Rising Costs, Shrinking Margins: does your supply chain have a weak link?

In today’s economic environment, businesses are feeling the pinch of skyrocketing supply chain costs, labour expenses, and the domino effect of inflation. I sat down with Paddy Lord from Exertis Supply Chain Services (ESCS) to talk about the effects of rising costs on every stage of supply chain, from navigating shipping disruptions like the Suez Canal saga to FX fluctuations and rising living costs. Paddy shares insights on how ESCS’s tailored solutions could be the lifeline for businesses amidst these storms.


Could you please give me an introduction to you and your role in the business?

I’m Paddy Lord, the Group Finance and Operations Director at ESCS, where I’ve been for nearly four years: I’ve just moved past my 9-year milestone with the Exertis group. My journey started in Dubai with Exertis Middle East, setting up finance and logistics operations, and now I’m back in Ireland. It’s been a broad role that has enriched my experience significantly.

 It’s no secret that costs are rising and the economic landscape is becoming difficult to navigate in recent times, could you tell me your first thoughts where that relates to supply chain

Although COVID might seem like a distant memory at this stage, it really wasn’t that long ago when you consider the level of destruction that it caused for businesses. Looking at more recent times, the last twelve to eighteen months have seen a significant impact from rising costs that businesses have faced. We’ve gone through a significant period of inflation causing rising interest rates.

Supply chains have received particular attention in recent years as a direct result of the pandemic. The impact of rising freight costs and shipping, longer lead times, disruptions to shipping methods, and the situation in the Suez Canal and Red Sea conflicts have all brought supply chain issues to the forefront for every business.

There is now a need to revisit the supply chain and assess how it can become more efficient and cost-effective, ensuring that products are readily available. Businesses might consider relocating where they purchase products from to be more accessible in times of disruption, while also examining the cost impacts from shipping that have accrued in recent years. Additionally, they might assess if there are more competitive ways of sourcing products.

I’d say these are both interesting and challenging times for businesses, but with these challenges comes the opportunity to look at operations and identify areas for improvement.

You said that that COVID has had very far-reaching consequences all across the supply chain. Do you think the effects of COVID are now stabilizing or are they continuing to affect operations?

I’d say the world, not just the business world, has clearly become more resilient on the back of the challenges presented by COVID and adapted very quickly. Such a significant shift in such a short space of time is really quite incredible.

This adaptation has demonstrated businesses’ resilience and given them the confidence to address any challenges that may present themselves moving forward. I’d say the COVID issues have definitely stabilized, however, we’re never too far away from the next challenge.

It sounds like there are a lot of factors to consider when making these decisions.  Could you expand on some of the rising costs that you’re referring to

In addition to points previously mentioned, businesses have faced increases in labour costs and issues with labour availability. These issues go hand in hand with the increased cost of living we’ve all experienced, the inflationary environment and the rapid pace of cost increases.

There were long periods of instability provoked by conflicts in Ukraine and Gaza. Such wide-reaching global events have created significant volatility in FX rates. Operating a global business in multiple territories presents great opportunities but also serious challenges, especially when trading in multiple currencies.

More recently, we’ve seen a steep rise in interest rates, affecting everyone and putting additional strain on business cash flows. This financial environment presents an opportunity for businesses to reconsider their operational efficiency and leverage services offered by companies like ESCS.

Would you say that there are any types of businesses that would be harder hit by this inflationary environment or other factors

The businesses that are hardest hit typically have international exposure and are reliant on a global supply chain that includes manufacturing and purchasing products from China or other global territories.

If a business is unable to navigate these challenges, what would be the knock-on effect on the consumer

Consumers are facing a variety of economic pressures including rising costs, longer lead times, increased freight and production costs, alongside the inflationary impact affecting businesses and rising labour costs. As these costs are largely passed on to consumers, they lead to more expensive products at a time when consumers are also dealing with higher living costs and rising mortgage interest rates.

This rapid increase in costs has softened market demand and consumer sentiment over the past year. Although the situation was challenging globally in 2023, there are signs of stability and recovery, and I am optimistic about improvements in the coming year.

Does that mean that financing alone is not enough to help businesses overcome these challenges?

Financing is just one component of the broader suite of services that can greatly benefit businesses. A comprehensive services provider should also offer expertise in supply/demand forecasting, product compliance, and vendor due diligence, including factory audits in regions like China. These services are invaluable for managing a competitive and efficient supply chain that smaller businesses might not have.

Additionally, effective supply chain management should help businesses maintain optimal stock levels to meet demand without overstocking, which ties up capital and can lead to financial losses through discounted sales or product write-downs. Finding a provider that can integrate these services into a cohesive package will enable more efficient operations and financial health for any business.

So why is reviewing a supply chain an opportunity for a business to reduce their costs

Businesses should adopt a continuous improvement mindset when reviewing their entire supply chain, including sourcing, shipping costs, and inventory management. It’s crucial to analyse each stage of the supply chain for optimization opportunities, from procurement to stock holding, to maximize efficiency.

What are your final thoughts on the current situation of supply chain and how ESCS can help businesses to navigate it?

In light of the current supply chain challenges, I’m genuinely optimistic about the opportunities ahead. We’re witnessing a resurgence in market demand, and our volume of business reflects this positive trend. Businesses are increasingly recognizing the importance of efficiency in their supply chains, and for those seeking external support in any of the areas we’ve discussed here, ESCS stands ready to assist.

If you have further questions on this subject or other supply chain topics, don’t hesitate to contact us by using the contact button below!


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