3 Ways CFOs Can Use Embedded Intelligence Against Inflation

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Smart use of data can navigate today’s challenges—and build resilience for whatever comes next.

With the peak of the pandemic likely behind us, enterprises continue to recover and rebuild as they navigate supply chain disruptions, rising commodity prices and record inflation. According to the U.S. Bureau of Labor Statistics, the producer-price index rose 9.7% in 2021, reaching a near-40-year high in January 2022. Experts are forecasting another 18 months of inflation ahead as energy prices, supply chain disruption, labor shortages and a geopolitical crisis continue to raise costs across industries.

In this environment, companies must look for better options to manage inflation. They must go beyond traditional tactics—such as absorbing costs and raising their prices—to embed intelligence and predictive insights to drive innovation and fuel long-term growth. It can arm CFOs with the information and decision-making tools they need to chart their organizations through choppy financial waters—and come out thriving.

SOS: Embed Intelligence to Build Growth

Many companies have already experienced the benefits of embedded intelligence. Enterprises that invested in digital and data have fared the best through the pandemic, with intelligent decision-making enabling them to act quickly. Those who continue to invest in digital will continue to accelerate and future-proof their business.

To help their companies withstand and overcome stresses during this time of uncertainty, CFOs should make investments in integrated systems and agile models to streamline processes, work smarter and power intelligence-driven strategies. And they should continue to work with the leadership team to prioritize a long-term vision.

If they do so, they will be able to navigate inflation and build resilience in their companies in three important ways:

— Improve forecasting and stress test. Enterprises must be able to act and adapt quickly to fluctuating market conditions, which is difficult with legacy systems, manual processes and dispersed data. Forecasting enabled by AI and machine learning (ML) can help CFOs accurately make predictions, harnessing internal and third-party data to forecast demand, profit and loss, supply chain issues and more. These real-time insights enable CFOs to act decisively to tighten costs and cash management.

Finance teams can scenario and stress test based on external threats and then make changes to mitigate risk based on these insights. They can create formulas around knock-on impacts to key financial metrics to keep investors and stakeholders in the loop.

Intelligent sourcing to boost purchasing power. Inflation erodes purchasing power, making intelligent sourcing strategies essential. Predictive analytics can help forecast demand, supply shortages and price increases in materials. Using smart forecasting, CFOs can partner with chief procurement officers to consider every type of internal and external factor to make the decision of when and where to buy materials, goods and services for future use. And scenario planning helps to isolate the risks associated with holding excess stock and inventory and tying up cash and lays a solid foundation to find new ways to boost buying power.

– Be innovative in your tactics to influence consumer behavior. Intelligence-enabled strategies, including intelligent inventory forecasting, will help CFOs withstand supply-and-demand shortfalls and strengthen their company’s position longer-term. Leveraging AI and ML will enable retailers and suppliers to look for patterns and make predictions based on internal and external data. These insights can inform hyper-local inventory assortments and help target promotions based on consumer segmentation and loyalty. And CFOs can even champion innovation in finding new ways to influence consumption, such as automated at-shelf repricing to reignite desire and encourage brand switching.

Every company can benefit from these strategies, especially those who are hardest hit by inflation, such as manufacturing and retail. By relying too heavily on passing along costs by raising prices, companies risk pushing consumers to cheaper alternatives. Once brand loyalty is lost, it’s hard to win back. Implementing digital and data-driven strategies to automate fulfilment and reevaluate supply chain and logistics will minimize the impact of near-term disruption, improve long-term outcomes and make customers happy.

Nobody knows exactly what the next disruption will be or when. But the most successful enterprises will be those who are prepared whatever it is. Embedded intelligence puts CFOs in a position to build business resilience, allowing them to pivot operations confidently and stay the course for business growth.

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