see positive drivers favoring rail, including environmental benefits as customers prioritize ESG, lack of truck capacity with driver shortages, onshoring of industrial production and inflation that will all benefit our growth opportunities.”

“We need everybody in the supply chain to work. When you're talking about moving international boxes from a port to a warehouse on the south side of Chicago, you need the terminal to work, you need the railroad to work, you need the inland terminal to work, you need to have chassis there. You need to have packers there. You need to have somebody there that can unload the box when it gets to the warehouse and get it off the chance you can get it back. There are a billion moving parts.”

Sharon McCollam, Albertsons CFO:

“We are definitely still seeing supply chain disruption, and we still have categories where we are on allocation. So those issues have moderated. They are in no way passed. And from a supply chain operations standpoint, we have been hiring better and we've been more able to find labor. I'm not saying it's solved. It seems to have been mitigated. And on the transportation side, that continues to be a challenge. But again, moderated but not fixed.”

James Umpleby,  Caterpillar CEO:

“We've worked very hard on our lean manufacturing processes over the last few years. And it has been a struggle just given the supply chain challenges. And we have — and we all learned a new term called decommit, where a supplier, or one of their suppliers decommit so we get some last-minute surprises. So we're certainly not operating our factories as efficiently as we would like and as efficiently as we did before we started to come out of the pandemic. But again, we're continuing to work those issues hard.”

More supply chain:

Larry Dignan mugshot 2022
Larry Dignan
Editor in Chief

Larry Dignan is Celonis Media’s Editor-in-Chief. He is the former Editor in Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine.

Dear visitor, you're using an outdated browser. Parts of this website will not work correctly. For a better experience, update or change your browser.