Prices of some commodities and products that are critical inputs to commercial truck and truck equipment production, such as steel and aluminum sheet, started spiking second-quarter 2021. Primary reasons for price spikes were:
- Supply chain disruptions caused largely by plant and port shutdowns, and
- Global economic recovery from the 2020 recession which was unbalanced as a result of consumer demand for goods growing faster than supply.
This all led to inflation, which affected some industries (and market segments within industries) more than others. Inflation tends to negatively impact profitability, and as with any economic variable affecting profitability, it should be managed to the fullest extent possible. One strategy to consider is the use of price escalators in contracts with suppliers and customers. This could be especially helpful for contracts that will remain in force for six months or longer.
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